On April 1, 2023, the Union Bank of India (UBI) became the first Indian Bank to open its ‘Special Rupee Vostro Account (SRVA)’ in Malaysia to facilitate transactions between India and Malaysia in the Indian rupee. This will be done through the UBI’s corresponding bank in Kuala Lumpur, Malaysia i.e. India International Bank of Malaysia (IIBM).
- The will allow the Indian and Malaysian traders to invoice the trade in Indian Rupee.
Reason:
The opening of this account is in the backdrop of ongoing official efforts to Safeguard Indian trade from the impact of Ukraine crisis. Also, India is taking steps towards de-dollarization of its international trade, as the US (United States) dollar has been the dominant reserve currency for international trade.
Aim:
To facilitate the growth of global trade and to support the interests of the global trading community in Indian Rupee
Background:
i.On 1st April 2023, the Ministry of External Affairs (MEA) announced that India and Malaysia can now use the Indian rupee to settle trade in addition to other currencies including the Malaysian Ringgit.
ii.This follows the decision by the Reserve Bank of India (RBI) in July 2022 to allow the settlement of international trade in the Indian Rupee.
iii.RBI’s initiative is aimed at facilitating the growth of trade and supporting the interests of the global trading community in the Indian rupee.
Key Points:
i.The total trade between India and Malaysia reached US$19.4 billion in FY22, as per UBI.
ii.As on March 15, 2023 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 are the first foreign lenders to receive the approval.
iii.Malaysia is the third largest trading partner of India in the ASEAN(Association of Southeast Asian Nations) region, after Singapore and Indonesia that account for US$30.1 billion and US$26.1 billion bilateral trade with India respectively.
About SRVA:
According to RBI’s decision to permit the settlement of India’s international trade in Indian rupees, the authorized banks in India must establish and maintain Special Rupee Vostro accounts for the foreign banks with which they trade.These accounts hold the foreign bank’s funds in rupees. When an Indian trader needs to make a payment to a foreign trader in rupees, the amount is transferred to the corresponding Vostro account, and vice versa.
- The RBI granted permission for banks from 18 countries, including Malaysia, to open Special Rupee Vostro Accounts (SRVAs) for this purpose.
Recent Related News:
i.As per an analysis of the latest financial results of Public Sector Banks (PSBs), Pune (Maharashtra) based Bank of Maharashtra (BoM) tops the list of PSBs in terms of loan growth percentage for the third quarter of FY23 (Q3 FY23). BoM is followed by Union Bank with a growth rate of 19.80% in advances.
ii.Paytm Payments Bank Ltd (PPBL) introduced the ‘RuPay credit card on UPI’ in collaboration with the National Payments Corporation of India (NPCI), allowing users to link their RuPay credit cards to the Unified Payments Interface (UPI) infrastructure.
About Union Bank of India (UBI):
Managing Director– A. Manimekhalai
Headquarters– Mumbai, Maharashtra
Tagline– Good People to Bank With
