The Reserve Bank of India (RBI), which has given its nod to 18 countries for opening of Special Vostro Rupee Accounts to allow trading in the Indian currency, could open up the facility for more countries even as teething problems remain. The central bank is working towards resolving those issues.

“These issues need to be taken up seriously and solutions will come but only after detailed discussions involving every angle and that will take time,” a senior government official told India Narrative.

The RBI has aggressively embarked on the exercise of internationalising the rupee but it is yet to pick up steam.

The exercise of internationalising the rupee is not linked to US sanctions on Russia or other countries but a long term one.

“There are some issues with rupee trade. These teething problems are natural but discussions are on and we are looking at this (the rupee-ruble payment structure) as a long term system and not just to skirt the sanctions,” Sanjeev Sanyal, Member, Economic Advisory Council to the Prime Minister, told India Narrative.

Last week, the RBI-appointed working group thrashed out a prescription with a host of measures for the exercise.

China is already in the race of globalising its own currency—the yuan. However “India has a better chance at internationalizing its currency as compared to China,” due to the rupee being more market driven, a recent report published by a Gateway House, foreign policy think tank, has noted.

The exchange rate of the India rupee is primarily market driven based on demand and supply though the central bank does intervene occasionally in case of excessive volatility in the foreign exchange market.

The think tank also said that the Indian economy is more transparent compared to China. “There is a greater respect of property and individual rights,” it said, adding that the recent regulatory crackdowns in China may have also dent the exercise to push yuan as a global currency.

After the US sanctions on Russia, several countries are now actively looking at setting up alternate payments system. The knee jerk reaction of cutting Russia from accessing the SWIFT payment system has underscored the need to have a payment system which is outside the US dollar frame.

“The idea is not to replace the US dollar– it is not possible in the near future but the aim should be to set up an alternate payment system which is not dependent on the US currency. In case of sudden policy decisions impacting the US dollar, trade among countries should not be impacted,” a senior government official told India Narrative.

Globally, on an average, the US dollar makes up for about $6.6 trillion of daily trade, Forex.com said.

Uncertainty over the US dollar had heightened in May as well when Washington stood in a state of limbo on the issue of raising its debt ceiling.

“There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar,” US Treasury Secretary Janet Yellen told CNN in an interview.

Also read: Russia has options to use Indian rupees, FDI and government securities offer new avenues