Bangladesh, India set to launch trading in rupee on 11 July

Bangladesh and India are all set to start trading in Indian rupee as the central banks of the two neighbouring countries have made all the necessary arrangements to make this happen.

According to the agreed trading mechanism, Bangladeshi exporters will now be able to get export proceeds in rupee from 11 July, and the equivalent amount will be used for import bill settlement, sources at the Bangladesh Bank said.

Bangladesh Bank Governor Abdur Rouf Talukder is expected to attend the launching event to be organised by the High Commission of India in Dhaka on 11 July.

The move follows the last year's decision of the Reserve Bank of India (RBI) to allow the settlement of international trade in Indian currency.

Meanwhile, Bangladesh's Sonali Bank and Eastern Bank got approval from the RBI to open special accounts for rupee transactions.

Eastern Bank's managing director Ali Reza Iftekhar said they applied for transactions in both rupee and taka, and the Reserve Bank of India approved it. "Initially, the transaction will be in rupee only in small amounts. It will increase in phases. Besides, trading in taka will be launched later on," he told a local media.

"Trading in rupee will somewhat reduce dollar dependency, which is good for the country in the current context but the agreement is biassed due to the privilege for the rupee," Mohammad Hatem, vice-president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told.

"Although we could not start taka trading this time because of the huge trade gap with India, we have to think of that in future," he suggested.

According to official data, Bangladesh at present exports worth some $2 billion to India and imports worth nearly $14 billion.

The State Bank of India asked exporters in 2022 to avoid settling deals with Bangladesh in the greenback and other major currencies as it looks to curb exposure to Dhaka's falling reserves, reports Reuters.

Meanwhile, the Bangladesh Bank has decided to launch a taka-rupee-based debit card in the country in September, aiming to save dollars. Governor Abdur Rouf Talukder made this announcement while presenting the monetary policy for the first half of FY24 recently.

The card will allow users to make various payments, including domestic purchases, using taka, as well as enable them to spend Indian rupees when travelling to India.

The introduction of this card is expected to eliminate the need for double currency exchanges, thereby saving the 6% expenditure loss incurred in converting taka to dollars and then dollars to rupee, the governor said.

He added this convenience would be particularly beneficial for Bangladeshi tourists who frequently visit India.

Over 25 lakh Bangladeshis visited India on tourist visas in 2019, according to available data. The major purposes of the trips include religious programmes, leisure and medical treatment.

According to the International Monetary Fund (IMF), the rupee trading will not help build foreign exchange reserves of any country until the agency includes the currency in its SDR (Special Drawing Rights) basket. The inclusion in the SDR basket means it will be an internationally convertible currency.

The IMF included yuan in its SDR basket as the fifth currency in 2016, along with the US dollar, euro, Japanese yen and British pound.