RBI Monetary Policy Gives Three-Shot Boost To NRIs — Here's How

The Reserve Bank of India's Monetary Policy Committee kept the repo rate unchanged at 5.5% while maintaining a 'neutral' stance. During his speech, the RBI Governor Sanjay Malhotra also announced measures aimed at benefiting non-resident Indians (NRIs) via offering major incentives.

The RBI has introduced a series of measures that will ease cross-border trade and further expand the role of the Indian rupee in global trade. Most notably, the Governor promised to simplify regulations under the Foreign Exchange Management Act (FEMA).

One of the key measures includes the plans to establish transparent reference rates for currencies of India’s major trading partners.

For NRIs who remit or invest regularly in India, this step promises more clarity in currency conversion, reducing costs associated with exchange rate volatility.

The RBI has also issued the proposal to permit authorised dealer banks to lend the rupee to non-residents from Bhutan, Nepal and Sri Lanka for cross-border transactions.

This essentially means if a trader from Nepal wants to buy goods from India, they can directly use the Indian rupee for trade and even borrow from Indian banks, rather than relying on currency conversions, which are costly and time-consuming.

This move is expected to simply trade settlements for NRIs who have business ties in these neighbouring countries.

The third significant measure that has been introduced is the wider use of Special Rupee Vostro Account (SRVA) balances.

SRVAs are essentially a special bank account in India, held by a foreign bank, that allows trade to happen in Indian rupees instead of dollars or euros.

This move, although primarily aimed at internationalising the Indian rupee, could aid NRIs by allowing them to invest these balances in corporate bonds and commercial papers, thereby opening up new investment avenues.

Overall, the RBI has taken significant steps to make it easier for NRIs to not only invest and remit into India, but has also made things more accessible for non-residents to set up business in the country.