RBI forex measures to lower banks' overseas borrowing costs by 2-2.5%, aid inflows: Report

The Reserve Bank of India (RBI) is focusing on simplifying cross-border payment approvals and reducing regulatory friction for businesses and exporters as part of its Payments Vision 2028. According to an EY report, this initiative aims to enhance the efficiency of international transactions and strengthen India's position in global payments.

The RBI plans a comprehensive review of the cross-border payments ecosystem to remove regulatory and operational bottlenecks, particularly for MSME exporters. A key proposal is the examination of a 'single-window application process' for cross-border payment authorisations under both the Payment and Settlement Systems (PSS) Act and the Foreign Exchange Management Act (FEMA).

This focus on cross-border payments marks an evolution from the previous vision, which concentrated on the international expansion of domestic payment systems like UPI and RuPay. The new vision seeks to improve transparency and outcomes for exporters by simplifying approvals and creating a more efficient payments ecosystem.

Beyond cross-border payments, Payments Vision 2028 also emphasizes stronger user protection, fraud management, interoperability, and data-driven oversight, with the central bank increasingly looking at artificial intelligence and data analytics for risk monitoring and fraud detection. The overall aim is to position India as a global leader in payment system design and innovation.

Separately, previous RBI measures are expected to reduce banks' overseas borrowing costs by 2-2.5% through external commercial borrowings (ECBs). A special swap facility for ECBs and Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits is anticipated to lower hedging costs, while banks have increased FCNR(B) deposit rates to 6-7% for 3-5 year tenors to attract foreign currency inflows. These initiatives are predicted to bolster India's foreign exchange reserves and enhance systemic liquidity.