India-Bangladesh trade in rupee an important beginning : Pranay Verma
‘It will provide speed, efficiency, and convenience to the business community of both sides’
Dhaka: Indian High Commissioner in Bangladesh Pranay Verma described Tuesday’s launch of rupee trading as a “very important beginning” amid the US dollar crisis.
“It will provide speed, efficiency, and convenience to the business community of both sides,” the envoy said.
“It will reduce transaction cost, and transaction time for settlement of trade. It will make our trade more competitive which also creates new incentives for Bangladesh exporters to promote exports to India. So overall it’s an initiative where we are providing new options to the business community.
“We are actually increasing the ease of doing business, reducing the cost of doing business. Overall I think we are creating a comfort of dealing with our own currencies and minimizing the reliance on other currencies. This is a very important beginning,” he said.
Initially, Bangladesh’s state-owned Sonali Bank Ltd and private Eastern Bank Limited (EBL), 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 a 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 accounts. More banks are expected to join this trading regime.
Until Tuesday, the US dollar was the only means of Bangladesh’s foreign trade. This gives them an option. Excess balance can be repatriated in freely convertible currency or the currency of the beneficiary trading partner country.
Tamim Agro Industries is the first company in Bangladesh to open an export LC worth ₹16 million. Nita Company Ltd is the first exporter of India that opened ₹12 million LC.
The high commissioner said there was a demand for such a mechanism from the businesses particularly in Bangladesh. “We are happy that we have been able to do that.”
“It’s going to play a very important role in promoting our trade and economic ties. I always believe that the recent transformation in India-Bangladesh relations have been most visibly present in the growth of our economic engagement and in our connectivity links,” he said.
“We should do something to promote that cooperation. This particular step is a very important part of that effort. If you look at our trade relations, it has grown significantly over the years.
“Today Bangladesh is the largest trade partner of India in South Asia. Our trade volumes have doubled in the last five years. Bangladesh has also found a very reliable market for its exports in India. Bangladesh’s exports have been consistently growing. This has crossed $2 billion. We are the largest export market for Bangladesh in Asia. We want that number to grow,” the envoy said.
As Bangladesh will become a developing country in 2026, the high commissioner said both countries are doing a lot of things together “to capture new opportunities from this new reality”.
“One of them is the comprehensive economic partnership agreement (Cepa) that we are going to negotiate shortly and the other is the mechanism that we have put in place today. This is a very innovative way to improve our bilateral trade structure,” he said.
“Of course, the extent to which it will be used is limited at the beginning. The success of this rests on how well we make this information available to businesses and how widely they use this. It matures as we gain experience using this channel. I am sure there will be more improvement in the system,” he added.
Rupee has been fixed since the two-way trade is heavily in favour of India. Bangladesh exports $2 billion while imports $14 billion worth of products. The rupee bill will be paid equivalent to the export which means Bangladesh will be able to buy products worth $2 billion, the current export amount.
