What TV doesn't, print can't; we deliver.
What TV doesn't, print can't; we deliver.
India’s Foreign Trade Policy (FTP) 2023 intends to make INR a global currency.
India and Malaysia have announced a major breakthrough in their bilateral trade relations. The two Asian countries can now settle trade in Indian Rupee (INR) in addition to the other currencies currently in use.
In July last year, the Reserve Bank of India (RBI) made the announcement to allow merchants to trade in INR with other countries with the aim of supporting the growth of global trade and the interests of the global trading community in INR.
The announcement comes a day after India’s ministry of commerce launched the Foreign Trade Policy (FTP) 2023, with the intention of making the rupee a global currency. This is a significant move towards India’s goal of increasing the acceptability of the rupee in the international market.
A currency is deemed to be “international” if it is widely acknowledged as a medium of exchange across the globe. While India has been successful in conducting trade in rupee with a limited number of countries, it is actively collaborating with several others to extend its reach.
India International Bank of Malaysia (IIBM) has operationalized the mechanism by opening a special Rupee vostro account through its corresponding bank in India, the Union Bank of India. This mechanism is expected to benefit traders on both sides as they can directly trade in INR and save on currency conversion spreads.
The facility enables exporters and importers from India and Malaysia to invoice trade in INR, resulting in better pricing for goods and services traded. IIBM has said it will facilitate traders in Malaysia for settlement of this trade in INR. Banks from 18 countries have opened 30 special vostro accounts for trade in INR, with Sberbank and VTB Bank, the largest and second-largest banks of Russia, respectively, being the first foreign lenders to receive approval.
The new mechanism is also aligned with Malaysia’s Foreign Exchange Policies (FEP) which allows Malaysian banks to undertake settlement of international trade in goods or services in any foreign currency, subject to the rules and regulations of Bank Negara Malaysia.
The development of trade between India and Malaysia in INR is an indication of the growing acceptance of the currency internationally. India has been able to conduct rupee-denominated trade with a few nations and is working closely with several others to expand it. The move towards making the rupee an international currency will give Indian businesses a competitive advantage in the global market.
The new mechanism will also reduce transaction costs and currency risks for traders, making trade between India and Malaysia more attractive. It is expected to boost economic activity between the two countries and provide a major fillip to their trade relations.
