India and Malaysia can now additionally trade in Indian Rupees in addition to the current modes of settlement, the Ministry of External Affairs said in a statement.
The announcement on Saturday came a day after New Delhi unveiled its new Foreign Trade Policy (FTP) for 2023-28.
The statement said that the India International Bank of Malaysia (IIBM) in Kuala Lumpur has "operationalized" a Special Rupee Vostro Account (SRVA) at the Union Bank of India, allowing payment in the Indian currency.
Exporters and importers from India and Malaysia can now invoice the trade in Indian Rupee and achieve better pricing for goods and services that are being traded.
Settlement in Indian Rupee
The settlement in Indian Rupee is possible after The India International Bank of Malaysia (IIBM) operationalised a mechanism and opened a new Special Rupee Vostro Account through Union Bank of India, which is its corresponding Indian bank.
IIBM in a statement said, "This mechanism is expected to benefit the traders on both sides as they can directly trade in Indian Rupee and save on currency conversion spreads."
Press Release by India International Bank Malaysia | IIBM
RBI permits trade settlement in Rupee
This comes after the Reserve Bank of India last year allowed settlement of international trade in Indian currency. The decision by the RBI is to help grow global trade and support the interests of the trading community in Rupee.
A circular published by the Reserve Bank of India (RBI) last July approved the opening of 'special Vostro' accounts in Indian banks, a move aimed at circumventing trade in the greenback and subsequently the US-led Western sanctions.
Indian officials said that encouraging trade in rupees would help Indian exporters in case of economic contingencies in other countries, which include liquidity shocks such as currency failures or other economic contingencies.
