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In a move that could reshape how India trades with its neighbours, the Reserve Bank of India (RBI) has allowed Indian banks and their overseas branches to lend in Indian rupees to residents of Bhutan, Nepal, and Sri Lanka. The change is meant to simplify cross-border trade transactions, reduce dollar dependence, and strengthen the rupee’s regional role.

The new framework comes as part of the RBI’s ongoing effort to promote external trade and payments under the Foreign Exchange Management Act (FEMA). It reflects the central bank’s broader strategy of making the rupee more prominent in international markets, especially among South Asian economies that share close trade ties with India.

Why this matters

Until now, trade settlemen

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