Context:- 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
