The IMF is considering dropping a requirement that currencies be freely usable to be part of its internal currency basket, a step that could open the door to inclusion of China's yuan.

The International Monetary Fund said on Friday that its board met on October 28 to discuss options for broadening the basket that makes up its Special Drawing Rights unit of account, part of broader efforts to modernize the global monetary system. No decisions were taken.

One option discussed, the IMF said, was replacing the freely usable criteria, although some board members argued that the bar for newcomers should not be lowered and said it was important to safeguard the SDR as a reserve currency.

Because the yuan is not considered freely traded and China's capital markets are largely closed, it does not qualify under current IMF criteria as freely usable.

The changes under debate would reflect the growing role emerging economies such as China, India and Brazil are playing in the world economy. The SDR is currently composed of the U.S. dollar, British sterling, the euro and the Japanese yen.

The IMF board said the size of the SDR basket should remain relatively small to avoid adding undue costs and complexity for SDR users.

The SDR is itself not a currency and is only used as a reserve asset by central banks. It is not available to the private sector.

Also discussed was whether a new currency would replace an existing one or simply be added to the SDR basket; directors agreed that could be assessed on a case-by-case basis.

There is an ongoing debate among global policymakers over the U.S. dollar's status as the main world reserve currency, with some emerging economies arguing that the SDR should play a greater role.

In 2009, the Group of 20 emerging and developed nations authorized $250 billion worth of SDRs to be issued among the IMF's member countries to boost global liquidity, ensuring countries have easier access to foreign exchange funding.

Currently, the euro zone is talking about pooling its SDRs to help fight the region's sovereign debt crisis.

European officials have also approached China for financial support.

Two independent sources with direct knowledge of the matter told Reuters that one of the concessions Beijing had looked for in return for support was more influence at the IMF, including a more rapid path to include the yuan in the SDR basket.

(Reporting by Lesley Wroughton; Editing by Andrea Ricci, Andrew Hay, Leslie Adler)