Chennai,  The State Bank of India (SBI) on Thursday said the Reserve Bank of India (RBI) should internationalise the Indian rupee.

In a research report, the SBI said that the central bank should make a conscious effort to internationalise the rupee.

"The Russia-Ukraine war and the disruptions to payments caused by it, is a good opportunity to insist on export settlement in rupee, beginning with some of the smaller export partners," the SBI said.

The banking major also welcomed the RBI's measures relaxing the external commercial borrowing (ECB) and foreign portfolio investors (FPI) norms in the debt segment.

According to the SBI, the global economy is volatile and on an average, energy, base metals, precious metals, and agricultural prices are now down 25 per cent from 52 week highs with markets anticipating a global slowdown morphing into a full-blown global recession.

However, it is not clear whether such decline is the result of synchronised global rate actions or genuine fears of a recession looming large, the SBI report noted.

In India, such global developments could have a direct bearing on the inflation trajectory in the second half of the current fiscal.

"The RBI has been on course in normalising liquidity and net LAF (liquidity adjustment facility) is now close to the 1.5 per cent threshold non-inflationary level of liquidity. However, the problem is unspent Government cash balances that has now jumped to Rs 3.1 trillion," the report said.

This effectively implies that core liquidity is still at Rs. 6.2 trillion as against Rs 8.3 trillion in the beginning of April. Additionally, the RBI has also announced a slew of measures to augment capital inflows by making NRI deposits more attractive.

The SBI said the cumulative impact of all these measures will be beneficial for the external sector given the fact that total Non-Resident Indian (NRI) deposits exhibited an inflow of $3.2 billion in FY22 as against the inflows of $7.4 billion in FY21.

On credit growth, the SBI said it expanded at Rs 2.6 lakh crores far outstripping bank deposit growth at Rs 1.04 lakh crore in the current year.

The continued growth in bank credit is a matter of comfort and indicates that the Indian economy is still navigating through the turmoil rather well.