Ministry of External Affairs on Saturday announced that trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies. This comes a day after the ministry of commerce launched the Foreign Trade Policy (FTP) 2023, reiterating its commitment to make the rupee a global currency.
Ministry of External Affairs in a statement said, "Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies. This follows the decision by the Reserve Bank of India in July 2022 to allow settlement of international trade in Indian Rupee (INR). This initiative by RBI is aimed at facilitating the growth of global trade and to support the interests of the global trading community in Indian Rupee (INR)."
External affairs ministry further said, "India International Bank of Malaysia (IIBM), based in Kuala Lumpur, has operationalised this mechanism by opening a Special Rupee Vostro Account through its Corresponding Bank in India i.e. Union Bank of India."
Kuala Lumpur based India International Bank of Malaysia (IIBM) in a separate statement said, "IIBM now offers the facility to settle India-Malaysia bilateral trade in Indian Rupee (INR)...This new mechanism is also aligned with Malaysia's foreign exchange policies (FEP) as part of which Malaysian banks are allowed to undertake settlement of international trade in goods or services in any foreign currency, subject to the rules and regulations of Bank Negara Malaysia."
"Under this facility, exporters and importers from India and Malaysia can now invoice the trade in Indian Rupee (INR) and achieve better pricing for goods and services traded. IIBM will facilitate the traders in Malaysia for settlement of this trade in Indian Rupee (INR). For this purpose, IIBM has opened a Special Rupee Vostro Account through its Corresponding Bank in India i.e. Union Bank of India," IIBM said.
The mechanism is expected to benefit the traders on both sides as they can directly trade in Indian Rupee (INR) and save on currency conversion spreads, the bank added.
India International Bank (Malaysia) Berhad (IIBM) is a locally incorporated joint venture between 3 of India's largest government-owned financial institutions namely Bank of Baroda with 40 per cent shareholding, Indian Overseas Bank with 35 per cent and Union Bank of India with a remaining 25 per cent shares.
On Friday, the Ministry of Commerce and Industry on Friday launched the Foreign Trade Policy (FTP) 2023 with an aim to raise India’s exports to $2 trillion by 2023. The “dynamic and responsive” trade policy also aims to make the rupee a global currency. Commerce Secretary Sunil Barthwal said India is ready to trade in the rupee with countries that are facing currency failure or have dollar shortages. He said the government is focusing on strengthening the rupee payment system.