Literature Review
A.S.Blinder (1996)- International
currency with four characteristics
• Large share of official reserve of
central banks.
• Hand to hand currency at large
scale in foreign nations.
• Large scale of international trade.
• Dominant role in international
financial market as preferred
currency.
Robert Mundell (1999) - Seven features of
great international currency.
• Large trade area.
• Stable monetary policy.
• Absence of control or fuller convertibility.
• Strong central area.
• Past strong currency were initially backed
by gold or silver.
• Sense of permanence or confidence in
currency.
• Low interest rate.
Literature Review
Chinn and Frankel (2007) - Function of international currency for official and
private purposes.

Official Purpose Include Private Purpose Include

• International reserve currency • Currency substitution or dollarization
• Vehicle currency for foreign • For trade and transactions payment
intervention • Denomination of transactions
• Anchor for pegging local currency
Indian Government’s Effort to Increase Rupee
Trade
India has taken a number of policy measures to promote the acceptability of rupee in
international trade and financial transactions:
• A framework for issuance of rupee-denominated bonds overseas by Indian corporates.
• Masala Bonds
• Non-residents are permitted to hedge rupee risk of their exports and imports to and from
India.
• RBI permits eligible offshore entities to invest in rupee debt outside India.
• Exemptation of certain percentage in payments from any local tax.
• Centralised hedging facility for Indian subsidiaries of non-resident companies (A
Consideration by RBI)
• India has signed currency swap arrangements with a number of countries.