To facilitate transactions between India and Malaysia in the Indian rupee, Union Bank of India (UBI) announced on Saturday the opening of its ‘Special Rupee Vostro’ account in Malaysia. UBI’s announcement came on a day the ministry of external affairs said the two countries can now settle trade in the rupee as well, in addition to the current modes of settlement in other currencies, including the Malaysian Ringgit.
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With this, UBI has become the first Indian bank to operationalise a Vostro account in the fellow Asian nation. The account has been operationalised through the India International Bank of Malaysia (IIBM), UBI’s corresponding bank in that country.
Here is all you need to know about a ‘Special Rupee Vostro’ bank account:
(1.) In July 2022, the Reserve Bank of India (RBI) decided to allow the settlement of India’s international trade in rupee. Accordingly, authorised Indian banks must open and maintain Special Rupee Vostro accounts of the partner trading country’s banks.
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(2.) These accounts keep the foreign bank’s holdings in the Indian counterpart, in rupees. When an Indian trader wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account.
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(3). Similarly, in the reverse scenario, the amount to be paid to an Indian trader is deducted from the Vostro account, and credited to the person’s regular account.
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(4.) According to PTI, as on March 15, Indian banks, including HDFC Bank and UCO Bank, had opened as many as 30 such accounts in 18 countries. The partner international banks include Sberbank and VTB, the largest and second-largest, respectively, in Russia.
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(5.) The total trade between India and Malaysia reached $19.4 billion in FY 2021-22, as per Union Bank. Also, at present, 1 Malaysian Ringgit is equivalent to approx. ₹19 in India.
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