The Central Bank of Myanmar (CBM) held on 28 January a briefing on the rupee and kyat trade settlement mechanism to mark the start of trading and direct payments using the two currencies through the Special Rupee Vostro Account (SRVA) for bilateral trade.
It was announced that the guideline for payment procedures under the SRVA has been released, and payment using the two currencies can start in February.
A Joint Concept Note Paper and Standard Operating Procedures (SOPs) were also approved at the meeting, but no details were reported on its content.
During the meeting, CBM Governor Daw Than Than Swe reported on the activities of the rupee/kyat payment working committee as well as the CBM’s broader efforts to reduce the reliance on the USD for trade.
Meeting attendees included representatives from the Indian Embassy in Myanmar, Reserve Bank of India, Indian Ministry of Finance, UMFCCI and the Indian Chamber of Commerce.
Bank representatives in attendance were from United Amara Bank (UAB), CB Bank and the Punjab National Bank (PNB).
On 27 January, UAB announced that customers can now open Indian rupee accounts to facilitate INR transfers for trade and other approved purposes. INR accounts can be opened by companies only.
The launch of the rupee-kyat mechanism has been delayed for undisclosed reasons. Last year it was reported that the CBM hoped to launch the mechanism by June-end, but this self imposed deadline was not met.
The PNB has been designated to carry out Special Rupee Vostro accounts for Myanmar banks.
PNB reportedly approached CB Bank and United Amara Bank in June 2023 to open vostro accounts for trade settlements.
At the time it was reported that the State Administration Council wanted to involve more banks in the new mechanism, although there have been no announcements on whether other banks are set to join the scheme.
Under the scheme, Myanmar will accept rupee payments for all its exports to India, and use the rupees for imports.
The PNB has been designated as the bank to carry out Special Rupee Vostro accounts for Myanmar banks.
The Indian government has also been pushing for trade in non-USD currencies to reduce its reliance on the dollar, as the rupee has been heavily impacted by US Federal Reserve rate rises.
The RBI announced on 16 March 2023 that it had allowed Myanmar and 17 other countries to open vostro accounts to settle international trade in rupees. This framework allows all exports and imports to be denominated and invoiced in Indian rupees, with the exchange rate between the currencies of the two trading partner countries to be market determined.
The RBI previously stated that "Indian importers undertaking imports through this mechanism shall make payment in Indian rupee, which shall be credited into the special vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier."
In FY2022/23, India exported $820m worth of goods to Myanmar, and imported goods worth $540m. India accounts for roughly 5% of Myanmar's international trade.
Top exports from Myanmar to India include metal ore, natural rubber, plywood, fish, lentils and garments. Myanmar's major imports from India include pharmaceuticals, petroleum products, chemicals, machinery, coffee and tea.
Myanmar currently has schemes in place for trade settlement in baht and yuan with Thailand and China.
