India and Myanmar have launched a new bilateral trade payment system, with the Yangon office of Punjab National Bank completing the first transaction exceeding Rs 1 crore for a shipment of pulses under the Rupee-Kyat Settlement Mechanism on Tuesday.

This initiative aims to streamline trade transactions between the two countries, improving efficiency by bypassing exchange rate complexities through direct payments in local currencies.

“Rupee-Kyat trade settlement mechanism is operational now,” the Embassy of India in Yangon posted on X.

“The first transaction of over INR 1 cr of pulses export was successfully executed by the Yangon office of @pnbindia today. We encourage businesses on both sides to benefit from the mechanism,” it said.

In February, the Indian mission, in collaboration with the India-Myanmar Chamber of Commerce (IMCC), organised an awareness event on the utilization of the Rupee-Kyat Trade Settlement Mechanism.

The Central Bank of Myanmar issued guidelines for payment procedures under the Special Rupee Vostro Account (SRVA) on January 26th.

“To boost bilateral trade and to enhance the usage of local currencies, a Rupee Kyat Trade Settlement Mechanism has been operationalised,” the Indian embassy had earlier said in a press release.

The establishment of the mechanism, the press release said, “will simplify trade transactions and make them more efficient. It will reduce costs associated with currency conversions”.

The rupee-kyat settlement mechanism allows Indian traders to use Punjab National Bank to import pulses from Myanmar.

Banks from various countries have established special Rupee Vostro accounts in Indian banks to facilitate transactions in local currencies. Essentially, Vostro accounts enable domestic banks to offer international banking services to clients with global banking requirements.

Last year, the Reserve Bank of India implemented arrangements permitting transactions in domestic currencies to foster global trade, particularly boosting exports from India and generating interest in the Rupee.

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