Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies, said the Indian High Commission to Malaysia.
This follows the decision by the Reserve Bank of India (India’s Central Bank) in July 2022 to allow the settlement of International trade in INR.
“This initiative by the Reserve Bank of India is aimed at facilitating the growth of global trade and supporting the interests of the global trading community in the 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 the settlement of international trade in goods or services in any foreign currency, subject to the rules and regulations of Bank Negara Malaysia,” said the High Commission in a statement.
The statement also said India International Bank of Malaysia (IIBM) is the first Bank in Malaysia that has operationalised this mechanism by opening a Special Rupee Vostro Account through its Corresponding Bank in India i.e. Union Bank of India.
It said this mechanism will allow the Indian and Malaysian traders to invoice the trade in INR, adding that the potential benefits from this mechanism include better pricing for traded goods and services and the ability to directly trade in INR — therefore saving on currency conversion spreads.
India-Malaysia bilateral trade, which has reached US$19.4 billion (RM85.6 billion) in FY 2021-22, is expected to benefit from this new option to settle bilateral trade in INR.