Bangladesh, India start trading in rupees
Initially, Bangladesh's state-owned Sonali Bank Ltd and private Eastern Bank Limited (EBL) are participating in the settlement of trade transactions in rupees
Dhaka: In a landmark development, Bangladesh and India launched trading in rupees on Tuesday in an effort to curb US dollar dependency in the wake of the Russia-Ukraine war.
This is just the beginning, both Bangladesh Bank Governor Abdur Rouf Talukder and Indian High Commissioner in Dhaka Pranay Verma said as they launched the initiative at an event at Hotel Le Meridien.
Tamim Agro Industries is the first company in Bangladesh to open an export LC worth 16 million rupees. Nita Company Ltd is the first exporter of India that opened 12 million rupees LC.
“This will increase our bilateral trade,” Bangladesh’s apex chamber, FBCCI, President Md Jashim Uddin said.
“We export $2 billion worth of products and import $14 billion from India. With the new initiative, we will be able to pay the import bill with the rupees that we earn from exports,” he said. “This will reduce pressure on our foreign reserves.”
Initially, Bangladesh’s state-owned Sonali Bank Ltd and private Eastern Bank Limited (EBL), and India’s State Bank of India (SBI) and ICICI Bank are participating in the settlement of trade transactions in rupees.
They will open “nostro accounts” in the Indian banks in rupees with the approval of the central banks of the two countries to initiate the transaction process.
A nostro account is an account opened by a bank of one country to another country’s bank for foreign currency transactions.
Indian importers can open letters of credit in those two Indian banks to import goods from Bangladesh in rupees.
Similarly, Bangladeshi importers can open letters of credit in those two selected Bangladeshi banks to import products from India in rupees.
Rupee, Taka exchange rate will be decided on cross currency basis by individual banks. Settlement will happen through the SWIFT mechanism between countries and the RTGS mechanism within the countries for crediting exporters account.
More banks are expected to join this trading regime. Until Tuesday, the US dollar was the only means of Bangladesh’s foreign trade.
The governor said they had been discussing for a long time to start trade in rupees. It gained momentum recently, he said, adding that trading in rupees will also increase trade.
“It will have a psychological effect on traders on both sides. This will increase trade. This will open a new window for us to go in a big way into the big market of India,” the governor said. “We are in the process of introducing a dual currency card. We are expecting it by December,” he said.
