Hours after the launching of the Bangladesh, India trade in rupee on Tuesday, State Minister for Foreign Affairs Md Shahriar Alam said it's a "successful story between the two trusted neighbours".
"This opens a new era in our relationship," he said while launching the India desk at the EBL Bank.
Private EBL bank, state-owned Sonali Bank Ltd are participating in the settlement of trade transactions in rupee along with India's State Bank of India (SBI) and ICICI Bank.
Bangladesh Bank Governor Abdur Rouf Talukder and Indian High Commissioner Pranay Verma inaugurated the new initiative at Hotel Le Meridian earlier in the morning.
There had been a long demand to introduce such an alternative to USD for trade, but the initiative got momentum due to the Russia, Ukraine war.
“The Covid-19 pandemic, post-Covid recovery struggles, and the latest Ukraine war have severely hurt almost all economies. At the same time, policy rate hike by advanced economies has induced extra pressure on all other currencies. These incidents have created pressures on external sectors of the country and the forex market faced a sudden pressure. The situation tempted us to rethink and review a way out to minimize over-dependency on reserve currencies,” the governor had said.
“It will reduce transaction cost, and transaction time for settlement of trade. It will make our trade more competitive which also creates new incentives for Bangladesh exporters to promote exports to India. So overall it's an initiative where we are providing new options to the business community," the high commissioner said.
At the EBL event, the state minister highlighted the India, Bangladesh relations and said they could achieve more than the targets in the last 10 years.
"It was not easy. There had been challenges in political front. But our Prime Minister Sheikh Hasina was determined to take the relationship to pre-1965 era," he said, referring to the Indo, Pakistan war period when the connectivity links between the then East Pakistan, now Bangladesh, and India were cut.
In the last 10 years, both countries restored those road and railway links.
"We had actually exceeded that era," the state minister said, referring to the launching of the rupee-based trade which did not exist during the 1965.
Tamim Agro Industries is the first company in Bangladesh to open an export LC worth ₹16 million. Nita Company Ltd is the first exporter of India that opened ₹12 million LC.
Rupee-taka exchange rate will be decided on a cross currency basis by individual banks.
Settlement will happen through the SWIFT mechanism between countries and the RTGS mechanism within the countries for crediting exporters accounts. More banks are expected to join this trading regime.
The EBL with the India Bangladesh Chamber of Commerce and Industry also launched a dual currency card.
The rupee part is expected to be activated by December when the central bank will launch its dual currency card.