India Launches Rupee Trade System to Cut Dollar Dependence

India has introduced a system allowing global trade payments to be conducted in Rupees, marking a strategic shift in its trade finance landscape [1]. This initiative, initiated by the Reserve Bank of India (RBI), gained momentum with regulatory changes in August 2025, which simplified the process for banks to open Special Rupee Vostro Accounts for foreign institutions without requiring prior central bank approval. The move has helped streamline cross-border transactions and significantly reduced one of the main operational barriers to using the Rupee in international trade.

As of now, 156 Vostro accounts have been established across 26 Indian banks, facilitated by 123 correspondent banks from 30 partner countries. The initiative has attracted participation from both major and smaller economies, including Russia, Bangladesh, Guyana, Seychelles, and Fiji. India has also entered into formal bilateral currency settlement frameworks with key trade partners, such as the UAE, Maldives, Indonesia, and Bangladesh. These arrangements are helping to create a more direct and efficient trade ecosystem by reducing reliance on third-party currency conversions.

The use of the Rupee in trade settlements offers multiple benefits. It reduces transaction costs, shields exporters from currency volatility, and minimizes dependence on the US dollar. Over the past two years, Indian companies have reportedly saved around $13 billion by importing discounted Russian oil in Rupees. The system has also proven to be adaptable during economic crises, as seen in Sri Lanka, where the Rupee was designated as a foreign currency to maintain trade with India amid a severe dollar shortage. In Russia’s case, large Rupee surpluses were eventually reinvested into Indian government bonds, infrastructure, and equities, further integrating these funds into the Indian economy.

India’s approach to this initiative is carefully balanced. Despite broader discussions within the BRICS group about reducing the dominance of the US dollar, New Delhi has avoided framing the Rupee settlement system as a direct de-dollarization effort. Instead, India is promoting a diversified currency strategy while maintaining strong ties to Western financial systems. This dual approach is evident in the statements of External Affairs Minister S. Jaishankar, who has consistently highlighted the US dollar’s role in global financial stability.

The RBI is currently working to expand the reach of the Indian Financial Network (Infinet) to international participants, which will allow for more secure and direct Rupee-based transactions through Vostro accounts. Indian banks are being encouraged to actively promote these settlement options to businesses, which could lead to a significant increase in adoption rates in the coming months.

The initiative also reflects a broader response to evolving global trade dynamics. The lingering effects of the Trump-era tariffs and the risk of future trade wars have made alternative payment mechanisms increasingly valuable. By allowing trade in Rupees, India is offering a practical diversification strategy that mitigates the risks associated with global monetary policy shifts, sanctions, and currency shortages. This shift is part of a growing trend among countries seeking to reduce their vulnerability to the volatility of the global dollar-dominated financial system.

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[1] India Allows Global Trade Payments in Rupees to Reduce Dollar Use (https://coinfomania.com/india-allows-global-trade-payments-in-rupees-to-reduce-dollar-use/)