NEW DELHI : At the 2026 BRICS discussions, RBI Governor Sanjay Malhotra said member countries were examining possible links between their fast-payment systems and central bank digital currencies.
The government’s latest move to promote the rupee in international trade addresses one of the practical problems India has faced in trying to increase the currency’s use overseas, which is giving Indian exporters a stronger reason to accept and use rupees for overseas sales.
The Directorate General of Foreign Trade (DGFT) on August 20 amended the Foreign Trade Policy 2023 to make it easier for exporters to invoice overseas sales and receive payments in Indian rupees.
The changes to paragraphs 2.52 and 2.53 mean eligible rupee export receipts can qualify for Foreign Trade Policy benefits and count towards export obligations.
This could also reduce currency-conversion costs where an overseas buyer is willing to pay in rupees.
If the buyer agrees to settle in INR, the Indian exporter can receive the payment directly in rupees rather than converting the transaction through another currency simply to meet earlier trade-policy requirements.
For exporters, the change removes a practical disadvantage to accepting rupee payments. It could reduce currency-conversion costs and improve the competitiveness of Indian exports.
Rupee trade is growing
The latest data from Reserve Bank of India (RBI) shows that the use of the rupee in trade has been rising.
Exports invoiced in rupees rose to Rs 3.54 lakh crore in 2025-26, from Rs 3.08 lakh crore in 2024-25. Imports invoiced in rupees increased to Rs 2.96 lakh crore, from Rs 2.60 lakh crore.
On an actual settlement basis, exports settled in rupees stood at Rs 1.87 lakh crore in 2025-26, against Rs 1.69 lakh crore a year earlier. Imports settled in rupees rose to Rs 1.72 lakh crore, from Rs 1.13 lakh crore.
While, invoicing refers to the currency in which the trade contract is denominated, settlement means the currency in which the payment is actually made. A transaction can therefore be invoiced in rupees without the final payment necessarily being settled in rupees.
The significance of the latest change from the DGFT becomes clearer when viewed against India’s experience with Iran and Russia, where the difficulty was not only finding a way to receive or make payments in rupees, but also ensuring that foreign holders had somewhere to use those rupees.
Iran and Russia: The two big tests of rupee settlement
India’s experience with Iran in 2012 and Russia after 2022 highlighted the same practical issue with using the rupee for international trade.
In 2012, US and European sanctions made it increasingly difficult for India to pay for Iranian oil through conventional banking channels.
India and Iran therefore used a mechanism under which around 45 percent of payments for Iranian oil were to be made in rupees. Iranian banks maintained accounts with Indian banks such as UCO Bank, and the rupee balances could be used to pay for Indian exports.
The arrangement helped keep part of the oil trade going, but it also exposed a limitation. India was importing substantially more from Iran than it was exporting, so Iranian entities could accumulate rupees faster than they could use them to buy Indian goods.
India eventually stopped importing Iranian crude in May 2019, after the United States ended the sanctions waiver that had allowed India and seven other countries to continue buying limited quantities of Iranian oil.
Iran returned briefly to the Indian oil trade in 2026. In March, the US issued a temporary 30-day waiver covering certain Iranian oil already at sea.
But the latest episode also underlined the limits of the rupee as an alternative settlement currency.
Indian refiners were reportedly paying for the Iranian cargoes in Chinese yuan, with the payments routed to yuan-denominated accounts. The US waiver for Iranian oil expired on April 19 and was not renewed.
The same issue resurfaced on a much larger scale with Russia after the Ukraine war began in February 2022.
India’s purchases of Russian crude rose sharply while sanctions disrupted conventional payment channels. On July 11, 2022, the RBI introduced a framework allowing international trade to be settled in rupees through Special Rupee Vostro Accounts, or SRVAs.
Under the mechanism, a foreign bank can maintain a rupee account with an authorised dealer bank in India, with the balance available for permitted transactions.
Russia became the bigger test because India’s imports from Russia rose far more rapidly than its exports to the country. Russian entities could therefore accumulate rupee balances without having enough Indian goods and services to buy.
Russian Foreign Minister Sergei Lavrov said in 2023 that Moscow had accumulated billions of rupees that it was struggling to use.
India has since looked at increasing exports to Russia and creating more avenues for rupee balances to be deployed.
