The Ministry of External Affairs announced on April 1, 2023 that India and Malaysia have agreed to settle trade in the Indian Rupee. The announcement comes against the backdrop of ongoing official efforts to protect Indian business from the impact of the Ukraine crisis. The move away from the US dollar, which has so far been the major reserve currency for international trade, assumes significance as it indicates that India is ready to take concrete steps towards dollarization of its international trade.
"Trade between India and Malaysia can now be settled in Indian Rupee (INR) in addition to the existing modes of settlement in other currencies. This is in line with the decision of the Reserve Bank of India to allow settlement of international trade in Indian Rupee (INR) in July 2022. This initiative of RBI is aimed at facilitating the growth of global trade and supporting the interests of the global business community in the Indian Rupee,” announced the Ministry of External Affairs.
Trading in the US dollar has been difficult since the Russian economy was sanctioned by Western powers after President Putin launched a so-called "special military operation" against Ukraine on February 24, 2022. As a result of the sanctions—and the war—it became increasingly difficult to make payments to Russia in US dollars which in turn triggered a worldwide search for solutions for national currencies and de-dollarization.
"The Kuala Lumpur-based India International Bank of Malaysia (IIBM) has operationalized this mechanism by opening a special Rupee Vostro Account through its correspondent bank in India, ie, Union Bank of India," said the official announcement.
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