Key Details
The Ministry of External Affairs’ Annual Report 2025 shows economic diplomacy operating through two connected channels: commercial systems that facilitate trade and payments, and government-backed finance for development projects in partner countries.
Four local-currency settlement arrangements: UAE, Indonesia, Mauritius and Maldives
34 countries with operational Special Rupee Vostro Accounts
UPI available in eight overseas markets: Nepal, Bhutan, UAE, Singapore, Mauritius, Sri Lanka, France and Maldives
23 agreements for sharing Indian digital public infrastructure
New rupee credit: ₹4,850 crore for the Maldives and ₹4,000 crore offered to Bhutan
Capacity building: Nearly 14,000 training opportunities offered to professionals from about 114 countries
Rupee Use Expanded Across Trade and Development Finance
India pursued wider international use of the rupee through Local Currency Settlement Systems (LCSS) and Special Rupee Vostro Accounts (SRVAs).
LCSS arrangements with four countries allow eligible bilateral transactions to be settled in the currencies of the two trading partners. Similar arrangements were being pursued with Qatar, Kuwait, South Africa and Kenya, while Tanzania and Nigeria were under consideration.
Alongside this, SRVAs were operational in 34 countries. The RBI removed the earlier requirement for prior approval before authorised Indian banks could open these accounts for foreign correspondent banks.
Rupee internationalisation also entered India’s development-finance programme:
A ₹4,850 crore rupee-denominated Line of Credit was signed with the Maldives.
The first rupee credit under the IDEAS framework had been extended to Mauritius in March 2025, including ₹487.60 crore for a water-pipeline project.
India offered Bhutan its first IDEAS credit line—₹4,000 crore for energy projects.
Rupee credit was announced for Sri Lanka’s post-cyclone reconstruction and rehabilitation.
This reduces dependence on the dollar as an intermediary currency, but the presence of accounts and agreements does not by itself establish widespread rupee use. Actual transaction volumes and market liquidity will determine whether the infrastructure becomes commercially significant.
How Do LCSS and Special Rupee Vostro Accounts Differ?
A Local Currency Settlement System is a bilateral arrangement under which participating countries can settle eligible transactions directly in their respective currencies.
A Special Rupee Vostro Account is an account maintained by an Indian bank on behalf of a foreign bank. It allows trade invoices and payments to be settled in rupees without routing every transaction through a third currency such as the US dollar.
Both mechanisms support rupee trade, but businesses must still agree to invoice in rupees, while banks need adequate liquidity and workable arrangements for using accumulated balances.
UPI and India Stack Became Diplomatic Offerings
The report records 23 government-to-government agreements for sharing Indian digital systems. Six were signed with Venezuela, Sri Lanka, Lesotho, Maldives, Brazil and Mongolia, enabling possible adaptation of platforms such as digital identity, UPI and DigiLocker.
UPI acceptance had been implemented in eight overseas markets. Letters of intent were also signed between the RBI and central banks in Guyana, Peru, Uruguay, Namibia, Fiji and Nigeria. Commercial arrangements covering Namibia, Peru and Trinidad and Tobago were expected to go live in 2026.
India is separately supporting Sri Lanka’s Unique Digital Identity programme through grant assistance.
The diplomatic proposition extends beyond exporting software. India is offering partner countries a model for building population-scale digital identity, payments and public-service systems, potentially giving Indian standards and technology providers a larger international footprint.
Credit Lines Continue to Finance Physical Infrastructure
Traditional infrastructure remained central to India’s development cooperation.
A further $700 million credit line to Mongolia was signed for its oil-refinery project, taking India’s overall commitment to the project to $1.692 billion—the largest project supported under the IDEAS framework.
Projects completed or commissioned during 2025 included:
Roads and drainage infrastructure in the Maldives
A road link in Guyana
Power transmission infrastructure in Nicaragua
A solar plant in Mauritius
A cassava project supporting food security in Cameroon
India also completed debt restructuring with Sri Lanka and agreed to reduce the Maldives’ annual repayments to the Export-Import Bank of India by approximately 40%.
The report indicates greater attention to execution: project reviews were conducted across several countries, and lender’s engineers were appointed to monitor selected projects in Bangladesh, Maldives, Mongolia, Mozambique and Nepal.
Training Remains a Parallel Instrument of Influence
India offered nearly 14,000 training opportunities to government and security professionals from about 114 countries during 2025. Programmes under the Indian Technical and Economic Cooperation initiative covered subjects ranging from agriculture and entrepreneurship to artificial intelligence, biotechnology and cybersecurity.
India has also established 58 Centres of Excellence in Information Technology across 47 countries, which have trained nearly two lakh people in areas including high-performance computing, artificial intelligence and big data.
This capacity-building network complements infrastructure and digital cooperation by creating long-term professional links with officials and institutions in partner countries.
Policy Relevance
Payment infrastructure must translate into usage. Reporting should move beyond the number of SRVAs and agreements to disclose rupee-settled trade volumes, transaction costs and the use of surplus balances.
Digital exports carry governance responsibilities. Overseas adoption of India Stack can strengthen India’s technology influence, but systems involving identity and public data require credible safeguards for privacy, cybersecurity and institutional accountability.
Development finance needs disciplined execution. Rupee credit may diversify financing, but project delays, repayment capacity and currency exposure remain material concerns for both India and borrowing countries.
Commercial participation could expand available capital. MEA has begun exploring “aid-to-investment” models involving banks, development institutions and private investors. Any transition will need clarity on risk allocation and the distinction between concessional assistance and commercially viable investment.
Follow the Full Report Here: MEA Annual Report 2025