New Delhi: The Ministry of External Affairs said today that India and Malaysia can now use the Indian rupee to settle trade in addition to other currencies. The move follows the decision announced by the Reserve Bank of India (RBI) in July last year to allow settlement of international trade in Indian currency.
“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 MEA. The MEA revealed that RBI’s initiative aims at facilitating the growth of trade and supporting the interests of global trading community in the Indian rupee.
India International Bank of Malaysia (IIBM) based in Kuala Lumpur has operationalized this opening a special Rupee Vostro account through Union Bank of India, its corresponding bank in India. Vostro accounts are accounts that a bank holds on behalf of another, often foreign banks and this forms a key part of corresponding banking.
When countries import and export goods and services, they need to settle payments in a foreign currency. Since US Dollar is world’s reserve currency, both the parties involved in the trade need to bear the conversion expenses and bear the risk of foreign exchange rate fluctuations. However, now with the help of Vastro account, instead of paying in US dollars, the invoice will be made in Indian rupees in Rupee Vastro account.