The Reserve Bank of India (RBI) has allowed Indian banks and their overseas branches to offer loans in Indian Rupees to residents of Bhutan, Nepal, and Sri Lanka.
This move is aimed at strengthening regional trade and simplifying cross-border payments.
Banks can now lend in rupees to individuals and banks in these countries, making cross-border trade transactions easier and more efficient.
Changes in Foreign Exchange Regulations
The RBI has updated rules under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015.
According to RBI, authorised dealer (AD) banks in India and their overseas branches can now extend rupee-denominated loans to residents and banks in Bhutan, Nepal, and Sri Lanka.
This is expected to facilitate smoother trade transactions in the region.
Easier Rules for Indian Exporters with Foreign Currency Accounts
The RBI has also eased norms for Indian exporters holding foreign currency accounts abroad.
Earlier, exporters had to repatriate unused balances by the end of the month after realisation.
Now, if the foreign currency account is maintained with a bank in the IFSC in India, the repatriation period has been extended to three months.
This change provides exporters with more flexibility in managing foreign currency funds.
This update aligns with the RBI’s October 1 monetary policy statement, reflecting the central bank’s continued focus on facilitating trade and simplifying payment mechanisms for Indian businesses and the region.
