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Dhaka, Delhi close to start trading in taka, rupee
17 April, 2023, 10:50 pm
Last modified: 17 April, 2023, 11:01 pm
Infographic: TBS
Infographic: TBS
Bangladesh and India have agreed to settle a part of bilateral trade transactions in their own currencies to ease pressure on dollar holdings.
To facilitate the cross-country transactions, Sonali Bank and Eastern Bank will open accounts in two Indian lenders – State Bank of India and ICICI Bank. The two Indian banks will also open similar accounts in the two Bangladeshi banks.
Opening of these accounts – known as vostro and nostro accounts in global accounting – will require approval of respective central banks, officials of the Bangladesh Bank and relevant commercial banks said on Monday.
"Bilateral trade with India in taka and rupee will reduce pressure on the US dollar. Both countries will benefit from this," said Md Afzal Karim, CEO and managing director of Sonali Bank Limited.
He told The Business Standard that more banks of the two countries will gradually join the process.
Settling bilateral transactions in taka and rupee has been in talks for months amid the crisis of dollar induced by the war.
However, not all of the bilateral trade will be in local currencies.
Exports from Bangladesh to India are worth about $2 billion, transactions of which will be completed in rupees and takas. On the other hand, Bangladesh's import from India in last fiscal year was about $13.69 billion, of which $2 billion, an equal trade value, will be traded in rupees, while the rest will be paid in US dollars as always.
Ali Reza Iftekhar, Managing Director of EBL told TBS, initiatives have been taken to transact directly in taka-rupees without the inclusion of any third currency.
"Once we get the approval of the central banks of both countries, we will inform the customers that import and export with India can be done directly through rupees. Interested traders can then directly open LCs in rupees. It will reduce the cost of traders. Again, the additional pressure caused by the demand for dollars will ease," he said.
A delegation from India's central bank the Reserve Bank of India and the State Bank of India visited Dhaka earlier this month to discuss transaction processes between the two countries. On 11 April, they held a meeting at EBL, where managing directors of EBL and the Sonali Bank discussed payment methods for commercial transactions between the two countries in taka and rupees.
Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque told TBS that India's central bank issued instructions for direct transactions in rupees several months ago.
"In the light of this decision of the Reserve Bank of India, Bangladesh has reviewed the matter and taken a policy decision regarding bilateral transactions in taka and rupee. Any trader in Bangladesh who wants to open an LC in rupees for import or export can do so, once the due processes are completed," he said.
He added that there are some procedural issues in making such transactions.
Businesses have welcomed the move as they believe the arrangements will promote trade, and reduce pressure on forex reserves.
Bangladesh's exports to India have been increasing for the past two years and are expected to increase further.
President of Bangladesh-India Chamber of Commerce and Industry Abdul Matlub Ahmad told TBS, "We have been requesting the central banks of both countries to complete the transaction equivalent to Bangladesh' s exports to India in taka and rupees for quite some time.
We also discussed this issue during Prime Minister Sheikh Hasina's last visit to India.
President of Bangladesh Chamber of Industries Anwar-ul Alam Chowdhury Parvez told TBS that now both countries are working on dealing with India in rupees equivalent to $2 billion dollars (equal to Bangladesh's export earnings in India).
"The procedural steps are being taken care of. However, it may take several months for the transaction in taka and rupee to start," he said.
"The exchange rate of rupee is steady compared to taka. So our currency needs to be more stable before starting transactions in rupees," he pointed out.
Bangladesh is working on signing a currency swap agreement with Russia. China has also offered a currency swap with Bangladesh and the government is reviewing the Chinese proposal.
Due to the Russia-Ukraine war-induced commodity price hike, several countries are facing a dollar crisis. Besides, many countries around the world are inclining towards transacting in their own currencies, avoiding the US dollar, due to geopolitical reasons.
The BRICS countries – India, Russia, China, Brazil and South Africa have also started discussions about starting import and export in their own currencies, avoiding the US dollar.
Saudi Arabia has also decided to export fuel oil to China in yuan.
www.tbsnews.net
ECONOMY
Abul Kashem & Shaikh Abdullah17 April, 2023, 10:50 pm
Last modified: 17 April, 2023, 11:01 pm
Infographic: TBS
Infographic: TBS
Bangladesh and India have agreed to settle a part of bilateral trade transactions in their own currencies to ease pressure on dollar holdings.
