Examine why the internationalisation of the rupee has made limited progress despite bilateral arrangements with over 20 countries.

Internationalisation of the rupee means its wider use by non-residents for invoicing, settlement and holding of assets. Since the RBI permitted Special Rupee Vostro Accounts (SRVA) in July 2022 [2], partner arrangements have widened, yet actual settlement remains thin — the binding constraints are structural, not procedural.

Trade asymmetry and the "rupee pile-up"

• India runs trade deficits with most rupee-settlement partners, so they accumulate rupees faster than they can spend them; Russia's accrued balances are the standard illustration.
• The RBI allows surplus vostro balances to be invested in government securities and T-Bills without an FPI licence [2], but an investment outlet is a weaker draw than the ability to buy goods.

Weak incentive for exporters

• A depreciating rupee raises rupee realisation on dollar invoices; rupee billing offers no such gain, so exporters default to the dollar.
• The RBI's Inter-Departmental Group (IDG) on Internationalisation of INR (2023) therefore recommended parity of export incentives irrespective of invoicing currency [1] — evidence that the tap was turned the wrong way.

Domestic macro-financial limits

• Capital controls and a managed exchange rate restrict free movement of rupees; the IDG framed fuller capital account convertibility and non-resident rupee accounts, in India and abroad, as prerequisites [1].
• India's modest share of world exports naturally caps external rupee demand — currency reach follows trade size.

Institutional and diplomatic frictions

• Documentation is negotiated bank-pair by bank-pair; the IDG sought a standardised template for rupee invoicing and settlement [1].
• Multilaterally, the BRICS New Delhi Declaration (2026) endorses local-currency trade only "respecting national priorities", with no one-size-fits-all approach [3][4], leaving implementation to task forces rather than binding mechanisms.

Rupee internationalisation is thus less a diplomatic project than a domestic reform sequence. Incentive parity for exporters, standardised settlement procedures, calibrated capital-account opening and digital-currency-based settlement rails can convert dormant vostro accounts into live trade — aligning the rupee's reach with India's growing weight in the global economy.