RBI measures to internationalize the Indian Rupee and strengthen India-Nepal economic ties
The Reserve Bank of India (RBI) has introduced three measures to facilitate INR-based transactions with Nepal, Bhutan, and Sri Lanka. These include allowing authorized dealers to lend INR to non-residents for cross-border trade and permitting Special Rupee Vostro Accounts for investments in corporate bonds. For Nepal, these moves aim to reduce dependence on the US dollar, ease currency availability, and lower the Current Account Deficit (CAD). India remains Nepal's largest trading partner and investor, accounting for 33% of its total Foreign Direct Investment (FDI) and 65% of its international trade.
Key Points
- RBI's new measures allow foreign banks with Special Rupee Vostro Accounts to invest in Indian corporate bonds.
- The internationalization of the Rupee aims to shield the Nepalese economy from US dollar exchange rate fluctuations.
- India is Nepal's largest export destination, receiving 67% of its total exports, including edible oil and tea.
- The Indian Rupee (INR) is currently pegged to the Nepalese Rupee (NPR) at a rate of 1.6.
Exam Facts
- India's FDI in Nepal is nearly $670 million.
- India constitutes 65% of Nepalese international trade.
- Nepal is India's 17th largest export destination.
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