RBI’s agenda: capital account liberalisation, globalisation of rupee and digital payment system

Contact Counsellor

Last Updated10/06/2024

RBI aims to liberalize capital account, internationalize rupee and attain universalisation of digital payments along with globalization of India’s financial sector.

The central bank has proposed enabling availability of the rupee to non-residents for facilitating cross-border transactions in the rupee and enhancing accessibility of rupee accounts to persons resident outside India (PROIs).
It has proposed adopting a calibrated approach towards interest-bearing Non-Resident Deposits and promoting Indian multi-national corporations (MNCs) and Indian global brands through overseas investments, according to Aspirational Goals for RBI@100 in a Multi-Year Time Frame.
Meanwhile, on deepening and universalisation of Digital payment systems domestically and globally, the RBI’s agenda includes plans for the internationalisation of India’s Payment Systems and participation in payment systems linkage projects across countries bilateral and multilateral.
It has planned to increase the domestic usage of digital payments and phased implementation of Central Bank Digital Currency (e - Rupee).

India has not yet opened up its capital account fully which will allow free flow of capital to the country and outside. The rupee was made full float in the trade account during the 1991 reforms initiated by the then government.
Capital account convertibility means the freedom to convert rupee into any foreign currency and foreign currency back into rupee for capital account transactions.
The Tarapore committee had listed several preconditions such as fiscal consolidation, inflation control, low level of non-performing assets, low current account deficit and strengthening of financial markets for achieving capital account liberalisation.

On globalisation of India’s financial sector and financial sector reforms, RBI plans expansion of banking domestically in consonance with national growth and positioning 3-5 Indian banks among top 100 global banks in terms of size and operations.
It plans to support the International Financial Services Centres Authority (IFSCA) to make GIFT City a leading international financial centre.
It suggested strengthening the financial market by fostering a global 24×5 rupee market and recalibration of the FPI (foreign portfolio investor) regime.

Over the next two to five years, the RBI group recommended a review of taxes on rupee masala bonds
International use of Real Time Gross Settlement (RTGS) for cross-border trade transactions and inclusion of Indian Government Bonds in global bond indices.
The RBI has also proposed a review of the monetary policy framework to address Balancing price stability, economic growth from an Emerging Market Economy (EME) perspective, refinements in monetary policy communication and spillovers to EMEs from private and public debt overhang in systemically important economies.
On dealing with climate change, the RBI plans guidance for regulated entities (REs) to stress test their asset portfolio to assess impact of climate change and strengthening payment systems’ resilience to climate risks.
It also proposed climate risk disclosure norms for Res and inputs to the government for finalizing taxonomy on climate risks.