India and Bangladesh Unite to Replace U.S. Dollar in Cross-Border Trade

India and Bangladesh have established a cross-border trading system in which they will use their own currencies, the Indian rupee (INR) and the Bangladeshi taka (BDT), making Bangladesh the nineteenth nation to abandon the US dollar.

After months of intensive talks and gatherings, a team from the Reserve Bank of India (RBI) and the State Bank of India (SBI) made a trip to Dhaka in order to deliberate and finalize the means to partake in cross-border trade using local currencies.

It is anticipated that Sonali Bank and Eastern Bank Limited of Bangladesh will open accounts in the State Bank of India and ICICI Bank of India in order to initiate the initiative.

According to news reports, two Indian banks are also planning to open similar accounts with two Bangladeshi banks.

Bank officials have stated that the establishment of vostro and nostro accounts, which are known as global accounting accounts, must be authorized by the respective central banks.

Of the total value of Indian exports to Bangladesh, $2 billion is to be traded in Indian Rupees (INR), while the remaining portion is to be paid in US Dollars. On the other hand, exports from Bangladesh to India will only be conducted in Rupees and Taka, as reported by Indian media.

The two neighbours, friendly to each other, will engage in cross-border trade using only rupee and taka, eliminating the need for a third currency and therefore benefiting from avoiding the dollar exchange process.

Md Afzal Karim, CEO and Managing Director of Sonali Bank Limited, was quoted by The Business Standard as saying that bilateral trade between India and Bangladesh in taka and rupee will reduce pressure on the US dollar, and both countries will benefit from this.

Karim stated that, over time, additional banks from both countries will become involved in the process; however, not every two-way trade will be conducted in the respective local currencies.

Md Mezbaul Haque, Executive Director and Spokesperson of Bangladesh Bank, expressed his approval of businesses in Bangladesh for settling trade with India in Indian Rupees (INR) and Bangladeshi Taka (BDT), stating that it is believed that this arrangement will stimulate trade and lessen the strain on foreign exchange reserves.

Prior to Bangladesh, Russia, Germany, the United Kingdom, Singapore, Sri Lanka, Oman, and 12 other countries had already been trading with India in INR.

India has become a prominent participant among those who are encouraging the worldwide de-dollarization trend, and has steadily increased its foreign trade with other nations through the use of the rupee.

In 2022, India unveiled a rupee-based trade settlement system, providing a platform for countries that lack sufficient U.S. dollars or are unable to use the dollar for trading to transact in Indian rupees.

In April of last year, India and Malaysia came to an agreement that permits bilateral trade between them to be settled in Indian rupees.

Nouriel Roubini, a renowned economist, suggested last week that the Indian rupee could eventually become one of the major reserve currencies worldwide.

Roubini, who is famously known as ‘Doctor Doom’ by Wall Street, stated in an interview with ETNow news channel that the Indian rupee (INR) might be seen as a vehicle currency for some of the trade that India does with the rest of the world, especially South-South trade.

The economist noted that the Indian rupee could potentially be a unit of account, a means of payment, and a store of value. In addition, they suggested that over time the rupee could become one of the global reserve currencies.

Flipping the script

In April, the New Development Bank (NDB), created by the BRICS group, declared its intention to move away from the US dollar in international trade, and to utilize local currencies for its loans instead.

In a groundbreaking decision that has changed the dynamics of global politics, President Dilma Rousseff of the New Development Bank (NDB) has announced that the bank will be providing 30 percent of its loans in the local currencies of its member nations, thus shifting away from the reliance on the US dollar for international transactions.

During an April 14th interview with Chinese media outlet CGTN, Rousseff emphasized the importance of finding ways to mitigate foreign exchange risk and the dangers of relying on a single currency, like the US dollar.

The BRICS nations – Brazil, Russia, India, China and South Africa – are at the forefront of this change and are in the early stages of designing and adapting a new currency which seeks to challenge the dominance of the American bill.

According to The Daily Hodl, the BRICS nations have reportedly made a move to increase their gold reserves and potentially dethrone the US dollar by buying a large amount of gold.

According to Robert Kiyosaki, author of Rich Dad Poor Dad, if the BRICS nations choose to abandon the US dollar, the United States will face the consequences of devastating hyperinflation and war-induced starvation.

By 2050, the BRICS group – comprised of Brazil, Russia, India, China, and South Africa – is expected to collectively dominate the global economy, as these are the fastest-growing economies that are economically-aligned.

Iran, alongside Saudi Arabia and other nations, has submitted an official request to become part of the expanded BRICS+ collective.

Saudi Arabia, a major member of the Organization of the Petroleum Exporting Countries (OPEC), has declared that it will no longer be accepting the US dollar for oil transactions, and instead will switch to the Chinese yuan (PetroYuan). This decision follows Iran’s move to stop trading in US dollars with both Russia and China.

The global movement of de-dollarizing is becoming more widespread, and is seen as a malignant force against the US. Economists believe that this process is inevitable and cannot be stopped.

The US’s practice of imposing illegal sanctions on other countries has caused a decrease in confidence in the dollar, leading to a de-dollarization trend gaining momentum among developing nations as a form of opposition to US hegemony.