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India and Malaysia have reach an agreement whereby the trade between to Asian countries can be settled in the Indian rupees. The announcement regarding the trade agreement was made by the Ministry of External Affairs announced on on April 1, 2023.
The announcement came in the backdrop of ongoing official efforts to Safeguard Indian trade from the impact of Ukraine crisis. The shift away from the U.S. dollar which has been the dominant reserve currency for international trade so far has added significance as it indicates India is willing to take concrete steps towards de-dollarization of its international trade.
“Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies. This follows the decision by the Reserve Bank of India in July 2022 to allow the settlement of international trade in the Indian Rupee (INR). This initiative by RBI is aimed at facilitating the growth of global trade and to support the interests of the global trading community in Indian rupees, “ the Ministry of external affairs announced.
Trading in the U.S. dollar has become difficult especially after the Russian economy was sanctioned by the western powers following president Putin’s launch of a so-called “special military operation” against Ukraine on February 24, 2022. As a fallout of the sanctions and war-making payments to Russia in U.S. dollars became increasingly difficult which in turn triggered a search for solutions in national currencies and de-dollarisation worldwide.
“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 i.e. Union Bank of India,” the official announcement stated.
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