Bangladeshi banks plan India rupee transactions as reserves fall

economictimes.indiatimes.com:

reliance on dollars. Eastern Bank, which opened rupee accounts with the State Bank of India and ICICI Bank, will announce the plan for rupee trade on July 11. The other Bangladeshi lender offering the same service is the state-run Sonali Bank.

These lenders’ use of the Indian rupee is part of an emerging global movement to rely less on the dollar. Using local and regional currencies can help developing nations shield foreign exchange reserves in times of crisis. “The use of the Indian rupee in India-Bangladesh trade provides a convenient and cost-effective mechanism for conducting cross-border transactions,” Eastern Bank’s Managing Director Ali Reza Iftekhar said in an interview on Thursday.

“That will reduce the exchange cost and the cost of doing business.” Bangladesh imported about $14 billion worth of goods from India, the second largest supplier after China, in the 2021-22 fiscal year. Just $2 billion of merchandise were exported to India from Bangladesh in the same period. A portion of the bilateral trade, particularly Bangladesh’s imports from India, is expected to flow through these bank transactions.

“On day one, I don’t expect that trade will hit $15 billion, but we’ll start in a very humble way,” Iftekhar said. “For businesspeople, the exchange loss will be less and terms can be faster.” Bangladesh’s reserves fell to $31.16 billion as of July 5 from $41.88 billion a year earlier. The South Asian country has moved to a more market-determined exchange rate to stabilize the reserves.