India, Bangladesh start trade in rupees

India and Bangladesh have started bilateral trade in rupees. It was launched at an event jointly organised by Bangladesh Bank and High Commission of India in Dhaka on Tuesday. Now India and Bangladesh will trade in Indian rupees alongside the usual transaction method in US dollar, said Pranay Verma, Indian High Commissioner in Dhaka.Trade settlement through Indian rupee will only apply to export amount from Bangladesh while the rest of imports from India will be settled in US dollars, said Verma. From Bangladesh side trade and transactions with India will be done by its Eastern Bank and Sonali Bank Ltd, while from Indian side operations will be done by State Bank of India and ICICI Bank, said Abdur Rouf Talukdar, Governor General of Bangladesh's central Bank.
Bangladesh is India's biggest trade partner in South Asia and India is the second largest trade partner of Bangladesh in Asia. Reserve Bank of India has allowed banks from 18 countries to trade in rupees including Germany, Russia, Singapore, Sri Lanka, the United Kingdom, Myanmar, Oman and others; Bangladesh become 19th country to trade with India in rupees.

The move is likely give some respite to the importers since they will be able to open letters of credit in rupee to source a portion of the products from the neighbouring country, thus cutting the use of the US dollar to some extent. The Bangladesh government has toughened import rules due to the shortage of the American greenback, driven by higher import bills, with a view to stopping further depletion of Bangladesh's foreign currency reserve, which has fallen by nearly 30 per cent from a year ago. The Bangladesh Bank has already given permission to three banks – Sonali Bank, Eastern Bank and State Bank of India (SBI) in Bangladesh – to open nostro accounts with their counterparts in the neighbouring country.