Bangladesh and India have agreed to settle a part of the bilateral trade transactions in their own currencies -- Rupee and Taka -- to ease pressure on dollar holdings, Bangladesh-based news website The Business Standard (TBS News) reported.
In order to facilitate cross-country transactions, Sonali Bank and Eastern Bank will open accounts in the State Bank of India and ICICI Bank. The two Indian banks will also open similar accounts in the two Bangladeshi banks, as per the news report.
The opening of these accounts known as vostro and nostro accounts in global accounting will need the approval of respective central banks, The Business Standard (TBS News) reported citing officials of the Bangladesh Bank and relevant commercial banks.
Md Afzal Karim, CEO and managing director of Sonali Bank Limited, said, "Bilateral trade with India in taka and rupee will reduce pressure on the US dollar, The Business Standard (TBS News) reported. Both countries will benefit from this." He further said that more banks of India and Bangladesh will gradually become part of the process.
As per the news report, settling transactions in taka and rupee has been in discussions for months amid the crisis of the dollar. However, all the bilateral trade between the two nations will not be made in local currencies.
Bangladesh's import from India in the last fiscal year was around USD 13.69 billion. Of which, USD 2 billion will be traded in rupees while the rest will be paid in US dollars, as per the TBS News report. Meanwhile, exports from Bangladesh to India were about USD 2 billion and transactions regarding these will be made in rupees and takas.
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A delegation from the Reserve Bank of India (RBI) and the State Bank of India (SBI) visited Dhaka in April to discuss transaction processes between the two nations.
On April 11, the delegation from RBI and SBI held a meeting with the managing directors of Eastern Bank Limited and Sonali Bank and discussed payment methods for commercial transactions between two nations in taka and rupees, as per the TBS News report.
Speaking to TBS, Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque said that India's central bank several months back gave instructions regarding direct transactions in rupees. Haque further said there are some procedural issues in making such transactions. Businesses have welcomed the decision as they think that the arrangement will promote trade and reduce pressure on forex reserves, as per the news report.
Bangladesh-India Chamber of Commerce and Industry president Abdul Matlub Ahmad said that they have been for some time urging the central banks of the two nations to complete the transactions that are equivalent to Bangladesh's exports to India in taka and rupees, according to TBS News report. .
He said, "The procedural steps are being taken care of. However, it may take several months for the transaction in taka and rupee to start." Abdul Matlub Ahmad noted that the exchange rate of rupees is steady in comparison to taka.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)