Union Bank of India (UBI) has announced the opening of a ‘Special Rupee Vostro’ account in Malaysia to facilitate transactions between India and Malaysia in the Indian rupee. This move comes after the Reserve Bank of India (RBI) allowed the settlement of India’s international trade in rupees in July 2022. UBI’s Vostro account has been operationalised through the India International Bank of Malaysia (IIBM), its corresponding bank in Malaysia, making it the first Indian bank to operationalise such an account in the country.
What is a ‘Special Rupee Vostro’ bank account?
- The RBI has mandated authorised Indian banks to open and maintain Special Rupee Vostro accounts of the partner trading country’s banks to settle India’s international trade in rupees.
- 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.
- 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.
- According to PTI, as of March 15, 2023, Indian banks, including HDFC Bank and UCO Bank, have opened 30 such accounts in 18 countries, including Russia’s largest and second-largest banks, Sberbank and VTB.
- The total trade between India and Malaysia reached $19.4 billion in FY 2021-22. Also, 1 Malaysian Ringgit is equivalent to approximately ₹19 in India.
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