India Announces Trade Settlement in Rupees With Malaysia, gives blow to Dollar Hegemony

India's Ministry of External Affairs (MEA) in a statement announced that the trade between India and Malaysia can now be settled in Indian Rupees (INR) in addition to the present modalities of a settlement involving other currencies. "This initiative by the Reserve Bank of India (RBI) is aimed at facilitating the growth of global trade and to support the interests of the global trading community in Indian Rupees (INR)," as per the statement.

It stated that a Special Rupee Vostro Account (SRVA) at the Union Bank of India had been "operationalized" by the India International Bank of Malaysia (IIBM) in Kuala Lumpur, enabling payment in Indian rupees. In July of last year, the Reserve Bank of India (RBI) issued a circular approving the opening of "special Vostro" accounts in Indian banks as a means of avoiding dollar trading and the ensuing US-led Western sanctions.

$17 billion bi-lateral trade between India and Malaysia

Data from the Ministry of Commerce said that New Delhi is Kuala Lumpur's 13th largest trading partner, whose bilateral trade with India reached $17 billion in 2021–22.

The Reserve Bank of India (RBI) had authorised banks from 18 countries, including Malaysia, Russia, Germany, Singapore, Sri Lanka, and Tanzania, to operate Vostro accounts. India has never backed up the unilateral economic restrictions imposed by several Western countries. Given the instability in food and fuel prices around the world, New Delhi has increased its commerce with Moscow to unprecedented levels since Western sanctions began last year.

India unveils new Foreign Trade Policy (FTP) for 2023-28

A day prior to the announcement on Saturday, New Delhi released its revised Foreign Trade Policy (FTP) for the years 2023–28. One of the main goals of the new trade strategy, according to the Indian Commerce Ministry, is to "encourage" the internationalisation of the rupee. The policy also aims to increase Indian exports of goods and services to $2 trillion by 2030.

In case of economic contingencies in other nations, such as liquidity shocks like currency collapse or other economic emergencies, Indian exporters would benefit by boosting commerce in rupees, according to Indian officials.