New Delhi: Public sector Union Bank of India has operationalised the mechanism to allow Indian and Malaysian traders to invoice and settle the trade in Indian Rupee (INR).
In an official announcement on Saturday, the public sector bank said that it is the first bank in India that has set up this mechanism.
“This mechanism will allow the Indian and Malaysian traders to invoice the trade in Indian Rupee and therefore achieve better pricing for goods and services traded. This mechanism is expected to also benefit the traders on both sides as they can directly trade in Indian Rupee and therefore save on currency conversion spreads,” the state-run bank said.
It noted that Union Bank of India is the first Bank in India that has operationalised this mechanism by opening a Special Rupee Vostro Account through its Corresponding Bank in Malaysia i.e. India International Bank of Malaysia.
The development has come a day after India unveiled a new Foreign Trade Policy (FTP 2023) seeking to promote rupee trade. The new policy also focuses on making India a global trading hub.
“The internationalisation of Indian rupee (INR) is something that we will be working on and under the FTP the changes required to facilitate international trade settlement in rupee have already been provided for. This will be taken forward and encouraged,” Directorate General of Foreign Trade (DGFT) Chief Santosh Sarangi had said while launching the new FTP.
United Bank of India said today that trade between India and Malaysia can now be settled in Indian Rupee in addition to the current modes of settlement in other currencies.
The Reserve Bank of India had in July 2022 allowed the settlement of international trade in Indian Rupees.
“This measure is aimed at facilitating the growth of global trade and to support the interests of the global trading community in Indian Rupee,” the Union Bank of India said in its statement.
India-Malaysia bilateral trade, which has reached US$19.4 billion in FY 2021-22, is expected to benefit from the option to settle bilateral trade in Indian Rupee.