India and Malaysia have reached a landmark agreement that will allow the two nations to settle trade in Indian Rupee, the Ministry of External Affairs (MEA) announced on Saturday. This development comes as a result of the Reserve Bank of India's decision in July 2022 to permit the settlement of international trade in Indian currency. In a statement, the MEA said that "Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies." The move is aimed at facilitating the growth of trade and supporting the interests of the global trading community in the Indian rupee. The India International Bank of Malaysia (IIBM) has already operationalized this mechanism by opening a special Rupee Vostro account through its corresponding bank in India, Union Bank of India. Vostro accounts are used to make payments in domestic currency. The opening of this account will allow Malaysia to use the Indian Rupee to settle trade payments. This move is expected to be beneficial for both India and Malaysia. It will eliminate the need for foreign exchange conversion and will reduce transaction costs. This development is also expected to lead to increased trade between the two countries, especially in areas such as textiles, automobiles, and electronics. India has been working towards promoting the use of the Indian Rupee in international trade settlements, and this agreement with Malaysia marks a significant step in this direction. India has also signed similar agreements with other countries such as Iran, Russia, and the United Arab Emirates. Earlier this month, in response to a query in Rajya Sabha, the government said that RBI has so far allowed 18 countries to open Special Vostro Rupee Accounts (SVRAs) for settling payments in Indian rupees. Special banks, including HDFC Bank and UCO Bank have opened as many as 30 SVRAs to facilitate rupee trade.
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