Context:

• India and Malaysia are forming a framework for conducting trade in Local Currency and initiating a process to review the 12-year-old comprehensive economic cooperation agreement.

Seek to Enhance Trade Collaboration in High-Tech Sectors

• Both sides are also keen to expand trade engagement in Local Currency in emerging areas such as electronics, semiconductors, fintech, renewable energy, new technology and startups.

India Encourages Use of Local Currency in Global Transactions

• India has taken substantial steps to promote the usage of its national currency in international transactions. 
• Banks from 18 countries have been permitted by the Reserve Bank of India (RBI) to open Special Vostro Rupee Accounts (SVRAs) for settling payments in Indian rupees.

• • SVRAs could be set up by banks of partner countries by approaching Authorized Dealer (AD) banks in India that may get permission from the RBI after the due procedure.
  • 18 Countries Includes: Botswana, Fiji, Germany, Guyana, Israel, Kenya, Malaysia, Mauritius, Myanmar, New Zealand, Oman, Russia, Seychelles, Singapore, Sri Lanka, Tanzania, Uganda and the United Kingdom
• A Vostro Account is a bank account held by a domestic bank for a foreign bank, denominated in the domestic currency of the former.
  • The Rupee Vostro Account specifically holds the foreign entity’s deposits in Indian rupees at the Indian bank.
  • Nostro account refers to an account that a bank holds in a foreign currency at another bank.
• The settlement through Indian Rupees (INR) is an additional arrangement to the existing system that uses freely convertible currencies.

India-Malaysia Comprehensive Economic Cooperation Agreement:

• India- Malaysia have discussed the need to relook at the Comprehensive Economic Cooperation Agreement (CECA) that came into effect in 2011, to include new areas of trade like the digital economy and other emerging areas.
• CECA: It is a comprehensive agreement that covers trade in goods, trade in services, investments and movement of natural persons. 
• It value-adds to the benefits shared from ASEAN-India Trade in Goods Agreement (AITIG) and further facilitates the two-way economic relations.

News Source: Business Standard

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