RBI Allows Rupee Lending To Bhutan, Nepal, And Sri Lanka For Cross-Border Trade

The Reserve Bank of India (RBI) has introduced new measures to facilitate cross-border trade and payments by allowing Indian banks and their overseas branches to extend loans in Indian Rupees to residents of Bhutan, Nepal, and Sri Lanka - including banks based in these countries. The move aims to strengthen trade connectivity and simplify transactions with India's neighboring economies.

In a statement issued Monday, the RBI announced amendments to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015. The central bank said these changes are part of its ongoing efforts to enhance the ease of external trade and streamline payment mechanisms.

"Authorised Dealer (AD) banks in India and their overseas branches have been permitted to lend in Indian Rupees to persons resident in Bhutan, Nepal, and Sri Lanka, including banks in these jurisdictions, to facilitate cross-border trade transactions," the RBI stated.

Earlier, in January 2025, the RBI allowed Indian exporters to open foreign currency accounts with banks outside India to help in the realization of export proceeds. Under the existing rule, unutilized balances in these accounts had to be repatriated by the end of the month following the date of realization.

However, the RBI has now extended this repatriation window. "It has been decided that the period for repatriation shall be extended up to three months in the case of foreign currency accounts maintained with a bank in the International Financial Services Centre (IFSC) in India," the central bank added.

The updated regulations reflect the RBI's continued push to promote the Indian Rupee in regional trade and strengthen India's financial linkages with its neighboring economies.