The central banks of Malaysia, Indonesia and Thailand have introduced a local currency settlement framework to promote local currencies in settling bilateral trade and direct investments.

The move will enable all the three countries to reduce their dependency on the US dollars for such transactions.

All three frameworks, which include rupiah-ringgit framework; rupiah-baht framework; and expanded baht-ringgit framework, will come into effect from 2 January 2018.

The latest move is in line with two bilateral memorandums of understanding on local currency settlement framework that were signed between the three central banks in December 2017.

The central banks have appointed banks including Maybank, CIMB, RHB, Public Bank, Hong Leong Bank, Bangkok Bank, United Overseas Bank and Bank of Tokyo-Mitsubishi as the eligible lender for the settlement.

Additionally, the baht-ringgit settlement framework between BNM and BOT has also been expanded to include direct investment to enrich the existing trade transactions.