Skip to main content

India and Malaysia can now use rupee to settle trade

India and Malaysia can now use the Indian rupee to settle trade addition to other currencies, the Ministry of External Affairs said on Saturday. The move follows the decision by the Reserve Bank of India in July last year to allow settlement of international trade in Indian currency. The MEA said the

 RBI's initiative is aimed at facilitating the growth of trade an supporting the interests of the global trading community in the Indian rupee. "India International Bank of Malaysia (IIBM), based in Kuala Lumpur , ahs operationalized this mechanism by opening a special Rupee Vostro account through its corresponding bank in India that is Union Bank of India."


What is a Vostro Account?

Vostro accounts are used to make payments in domestic currency. The opening of this account will allow Malaysia to use the Indian Rupee to settle trade payments. This move is expected to benefit both India and Malaysia. It will eliminate the need for foreign exchange conversion and will reduce transaction costs. This development is also expected to lead to especially to lead to increase trade between the two countries especially in areas such as Textiles, automobiles and electronics.


What is De-dollarization?

De-dollarization is a process of substituting the US dollar as the currency used for:
Trading oil and/ or other commodities
  • Buying US dollar for the forex reserve 
  • Bilateral trade agreements 
  • Dollar-dominated assets
It happens when the central bank of the country diversify their reserves away from the USD to other assets or currencies like the Euro, Renminbi, Rupee or gold. The USD has been the world's dominant
 currency since the conclusion of the second world war. Since then it has been the most sought currency for decades, which means it is held by central banks across the globe in significant quantity. This unique ability not only makes the US the leader in the financial and monetary system, but also provides incomparable leverage when it comes to coercive ability to shape decisions taken by governments, businesses, and  institutions.


What is the cause of this shift?

The Ukraine was played a very important role for this decision as oil prices rose all across the world. The price rise and also the food shortage create an environment for the decision to de-dollarize their
 economy. The US has used this leverage for a very long time, they have imposed sanctions on regimes and states to achieve their foreign policy goals. After the US-China trade war, China started the process of discussing the possibility of using yuan in the trade with countries.     
Labels:

Comments

Post a Comment

Popular posts from this blog

Russian Government's decision to put nuclear weapons in Belarus.

 On Saturday, Russian President Vladimir Putin announced plans on Saturday to station nuclear weapons in neighboring Belarus, sending a warning to NATO over its support to Ukraine and escalating stand off with West. While, Putin said the move would not violate nuclear non-proliferation promises, it is one of Russia's pronounced nuclear signals since the start of the war. He also added that this move was triggered by Britain's decisions this past week to provide Ukraine   with armor-piercing rounds containing depleted uranium. In addition, Russia is presenting the deployment not just as a decision made by both countries,, but as a response to long-standing requests by Belarusian leader Alexander Lukashenko. This is Russia's tried-and-tested way of showing respect for its ally, previously cited when dispatching Russian troops to Belarus for training exercises both last February- ahead of the invasion - and in October. Tactical nuclear weapons are intended  for use on the ...
Post a Comment
Read more

Why Credit Suisse shares are falling?

On March 15, credit Suisse shed a quarter of its value after its largest shareholder said it could not provide any more support. Saudi national Bank(SNB) who is the largest shareholder which hold about 9.9% credit Swiss, said it would not buy any more shares. According to the statement of SNB chairman Ammar Al Khudairy "we cannot because we would go above 10 per cent. Its a regulatory issue". After that the shares of credit Swiss dropped by as much as 30%, which leads to a fall of 7% in the European banking index. The stick has pummelled earlier in the week due to the collapse of US tech lender silicon valley Bank. The analysts of France said that the credit Suisse want a bailout by the Swiss National Bank and financial regulator FINMA, possibly one or more other banks. The analysts also said that the Saudi National Bank could do a U-turn.. Last year the Saudi National Bank has increased it stake in credit Suisse and committed to invest up to $1.5 dollars. On Tuesday the ban...
1 comment
Read more

US-India Jet Engine Deal: A Boost for Both Countries

  US-India Jet Engine Agreement: A Boost for Both Countries The United States and India are close to finalizing an agreement to jointly manufacture fighter jet engines in India. The deal, which would involve General Electric (GE) partnering with state-owned Hindustan Aeronautics Limited (HAL), is seen as a significant step forward in India’s efforts to develop a domestic defence industrial base. Currently, India relies on imports for most of its fighter jet engines. The deal would allow India to produce advanced jet engines, which would give it greater self-reliance in the defence sector. It would also strengthen India’s strategic partnership with the US. The deal is still in the early stages of negotiations, but if it is successful, it would be a major boost for both countries. For the US, the deal would help to secure a long-term customer for its advanced jet engine technology. For India, the deal would help to meet its growing demand for fighter jets and would give it a more sec...
Post a Comment
Read more