The ongoing crisis in the rupee, with the Indian currency edging near the 95-mark against the dollar, underlines the need for creating more demand for rupee outside India. The good news is that the usage of rupee for settling foreign trade has begun in a small way, in the last four years.
The removal of Russia from the international trade messaging platform, SWIFT, following the invasion on Ukraine in 2022 has brought about a sea change in the way policy makers approach their foreign currency reserves and international payments. Serious efforts are now underway to devise alternative platforms and channels for cross-border payments, diversify reserves away from dollar and to settle bilateral trade in local currencies. The US-Israel-Iran conflict is likely to give further impetus to this move as countries will now have to also sew up deals to ensure energy security, besides continuing to reduce their reliance on the dollar.
Rupee internationalisation, which was a pie in the sky until a few years ago, seems a possibility now, given the increasing discontent against the dollar and the policies of the US administration in recent years. This is closely aligned with increasing de-dollarisation or reduction in dollar dominance in global reserves and payments.
Policy moves
Policy makers across the globe received a jolt when Russia was ostracised from global payment ecosystem in 2022. The RBI too began initiating steps to increase international use of rupee around this time. It allowed invoicing and settlement of foreign trade in rupee in July 2022. With India defying the sanction against Russian exports, India’s trade with Russia, including the purchase of Russian crude and defence supplies have been settled in rupee since 2022.
India has also entered into bilateral agreements with countries such as the UAE, Indonesia and Maldives for settlement of bilateral trade in local currencies. In December 2023, regulations were relaxed further to allow cross-border settlement with all trading partners in local currencies and rupee.
These moves have begun showing results. RBI data show that as of January 2026, 6.18 per cent of total exports of goods and services of India between April and January FY26 was invoiced in rupee, which was valued at ₹2.64 lakh crore. This share had been fluctuating around 5.80 to 5.9 per cent since FY24. Share of rupee invoicing in total imports is 4.69 per cent.
Share of rupee in settlement of Indian goods and services trade is however lower. The share of rupee in settlement of exports was only 2.76 per cent this fiscal year, while share in imports was 2.32 per cent. The gap implies presence of intent, which needs to be closed soon.
It is comforting to note that all countries are in the same boat, as far as need to reduce dependency on dollar goes. As on February 2025, permission had been given by the RBI to open 156 special rupee Vostro accounts by 123 foreign banks from 30 trading partner countries. Around 26 Indian banks are involved in this.
With resentment over the US’ high-handedness growing following the West Asia conflict, the time is now right to push for greater usage of rupee in bilateral trades.
Dollar dominance wanes
Dollar’s dominance, on the other hand, has been steadily waning in recent years. Unbridled currency printing by the Federal Reserve to fight the global financial crisis and then the Covid pandemic has debased the dollar, making countries look for alternatives in reliable reserve currency.
According to IMF’s COFER (currency composition of official foreign exchange reserves) data, percentage of global foreign exchange reserves held in US dollars has declined from 64 per cent in 2017 to 56.7 per cent by the fourth quarter of 2025.
But the interesting part is that share of other currencies in global reserves has moved from 2.5 per cent to 6.13 per cent in this period, indicating a move towards non-traditional reserve currencies. Gold, the other safe-haven, is also emerging as a competitor to the dollar. Share of gold in global reserves more than double from 10 per cent in 2015 to 23 per cent now.
Share of US treasury securities held by foreign countries is also moving lower. According to the US Federal Reserve, around $9 trillion or 32 per cent of US treasury securities is currently held by foreign investors. This is down from almost 50 per cent holding of overseas investors in 2014.
The role of dollar as a reference currency for settling foreign trade between third party currency increases its share in global trade invoicing. The US Federal Reserve notes that according to data collected from the SWIFT platform, the dollar’s share of international payments (both trade and remittances) is about 50 percent currently.
Alternate mechanisms
But increasing settlement of bilateral trade in local currencies can help speed the move away from dollar. This can be aided by creating alternative settlement and messaging platform for international trade. With the SWIFT platform, governed by the Bank of Belgium, the US Federal Reserve and the European Central Bank, handling most of global payments from the US and Europe, any country evicted from the platform would come up against a wall in processing international transactions.
The BRICS Pay, which is being designed as a cross-border financial messaging system for the BRICS countries with their national currencies, is an alternative. But dominance of China in this system could be an issue. The larger BRICS countries including China and Russia are meanwhile developing their own messaging platforms, the CIPS (cross-border interbank messaging system) and SPFS (system for transfer of financial messages) respectively. Interoperability between these platforms could be one way to develop a larger alternative to SWIFT.
Central Bank Digital Currencies being developed by almost all countries can also provide a viable channel for cross-border trade settlement. According to Atlantic Council, there are currently 13 cross-border wholesale CBDC projects including Project mBridge which connects banks in China, Thailand, the UAE, Hong Kong, and Saudi Arabia.
While these are small steps, it is best to keep up the effort to internationalise the rupee, especially now when the global sentiment is tilted against the dollar
Published on April 4, 2026