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

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