India and Malaysia Expand Trade Settlement Options with Indian Rupee

India and Malaysia have agreed to settle trade using the Indian rupee, in a move aimed at boosting trade and economic ties between the two countries. The Ministry of External Affairs (MEA) announced the decision on Saturday, following a similar move by the Reserve Bank of India last year to allow the settlement of international trade in Indian currency.

Trade Settlement in Indian Rupee

According to the MEA statement, trade between India and Malaysia can now be settled in Indian Rupee (INR) alongside the current modes of settlement in other currencies. This will provide greater flexibility and convenience to businesses engaged in trade, and is expected to reduce foreign exchange risks and transaction costs for Indian and Malaysian businesses alike.

Initiative by Reserve Bank of India

The RBI's initiative to allow settlement of international trade in Indian Rupee is aimed at facilitating the growth of trade and supporting the interests of the global trading community in the Indian rupee. This move is expected to promote the use of Indian currency in international transactions and increase its acceptance as a global currency.

India International Bank of Malaysia (IIBM)

India International Bank of Malaysia (IIBM), based in Kuala Lumpur, has already set up a special Rupee Vostro account through its corresponding bank in India, Union Bank of India, to operationalize this mechanism. A Vostro account is typically used for making payments in the domestic currency.

Benefits to Businesses

The use of Indian rupee as a settlement currency is expected to provide several benefits to businesses, including reducing the risks associated with fluctuating exchange rates and the costs of converting currencies. This will be particularly beneficial to small and medium-sized businesses engaged in trade between India and Malaysia, as it will provide them with greater access to the Indian market and enable them to expand their operations.