Standard Chartered Bangladesh (SCB) and Islami Bank Bangladesh PLC have gained approval from Bangladesh Bank to engage in bilateral trade with India using the Indian rupee. This initiative follows the introduction of a cross-border trade settlement mechanism between Bangladesh and India on July 11 2023. Prior to this, Sonali Bank PLC, Eastern Bank PLC, and the State Bank of India had been utilizing this mechanism.
Under this arrangement, Indian exports and imports can be invoiced, paid for, and settled in the rupee, reducing dependency on the US dollar for transactions. This is facilitated through the use of nostro accounts, which are bank accounts held in another country by domestic banks and denominated in the currency of the foreign country. Bangladeshi exporters receive their proceeds in rupees in these accounts, and this balance is used to pay for imports from India, effectively allowing for the settlement of import bills equivalent to export proceeds. The exchange rate utilized is market-determined.
Notably, Tamim Agro Industries was the first company in Bangladesh to open a letter of credit for exports worth Rs16 million, while in India, Nita Company Ltd was the first to open an LC for exports worth Rs12 million. Subsequently, several other companies have also engaged in trade using the rupee. Recently, Eastern Bank PLC celebrated the settlement of a trade valued at over Rs 2.4 million on exports by Habiganj Agro Limited, a subsidiary of the Pran-RFL Group.