India, Malaysia can now trade in Indian rupee

Tags: Economy/Finance International News

The Ministry of External Affairs announced on 1 April that India and Malaysia have agreed to settle trade in the Indian rupee.

An overview of the news

• In July 2022, the Reserve Bank of India (RBI) allowed settlement of international trade in Indian currency.

• This step has been taken only after this decision of the RBI.

• According to the Ministry of External Affairs,trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the existing methods of settlement in other currencies.

• The RBI initiative is aimed at facilitating trade growth and supporting the interests of the global trading community in the Indian Rupee.

• Kuala Lumpur-based India International Bank of Malaysia (IIBM) has introduced this system in India by opening a special Rupee Vostro account through Union Bank of India.

• Vostro accounts are used to make payments in domestic currency.

What is a Vostro Account?

• Vostro is a Latin word meaning "your", hence, Vostro Account means "your account".

• Vostro account is defined as an account maintained by a correspondent bank on behalf of another bank.

• For example HSBC's Vostro account is being handled by SBI in India.

• A Vostro account is established to enable a foreign correspondent bank to act as an agent or provide services as an intermediary for a domestic bank.

About Malaysia 

• Prime Minister - Anwar Ibrahim

• Capital - Kuala Lumpur

• Currency - Malaysian ringgit

• Official Language - Malay

• Official Religion - Islam