In news– Recently, India and Malaysia have agreed to settle trade-related payments in Indian rupees.
Key updates-
- Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the current modes of settlement in other currencies,
- 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 that is Union Bank of India.
- Vostro accounts are used to make payments in domestic currency.
- The Union Bank of India in a statement said that it has become the first bank in India to operationalise this option by opening a Special Rupee Vostro Account through its “corresponding bank” in Malaysia — India International Bank of Malaysia.
- In March 2023, banks from eighteen countries were allowed by the Reserve Bank of India (RBI) to open Special Rupee Vostro Accounts (SRVAs) to settle payments in Indian rupees. Malaysia was one of the eighteen countries.
- The 18 countries are: Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Botswana,Sri Lanka, Tanzania, Uganda, and the United Kingdom.
- The move follows the decision by the Reserve Bank of India in July 2022 to allow settlement of international trade in Indian currency.
- RBI’s initiative is aimed at facilitating the growth of trade and supporting the interests of the global trading community in the Indian rupee.
India and Malaysia trade relations-
- With strengthening bilateral economic and commercial relations, Malaysia has emerged as 13th largest trading partner for India while India figures among the ten largest trading partners for Malaysia which is also our 3rd largest trading partner in ASEAN.
- A bilateral Comprehensive Economic Cooperation Agreement(CECA) covering goods, services and investment has come into effect from 1 July 2011.
- India’s major export items to Malaysia are mineral fuels, mineral oils; aluminum and articles thereof, meat and edible meat offal, iron and steel, copper and articles thereof, organic chemicals, nuclear reactors, boilers, machinery and mechanical appliances; electrical machinery and equipment; etc.
- India’s major import items from Malaysia are palm oil, mineral fuels, mineral oils, electrical machinery and equipment; animal or vegetable fats and oils and their cleavage products; nuclear reactors, boilers, machinery and mechanical appliances; copper and articles thereof, wood; wood charcoal, aluminum, organic chemicals, iron and steel and miscellaneous chemical products.
- The first Indian joint venture, Godrej commenced operations in 1968, and in the seventies and early eighties, Malaysia hosted the largest number of Indian joint ventures in any country.
- Malaysia ranks as the 26th largest investor in India with FDI inflow of US$ 1.12 billion during the period April 2000 to September 2021.
- The highest joint ventures and 3 Indian Public Sector Undertakings operating in investment proposals have been in the telecommunications, Malaysia.
- Their areas of operation are manufacture of textiles and yarn, followed by fuels (power and oil refinery), roads and highways.
- India-Malaysia bilateral trade touched $19.4 billion during 2021-22.
- Malaysia is the third largest trading partner of India in the ASEAN region, after Singapore and Indonesia that account for $30.1 billion and $26.1 billion bilateral trade with India respectively.
Source: Economic Times