India and Russia were also considering a semi-floating rupee-ruble exchange rate that could potentially be fixed monthly, partly to facilitate bilateral trade and reduce currency-conversion costs.
However, this proposal is yet to materialise.
Much of India-Russia trade was being conducted in local currencies or a third currency such as the UAE dirham, with the yuan also being used in some transactions.
This means that reducing dependence on the dollar does not automatically translate into greater use of the rupee.
The Iran and Russia experiences therefore point to two related requirements for rupee internationalisation: Indian exporters need to be able to receive rupees easily, while foreign holders need sufficient opportunities to spend, invest or otherwise deploy those rupees.
That is where the latest DGFT amendment fits into the larger story.
The history: How India got here
The formal policy discussion around a more international rupee goes back to the Tarapore Committee on Fuller Capital Account Convertibility, whose second report was submitted in 2006.
The committee was not specifically examining international trade settlement. Its mandate was much broader and covered the conditions under which India could progressively move towards fuller capital-account convertibility.
It nevertheless became an important milestone in the wider debate over how freely the rupee should interact with global financial markets.
India did not move directly towards full convertibility. Instead, the RBI gradually expanded the ways in which non-residents could access, hold, hedge and transact in rupees.
The RBI subsequently worked on some of the other barriers to wider rupee use, including currency risk. A foreign company receiving rupees is exposed to movements in the currency’s value, making access to hedging instruments important.
In December 2021, the RBI constituted an Inter-Departmental Group on Internationalisation of the Indian Rupee, which examined rupee invoicing and settlement, offshore rupee markets and greater access for non-residents to Indian financial markets.
The focus was therefore expanding beyond simply allowing trade to be settled in rupees. The question was becoming how to build an ecosystem in which foreigners could hold, hedge, spend and invest rupees.
The July 2022 SRVA framework was the major operational step in that process. It created a formal route for international trade to be invoiced and settled in rupees, while allowing foreign banks to maintain rupee balances with Indian banks.
The RBI has since widened the ways in which those balances can be deployed. In 2025, it allowed surplus balances in SRVAs to be invested in Indian government securities, and in October 2025 expanded the permitted investments to include non-convertible debentures, bonds and commercial paper issued by Indian companies.
India-UAE: A different model
India has also developed local-currency arrangements that do not depend on the kind of large trade imbalance seen with Russia.
In July 2023, the RBI and the Central Bank of the UAE established a framework for an INR-AED Local Currency Settlement System, allowing Indian and UAE traders to invoice and settle bilateral transactions in their respective domestic currencies.
The model is based on reciprocal use of local currencies rather than one side simply accumulating rupees.
The RBI has also entered into local-currency settlement arrangements with countries including Indonesia, the Maldives and Mauritius.
The broader objective is to give businesses the option of settling bilateral trade in domestic currencies where it makes commercial sense, rather than automatically routing transactions through a third currency.
BRICS: From currencies to payment systems
The BRICS discussion has added another layer to the rupee internationalisation debate.
BRICS is a grouping of emerging economies that originally comprised Brazil, Russia, India, China and South Africa and has recently expanded to included Egypt, Ethiopia, Iran, the UAE and Indonesia, giving the bloc a larger share of global trade and a broader platform for discussions on local-currency payments.
India has not backed the creation of a common BRICS currency. US President Donald Trump, meanwhile, has warned the bloc against efforts to undermine the dollar’s global role.
New Delhi’s approach has instead focused on greater use of national currencies, stronger payment connectivity and reducing the need to route bilateral transactions through a third currency.
What happens next
The discussion has increasingly moved from the currency itself to the infrastructure that moves money across borders.
At the 2026 BRICS discussions, RBI Governor Sanjay Malhotra said member countries were examining possible links between their fast-payment systems and central bank digital currencies.
The discussions are at an early stage, with the objective of reducing the cost and friction involved in cross-border payments.
For India, this sits alongside the international expansion of payment infrastructure such as UPI and the RBI’s efforts to develop local-currency settlement arrangements.
The latest DGFT amendment addresses the other side of the equation.
By removing the earlier policy disadvantage associated with rupee receipts, the government is making it easier for Indian exporters to invoice and receive payments in rupees, while the RBI is widening the avenues for foreign banks and companies to hold, use and invest those INR balances.
