by SHAFIQQUL ALIFF / pic by MUHD AMIN NAHARUL
BANK Negara Malaysia (BNM) and Bank Indonesia (BI) announced the expansion of local currency settlement framework effective yesterday.
The framework is to include direct investment (DI), income and transfer, in addition to trade, as eligible underlying transactions.
In a statement, the central bank stated the expansion also includes expansion of eligible users of the framework, such as individuals, and additional foreign exchange
policy flexibilities, such as more simple documentation requirement, to facilitate the operationalisation of the framework.
“This expansion is part of the continuous effort to facilitate a wider use of local currencies for settlement of trade and direct investment between Malaysia and Indonesia,” BNM said.
The settlement framework was initially released on Dec 11, 2017, in line with a memorandum of understanding signed on Dec 23, 2016, by BNM and Bank Indonesia.
Meanwhile, both of the banks have also appointed additional qualified commercial banks in respective countries.
This is to support the operationalisation of the expanded ringgit-rupiah settlement framework as the result of the expansion.
“In general, the appointed banks are experienced in facilitating trade and direct investment between the two countries, have a wide customer base and have established strong business relationships with banks in the counterpart’s country,” it said.