JOHOR BARU – Trade transactions between India and Malaysia can now be settled in rupees in addition to other current modes of settlement.
According to a press release by the Indian High Commission in Kuala Lumpur, the decision follows India Central Bank’s resolution in July 2022 to allow the settlement of international trade through the rupee.
“This initiative by India’s Central Bank is aimed at facilitating the growth of global trade and supporting the interests of the global trading community in rupees.
“This new mechanism is also aligned with Malaysia’s foreign exchange policies as part of which Malaysian banks are allowed to undertake the settlement of international trade in any foreign currency, subject to the rules and regulations of Bank Negara Malaysia,” the press release said.
Meanwhile, the India International Bank of Malaysia, will be the first financial institution in the country which has operationalised this mechanism by opening a Special Rupee Vostro Account through their corresponding bank in India, the Union Bank of India.
This allows Indian and Malaysian traders to invoice their trade in Rupees.
“Potential benefits from this mechanism include better pricing for traded goods and services and the ability to trade in Rupess directly and saving on currency conversion spreads,” the press release explained.
The high commission also stated that India-Malaysia bilateral trade, which has reached US$19.4 billion (current conversion to RM85.6 billion) from 2021 to 2022, would benefit from this new option to settle trade transactions in rupees. – The Vibes, April 1, 2023
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