Internationalisation of the rupee is 'inevitable', says RBI report

Internationalisation of the rupee is “inevitable” but will complicate the formulation of the monetary policy, according to the Reserve Bank of India’s (RBI’s) report on currency and finance.

Internationalisation means the currency can be freely transacted by both resident and non-residents, and be used as a reserve currency for global trades.

It can lower transaction costs of cross-border trade and investment operations by mitigating exchange rate risk, but “makes the simultaneous pursuit of exchange rate stability and a domestically oriented monetary policy more challenging, unless supported by large and deep domestic financial markets that could effectively absorb external shocks”.

“Internationalisation can potentially limit