Public sector lender, Union Bank of India has become the first bank in the country to open a special Rupee Vostro account in Malaysia through its related bank i.e. India International Bank of Malaysia. This means that trade between India and Malaysia can now be settled in Indian Rupees, in addition to the existing methods of settlement in other currencies.
Union Bank’s move is in line with the RBI directive in July last year allowing settlement of international trades indian rupees,
in a statement, Union Bank “The measure is aimed at facilitating the growth of global trade and supporting the interests of the global business community in denominating the Indian rupee,” it said.
Furthermore, it added that the mechanism would allow Indian and Malaysian traders to invoice trade in Indian rupees and hence get better prices for goods and services traded.
Also, this mechanism is expected to benefit the traders on both the sides as they can directly trade in Indian Rupee and hence save on currency conversion spread.
The bank said that India-Malaysia bilateral trade, which is set to reach USD 19.4 billion in FY 2021-22, is expected to benefit from the option to settle bilateral trade in Indian rupees.
Union Bank’s share price closed on BSE last week. On Friday it was up 0.4% at 66.49. The market cap of the bank is over 45,444 crores.
During the December 2022 quarter, the bank reported a strong growth of 106.81% in net profit. 2,245 crore as against a profit of Rs. 1,085 crore in Q3FY22. Also, Net Interest Income (NII) grew by 20.26% YoY 8,628 crores. Net interest margin (NIM) increased to 3.21% in Q3FY23 as against 3% in Q3FY22 and 3.15% in Q2FY23.
In Q3FY23, Union Bank’s gross NPA declined sharply by 369 bps YoY and 52 bps QoQ to 7.93%. Gross NPA was 11.67% in Q3FY22 and 8.45% in Q2FY23. Net NPAs, meanwhile, fell by 195 bps YoY and 50 bps QoQ to 2.14%. The provision coverage ratio (PCR) stood at 88.50% in Q3FY23.
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