Mumbai - The Reserve Bank of India (RBI), India, and Malaysia have decided to go beyond the dollar and can now use Indian Rupee (INR) to settle trade in addition to other currencies.
The Indian Ministry of External Affairs (MEA) issued a statement, which is a step further to the RBI’s decision in July last year that allowed the settlement of international trade in Indian currency.
As per the arrangement with Malaysia, "Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies," media reports citing a quote from the MEA said.
"India International Bank of Malaysia (IIBM), based in Kuala Lumpur, has operationalized this mechanism by opening a special Rupee Vostro account through its corresponding bank in India that is Union Bank of India," MEA statement said.
In its statement, the Union Bank of India said, “With this arrangement, the UBI has become the first bank in India to operationalize this option by opening a Special Rupee Vostro Account through its corresponding bank in Malaysia — India International Bank of Malaysia.”
“This mechanism will allow the Indian and Malaysian traders to invoice the trade in Indian Rupee and therefore achieve better pricing for goods and services traded. This mechanism is expected to also benefit the traders on both sides as they can directly trade in Indian Rupee and therefore save on currency conversion spreads,” a press note from the Union Bank of India said.
The move is significant, which indicates India’s willingness to take concrete steps towards the de-dollarisation of its international trade.
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