The Reserve Bank of India (RBI) should make a conscious effort to internationalise the rupee in the backdrop of the geo-political tensions triggering capital outflows from emerging market economies, including India, and currency depreciation, per a State Bank of India Economic Research Department Report.

“The Russia-Ukraine war and the disruptions to payments caused by it, is a good opportunity to insist on export settlement in rupee, beginning with some of the smaller export partners.” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, in the ‘Ecowrap’ report.

According to the Tarapore Committee (2006) on Fuller Capital Account Convertibility (CFAC), an “international currency” is a currency that is widely used for international transactions, such as the US dollar, Euro, British Pound, Swiss Franc and Japanese Yen. The “internationalisation” of a currency is an expression of its external credibility as the economy integrates globally.

“In practical terms, it would mean the use of the currency for invoicing and settlement of cross-border transactions, freedom for non-residents to hold financial assets/liabilities in that currency and freedom for non-residents to hold tradable balances in that currency at offshore locations,” the Committee had said.

Some degree of internationalisation can coexist with capital controls.