What Happened
- Prime Minister Narendra Modi and Malaysian Prime Minister Anwar Ibrahim held official talks in Putrajaya on February 8, 2026, and agreed to promote the use of the Indian rupee and Malaysian ringgit for bilateral trade and investment settlement.
- The two leaders witnessed the signing of 11 memoranda of understanding covering semiconductors, digital payments, defence, disaster management, anti-corruption, healthcare, vocational education, and UN peacekeeping cooperation.
- A key agreement was signed between NPCI International (India) and PayNet (Malaysia) to enable cross-border QR-based merchant payments, linking India's UPI with Malaysia's DuitNow.
- Anwar Ibrahim expressed hope that bilateral trade would surpass the previous year's $18.6 billion, and termed efforts on local currency trade settlement as "remarkable."
- The Reserve Bank of India and Bank Negara Malaysia are collaborating on frameworks to facilitate rupee-ringgit trade settlement.
Static Topic Bridges
Local Currency Settlement and De-Dollarisation
Local currency settlement refers to bilateral trade being invoiced and settled in the national currencies of the trading partners rather than in a third-party reserve currency (typically the US dollar). This reduces exchange rate risk, lowers transaction costs, and decreases dependence on dollar liquidity. India has been pursuing rupee trade settlement arrangements with multiple countries as part of a broader strategy to internationalise the Indian rupee.
- RBI issued a circular on July 11, 2022, allowing invoicing, payment, and settlement of international trade in Indian rupees through Special Rupee Vostro Accounts (SRVAs)
- India has rupee trade arrangements with countries including Russia, Sri Lanka, and the UAE
- India-UAE signed a local currency settlement agreement during PM Modi's visit to the UAE in July 2023, enabling INR-AED trade
- Malaysia has also pursued ringgit settlement with China, Indonesia, and Thailand
- The RBI-Bank Negara Malaysia cooperation provides institutional backing for the INR-MYR settlement framework
Connection to this news: The India-Malaysia agreement on local currency trade settlement extends India's rupee internationalisation strategy to Southeast Asia. With bilateral trade of approximately $19.86 billion (FY2024-25), shifting even a fraction to rupee-ringgit settlement could reduce dollar dependency for both economies.
India-ASEAN Economic Relations and Comprehensive Strategic Partnership
India's engagement with ASEAN countries is anchored in the Act East Policy (upgraded from Look East Policy in 2014). India became a Sectoral Dialogue Partner of ASEAN in 1992, a Full Dialogue Partner in 1996, and a Summit-level partner in 2002. India-ASEAN trade reached approximately $130 billion in 2024-25. Malaysia is India's third-largest trading partner within ASEAN after Singapore and Indonesia.
- India-ASEAN FTA in goods (AITIGA): signed in 2009, entered into force in 2010; currently under review for upgrade
- India-Malaysia bilateral trade (FY2024-25): approximately $19.86 billion (India exports $7.32 billion, imports $12.54 billion)
- India runs a trade deficit with Malaysia, primarily due to palm oil and electronics imports
- India-Malaysia Comprehensive Economic Cooperation Agreement (CECA): under negotiation but not yet concluded
- India upgraded relations with Malaysia to Enhanced Strategic Partnership in 2015, further elevated to Comprehensive Strategic Partnership during this visit
Connection to this news: The 11 MoUs signed during this visit, particularly on semiconductors and digital payments, represent a deepening of the Comprehensive Strategic Partnership. The local currency settlement push aligns with India's broader strategy of strengthening economic ties with ASEAN member states while reducing dollar dependence.
Unified Payments Interface (UPI) and Cross-Border Digital Payments
The Unified Payments Interface (UPI) is an instant real-time payment system developed by the National Payments Corporation of India (NPCI), launched in April 2016. It enables inter-bank peer-to-peer and person-to-merchant transactions through mobile phones. UPI processed over 16 billion transactions per month by late 2024, making it the world's largest real-time payment system by transaction volume.
- NPCI International Payments Limited (NIPL): overseas arm of NPCI, responsible for deploying UPI infrastructure abroad
- UPI international linkages already operational with: Singapore (PayNow-UPI, launched February 2023), Sri Lanka, Mauritius, France, UAE, Nepal, Bhutan
- Malaysia's PayNet operates DuitNow, Malaysia's national real-time payment platform
- The NPCI-PayNet agreement enables cross-border QR-based merchant payments between India and Malaysia
- UPI is built on the Immediate Payment Service (IMPS) infrastructure and uses Virtual Payment Addresses (VPAs)
Connection to this news: The UPI-DuitNow linkage signed during the Modi-Anwar summit adds Malaysia to the growing list of countries with cross-border UPI interoperability. This has both economic significance (easier remittances for the estimated 300,000+ Indian diaspora in Malaysia) and strategic significance (positioning India's payment infrastructure as a global standard).
Key Facts & Data
- India-Malaysia bilateral trade (FY2024-25): approximately $19.86 billion
- India's exports to Malaysia: $7.32 billion; imports: $12.54 billion (trade deficit for India)
- Number of MoUs signed: 11 (semiconductors, digital payments, defence, disaster management, anti-corruption, healthcare, vocational education, UN peacekeeping, social security, audio-visual co-production, security cooperation)
- RBI circular on rupee trade settlement: July 11, 2022
- UPI launch: April 2016 by NPCI; monthly transactions exceed 16 billion (as of late 2024)
- UPI-PayNow (Singapore) linkage: launched February 2023
- Indian diaspora in Malaysia: approximately 300,000+
- India's rank as Malaysia's trading partner: among top 10; Malaysia is India's third-largest ASEAN trade partner