To facilitate the cross-country transactions, Sonali Bank and Eastern Bank will open accounts in two Indian lenders – State Bank of India and ICICI Bank. The two Indian banks will also open similar accounts in the two Bangladeshi banks.
Opening of these accounts – known as vostro and nostro accounts in global accounting – will require approval of respective central banks, officials of the Bangladesh Bank and relevant commercial banks said on Monday.
"Bilateral trade with India in taka and rupee will reduce pressure on the US dollar. Both countries will benefit from this," said Md Afzal Karim, CEO and managing director of Sonali Bank Limited.
He told The Business Standard that more banks of the two countries will gradually join the process.
Settling bilateral transactions in taka and rupee has been in talks for months amid the crisis of dollar induced by the war.
However, not all of the bilateral trade will be in local currencies.
Exports from Bangladesh to India are worth about $2 billion, transactions of which will be completed in rupees and takas. On the other hand, Bangladesh's import from India in last fiscal year was about $13.69 billion, of which $2 billion, an equal trade value, will be traded in rupees, while the rest will be paid in US dollars as always.
Ali Reza Iftekhar, Managing Director of EBL told TBS, initiatives have been taken to transact directly in taka-rupees without the inclusion of any third currency.
"Once we get the approval of the central banks of both countries, we will inform the customers that import and export with India can be done directly through rupees. Interested traders can then directly open LCs in rupees. It will reduce the cost of traders. Again, the additional pressure caused by the demand for dollars will ease," he said.
A delegation from India's central bank the Reserve Bank of India and the State Bank of India visited Dhaka earlier this month to discuss transaction processes between the two countries. On 11 April, they held a meeting at EBL, where managing directors of EBL and the Sonali Bank discussed payment methods for commercial transactions between the two countries in taka and rupees.
Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque told TBS that India's central bank issued instructions for direct transactions in rupees several months ago.
"In the light of this decision of the Reserve Bank of India, Bangladesh has reviewed the matter and taken a policy decision regarding bilateral transactions in taka and rupee. Any trader in Bangladesh who wants to open an LC in rupees for import or export can do so, once the due processes are completed," he said.
He added that there are some procedural issues in making such transactions.
Businesses have welcomed the move as they believe the arrangements will promote trade, and reduce pressure on forex reserves.
Bangladesh's exports to India have been increasing for the past two years and are expected to increase further.
President of Bangladesh-India Chamber of Commerce and Industry Abdul Matlub Ahmad told TBS, "We have been requesting the central banks of both countries to complete the transaction equivalent to Bangladesh' s exports to India in taka and rupees for quite some time.
We also discussed this issue during Prime Minister Sheikh Hasina's last visit to India.
President of Bangladesh Chamber of Industries Anwar-ul Alam Chowdhury Parvez told TBS that now both countries are working on dealing with India in rupees equivalent to $2 billion dollars (equal to Bangladesh's export earnings in India).
"The procedural steps are being taken care of. However, it may take several months for the transaction in taka and rupee to start," he said.
"The exchange rate of rupee is steady compared to taka. So our currency needs to be more stable before starting transactions in rupees," he pointed out.
Bangladesh is working on signing a currency swap agreement with Russia. China has also offered a currency swap with Bangladesh and the government is reviewing the Chinese proposal.
Due to the Russia-Ukraine war-induced commodity price hike, several countries are facing a dollar crisis. Besides, many countries around the world are inclining towards transacting in their own currencies, avoiding the US dollar, due to geopolitical reasons.
The BRICS countries – India, Russia, China, Brazil and South Africa have also started discussions about starting import and export in their own currencies, avoiding the US dollar.
Saudi Arabia has also decided to export fuel oil to China in yuan.
Dhaka, Delhi close to start trading in taka, rupee
Bangladesh and India have agreed to settle a part of bilateral trade transactions in their own currencies to ease pressure on dollar holdings. To facilitate the cross-country transactions, Sonali Bank and Eastern Bank will open accounts in two Indian lenders – State Bank of India and ICICI Bank.
