Published: 13 hours ago

India has taken a historic step to challenge the dominance of the US dollar (USD) by issuing an official circular allowing BRICS nations to conduct 100% of their trade in Indian rupees.

According to a report from The Daily Hodl cited on Thursday (15 August), analysts believe this move could accelerate the decline of the dollar's supremacy in global markets.

On Tuesday, the Reserve Bank of India (RBI) instructed banks to open more Vostro accounts without requiring prior approval.

Under this policy, exporters and importers from other countries can now settle their trade using rupees via dedicated Vostro accounts.

Put simply, when another country wishes to purchase goods from India, it no longer needs to convert its currency into US dollars first—it can use the rupees already held in its Vostro account. The same applies in reverse.

This policy follows the imposition of a 50% tariff on Indian goods by former US President Donald Trump last week.

Prime Minister Narendra Modi's administration views the strengthening of the rupee as a direct response to the White House's trade measures.

In addition to BRICS nations, India has also sent the circular to several other countries, offering them the option to make direct payments in rupees instead of US dollars.

The move is expected to bolster India's position in cross-border trade while simultaneously curbing the dollar's dominance in international markets.

As per the RBI's report on Tuesday (15 August), foreign businesses no longer require approval to open Vostro accounts. Banks will facilitate the process, enabling more companies to participate and use the rupee as a settlement currency.

The RBI explained that this arrangement resembles the correspondent banking mechanisms commonly used in global markets. The initiative is anticipated to benefit BRICS nations in trade and help them avoid the impact of Trump-era tariffs by using the rupee for transactions.

Nonetheless, the RBI emphasised that all companies must still comply with Know Your Customer (KYC) regulations before joining the scheme.

The central bank believes that easing access to Vostro accounts will attract greater inflows of rupees from abroad, strengthen the domestic exchange rate, and reduce conversion costs, which will be determined directly by the foreign exchange market.

While India leverages the rupee to rival the USD, other BRICS member states are also beginning to promote the use of their local currencies in international trade. 
- idnfinancials

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