According to the Ministry of External Affairs, trade between India and Malaysia can now be settled in Indian Rupee along with the current modes of trading in other currencies. The decision has been moved by the Reserve Bank of India in favour of the decision taken in July last year. the trade can be made in Indian Rupee (INR) according to the new trade guidelines. According to the Ministry of External Affairs, the initiative taken by the Reserve Bank of India aims to facilitate global trade growth and will also support the interest of the global trading community in the Indian Rupee (INR).In addition to the present methods of settlement in other currencies, trade between India and Malaysia can now be handled in Indian Rupee (INR), according to the MEAs official announcement. This comes after the Reserve Bank of India decided to permit the settlement of foreign commerce in the Indian Rupee in July 2022.MEA further added, “India International Bank of Malaysia (IIBM), based in Kuala Lumpur, has operationalised this mechanism by opening a Special Rupee Vostro Account through its Corresponding Bank in India, which is Union Bank of India.” Vostro accounts are been used to make payments in domestic currency. Notably, India imports a sizable quantity of palm oil and its derivatives from Malaysia to meet its enormous domestic demand for edible oil.Meanwhile, at the time of unveiling Indias new Foreign Trade Policy 2023, the government said that it will boost the countrys exports to USD 2 trillion by the year 2030 and especially focuses on international trade settlement in rupees. When introducing the FTP 2023, Union Minister Piyush Goyal stated that the government has been working to make the Indian Rupee a worldwide currency and enable the settlement of international trade. Long-term, this method will aid in the internationalisation of the Indian rupee.A currency is considered “international” if it is frequently used for trade on a global scale. India is collaborating closely with many more countries to expand the number of countries with which it has so far been able to conduct rupee-denominated trade.It is also been anticipated that the move has come against the backdrop of ongoing official efforts to safeguard Indian trade from the impact of the Ukraine Crisis. It also indicates that India is willing to take concrete steps towards a process of aligning a countrys currency with the US dollar.How can the transaction be made in INRAccording to the reports, the invoicing in the Indian rupee does not require any approval and can be done in the same way it is done with other currencies.Correspondent Banker in India for SRVUnion Bank of India with over 8700+ branches in India and having the government of India as its major shareholder is the correspondent bank for the SRV Transactions.How can a company remit INR to their counterpart in India for trade settlementThe remittance transaction must be related to actual trade and up to the actual trade amount. A company must provide documentary evidence that proves the remittance/ trade settlement is trade related.Which countries use the Indian Rupee for tradeAccording to the new list, the Reserve Bank of India has allowed 18 countries who accept payment in the Indian rupee Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda and the United Kingdom.Benefits to Indian vendorsBy choosing to pay in Indian Rupee (INR), Indian vendors may experience quicker payments and a simpler account reconciliation process, boosting cash flows and resulting in favourable terms. It is possible to reduce the time it takes to receive payments and the difficulty of matching credits to invoices.
