The State Bank of India has completed its first non-dollar transaction with Sri Lanka, by paying for exports in Sri Lankan rupees.
The move comes as India looks to bring countries that are short of US dollars into the trade mechanism.
Sri Lanka is still grappling with its worst economic crisis since its independence, triggered by a shortage of dollars.
Sri Lankan banks were allowed to open ‘vostro accounts’ with the State Bank of India to conduct bilateral trade in rupees in recent weeks.
The Reserve Bank of India granted approval to open five vostro accounts for trade in rupees with Sri Lanka.
It is reported that India’s rupee trade settlement mechanism, a means of using rupees instead of US dollars and other big currencies for international transactions, is attracting interest from a number of countries.