Local Currency Trade to Shape India's Forex Market

### **Local Currency Trade to Shape India's Forex Market** RBI Deputy Governor **Rohit Jain** said local currencies will play an increasingly important role in cross-border trade and payments over the coming decade. Greater use of local currencies can **reduce transaction costs, lower currency mismatches and improve settlement efficiency**. India has introduced the **Special Rupee Vostro Account (SRVA)** framework to facilitate invoicing, payment and settlement of international trade in Indian rupees. Jain said its success will depend on commercial viability, wider use of local-currency settlements, market-determined exchange rates and confidence in the settlement system. Technology will also be a key driver of India's forex market. Forex transactions should become **digital from origination to reporting**, while AI and machine learning can help with document classification, anomaly detection and identifying reporting inconsistencies. Jain also highlighted the relatively low participation of **public sector banks in forex derivatives**, despite their strong links with MSMEs and smaller companies. Increasing PSB participation, expanding market makers and promoting electronic trading platforms are key priorities. RBI is also taking steps against unauthorised online forex trading through its Alert List, advisories and awareness campaigns. **Effect on Indian Stock Market:** The development is **structurally positive** for India's financial markets. Greater rupee-based international trade could benefit **banks, exporters, trade-finance companies, forex businesses and fintech firms**. Digitalisation can improve efficiency and transparency in forex transactions. In the long term, deeper forex markets and wider international use of the rupee could strengthen India's financial system. However, the **immediate impact on stock prices is likely to be limited**.