ASSOCHAM Recommends Measures To Strengthen Rupee Trade Settlement Framework

New Delhi, Jun 17 (KNN) Industry body ASSOCHAM has submitted a detailed representation to the government and the Reserve Bank of India (RBI), recommending measures to strengthen the rupee and expand its use in international trade settlement.
 
ASSOCHAM Calls For Stronger Push Towards Rupee Internationalisation
 
The proposals aim to strengthen GIFT City as a global financial hub and address gaps in the rupee trade settlement framework. ASSOCHAM has urged the government to create a dedicated policy framework to attract global family offices and multinational corporations' treasury operations to GIFT City. 
 
It said this could bring stable long-term capital, deepen financial markets, boost foreign exchange reserves and support the rupee, reported Fortune India.
 
The chamber also called for benchmarking GIFT City against leading financial centres such as Singapore, Dubai, London and Hong Kong to build a more competitive regulatory and operational ecosystem. 
 
Industry Body Flags Gaps In RBI's Trade Settlement Framework
 
ASSOCHAM also flagged operational gaps in the RBI's 2022 framework for rupee-based international trade settlement, saying restrictions on the use of Special Rupee Vostro Account balances have limited cross-border rupee transactions and sustained dependence on the US dollar. 
 
It urged the RBI to allow these balances to be used across countries for trade settlements under existing compliance norms, arguing that the move would strengthen the framework without requiring legislative changes or easing prudential standards. 
 
Geopolitical Shifts Create Opportunity For Wider Rupee Use
 
Citing evolving geopolitical dynamics, Minda said conditions are increasingly favourable for expanding the use of the rupee in global trade, particularly across BRICS nations, West Asia, ASEAN and Africa, where several countries are exploring alternatives to dollar-denominated settlements.
 
According to ASSOCHAM, settling just 15 percent of India’s commodity imports in rupees could reduce annual demand for US dollars by an estimated USD 70–80 billion.
 
Recommendations Focus On Coordinated Policy Action
 
The chamber also recommended bringing Merchanting Trade Transactions under the rupee settlement framework, extending export incentives to rupee-settled trade and prioritising bilateral arrangements with key trading partners. 
 
It further proposed that NITI Aayog set up an inter-ministerial working group and refer the issue to the Prime Minister’s Economic Advisory Council to ensure coordinated implementation of rupee internationalisation measures.
 
ASSOCHAM said the twin strategy of strengthening GIFT City and expanding rupee-based trade settlement could deepen India's financial markets and support the country's emergence as a leading global economic and financial power.
 
(KNN Bureau)