This follows the decision by the Reserve Bank of India (India’s central bank) in July 2022 to allow the settlement of international trade in rupees.

“This initiative by the Reserve Bank of India is aimed at facilitating the growth of global trade and to support the interests of the global trading community in Indian rupees.

“This new mechanism is also aligned with Malaysia’s foreign exchange policies as part of which Malaysian banks are allowed to undertake the settlement of international trade in goods or services in any foreign currency, subject to the rules and regulations of Bank Negara Malaysia,” the high commission said in a statement.

The statement also said India International Bank of Malaysia is the first bank in Malaysia that has put into operation this mechanism by opening a special Vostro rupee account through its corresponding bank in India — the Union Bank of India.

It said this mechanism would allow the Indian and Malaysian traders to invoice the trade in rupees, adding that the potential benefits from this mechanism included better pricing for traded goods and services and the ability to directly trade in rupees, therefore, saving on currency conversion spreads.

India-Malaysia bilateral trade, which reached US$19.4 billion (RM85.6 billion) last year, is expected to benefit from this new option to settle bilateral trade in rupees.