Meaning:
Internationalisation means the currency can be freely transacted
by both resident and non-residents and be used as a reserve currency for global
trades.
A recent RBI report suggest that
internationalization of rupee is inevitable. It will help to reduce foreign
currency risks for traders and help to overcome payment hurdles in trading
with Russia. Also, this will result to reduce demand for dollars.
RBI carefully monitor the exchange rates as a
key information variable for monetary policy formulation as inflation can
still alter by 10-13 per cent of the change in exchange rate.
|
Pros |
Cons |
|
Easy foreign trade |
Complex monetary policy |
|
Reduce exchange rate
risk |
Challenging to meet
exchange rate stability |
|
Reduce dependency on
Foreign Exchange reserve |
RBI will have little
less control over capital flows |
|
Aid capital flows |
|
Founder FinTorch
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