In a move aimed at deepening regional financial cooperation and promoting the internationalisation of the Indian rupee, the Reserve Bank of India (RBI) has permitted authorised dealer (AD) banks in India to extend rupee-denominated loans to persons and entities in Bhutan, Nepal, and Sri Lanka for cross-border trade transactions.
The decision, formalised through the Foreign Exchange Management (Borrowing and Lending) (Amendment) Regulations, 2025, amends the existing Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. The notification, issued by the RBI’s Foreign Exchange Department on October 6, 2025, introduces a new clause under Regulation 7A of the principal regulations.
Under the amendment, AD banks in India can now lend in Indian rupees to persons resident outside India—specifically those in Bhutan, Nepal, or Sri Lanka—including banks in these jurisdictions—for facilitating cross-border trade transactions.
RBI Unveils Multiple Reforms to Boost NRI Participation and Rupee Internationalisation
In tandem with measures to promote the global use of the Indian rupee, the Reserve Bank of India (RBI) announced a series of initiatives aimed at enhancing financial and investment opportunities for Non-Resident Indians (NRIs).
Simplified norms for business and borrowing
The RBI plans to streamline the External Commercial Borrowing (ECB) framework and relax existing norms to make it easier for non-residents to establish business entities in India.
Deeper rupee integration
Funds held in Special Rupee Vostro Accounts (SRVAs) will now be allowed to invest in corporate bonds and commercial papers. The central bank will also introduce transparent reference rates for major global currencies to support rupee-based trade.
Greater flexibility for exporters
The time limit for repatriating funds from International Financial Services Centre (IFSC) accounts has been extended from one month to three months. Additionally, the period for completing foreign exchange transactions under Merchanting Trade has been lengthened from four months to six months.
Enhanced investment thresholds
The RBI is considering doubling the individual investment cap for foreign investors—including NRIs—in listed Indian companies from 5% to 10%, while increasing the overall limit from 10% to 24%.
Rationalised remittance framework
With outward remittances under the Liberalised Remittance Scheme (LRS) reaching nearly $30 billion in FY25, the central bank will review the existing framework to simplify rules and encourage greater use of the rupee for cross-border transfers.
Wider digital payment access
NRIs will now be able to use the Unified Payments Interface (UPI) with international mobile numbers linked to their NRE and NRO accounts. Banks have also been granted more leeway in authenticating cross-border card transactions.
Notification Details
Date: 6th October, 2025
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