The Reserve Bank of India (RBI) on Thursday announced the issuing of revised Federal Emergency Management Agency (FEMA) regulations to permit more liberal use of INR accounts held by NRIs to make payments, in order to promote cross border transactions in the Indian rupee and national currencies of trading partner countries.

According to new regulations, overseas branches of Authorised Dealer banks will be able to open INR accounts for a person resident outside India for settlement of all permissible current account and capital account transactions with a person resident in India.

“Persons resident outside India will also be able to settle bona fide transactions with other persons resident outside India using the balances in their repatriable INR accounts such as Special Non-resident Rupee account and SRVA,” according to the statement.

The new rules further allow persons resident outside India to be able to use their balances held in repatriable INR accounts for foreign investment, including FDI, in non-debt instruments.

Besides, Indian exporters will be able to open accounts in any foreign currency overseas for settlement of trade transactions, including receiving export proceeds and using these proceeds to pay for imports.

The revised regulations and directions to effect these changes have been issued, the RBI statement said.

According to the RBI statement, these changes have been made in the extant FEMA regulations after holding consultations with the Central Government.

To encourage greater use of Indian Rupee (INR) for trade transactions, in July 2022, an additional arrangement in the form of Special Rupee Vostro Account (SRVA) was introduced. Several foreign banks have since opened SRVAs with banks in India.

The Central Bank has also signed memorandum of understanding (MoU) with the central banks of the United Arab Emirates, Indonesia and Maldives, to encourage cross-border transactions in local currencies.

Further, in December 2023 the Foreign Exchange Management (Manner of Receipt and Payment) Regulations were revised to enable cross border transactions in all foreign currencies (including local currencies of trading partner countries) and INR.