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The Reserve Bank of India has allowed the settlement of international trade between India and Malaysia to be conducted in Indian Rupee (INR) in addition to other currencies.
This move is aimed at promoting the growth of global trade and supporting the interests of the global trading community in the INR.
This is particularly relevant as India imports a large amount of palm oil and its derivatives from Malaysia to meet the country’s huge domestic edible oil demand.
India International Bank of Malaysia (IIBM) has operationalized this mechanism by opening a Special Rupee Vostro Account through its Corresponding Bank in India, Union Bank of India.
The Ministry of External Affairs has released an official statement on Saturday announcing this initiative.
More information about the trade settlement can be accessed on the bank’s website, www.Indiainternationalbank.com.my.
Meanwhile, India has recently unveiled its new Foreign Trade Policy (FTP) 2023, which seeks to boost the country’s exports to USD 2 trillion by 2030 and has a specific focus on international trade settlement in rupees.
The government of India has been working towards making the Indian Rupee a global currency and allowing international trade settlement. This mechanism will help in internationalizing the Indian currency in the long run.
A currency can be termed “international” if it is widely accepted worldwide as a medium of exchange.
India has so far been able to conduct rupee-denominated trade with only a few countries but is in close coordination with several others to expand this initiative.
The move towards INR as a mode of international trade settlement is expected to have a significant impact on bilateral trade between India and Malaysia, and could also have wider implications for international trade involving other countries.