Frequently Asked Questions

A. Settlement of International Trade of Goods and Services in Ringgit

1. Where can a non-resident obtain ringgit to facilitate the trade settlements?

A non-resident can obtain ringgit from the following sources:

(a) the non-resident's own ringgit account (*External Account) maintained with an onshore bank;

(b) sale of foreign currency into ringgit with an onshore bank or an appointed overseas branch within the same banking group of an onshore bank; or

(c) ringgit trade financing facility from an onshore bank.

* A ringgit account maintained in Malaysia with an onshore bank to retain ringgit funds belonging to a non-resident.

2. Does a non-resident need to open an External Account to make payment to a resident?

The non-resident may choose to open an External Account with an onshore bank or transact through the External Account of an appointed overseas branch within the same banking group of an onshore bank to facilitate the settlement for trade of goods and services with a resident.

3. How can a non-resident make payment in ringgit to a resident exporter?

The payment in ringgit can be effected as follows:

(a) Payment from the non-resident’s External Account; or

(b) Payment directly from an appointed overseas branch's External Account, through the purchase of the ringgit undertaken with the appointed overseas branch within the same banking group of an onshore bank

4. Can a non-resident make payment in ringgit through an overseas bank other than an appointed overseas branch of an onshore bank?

No.

This is part of the continuous effort to support an effective and well functioning surveillance to ensure that all ringgit settlements are effected with an onshore bank or an appointed overseas branch within the same banking group of an onshore bank to preserve monetary and financial stability.

5. Does a non-resident require an External Account to receive payment in ringgit?

Yes.

6. What can the non-resident do with the funds in the External Account?

A non-resident can use its ringgit funds in the External Account, among others, to pay for goods and *services in Malaysia or to purchase **ringgit assets in Malaysia.

The non-resident may also convert the ringgit into foreign currency with an onshore bank or an appointed overseas branch within the same banking group of the onshore bank for repatriation abroad.

* Services include:

1. Transportation, travel; or

2. Business services (merchanting trade, consultation, legal, accounting, communication, education, medical, construction, insurance).

** Ringgit assets include:

3. Ringgit-denominated securities including bills of exchange, private debt securities, Cagamas bonds or notes, Malaysian Government Securities, Treasury Bills, shares and warrants;

4. Derivatives traded on Bursa Malaysia and OTC derivatives (excluding OTC derivatives and structured products which tantamount to lending or borrowing of ringgit between residents and non-residents);

5. Fixed deposits and negotiable instruments of deposits denominated in ringgit;

6. Immovable properties in Malaysia; and

7. Other fixed assets in Malaysia.

7. Can a non-resident hedge his ringgit receivables and payables?

Yes. The non-resident is free to hedge his ringgit receivables and payables with an onshore bank or an appointed overseas branch within the same banking group of an onshore bank.

B. Borrowing in foreign currency by resident

8. How much can a resident company borrow foreign currency from overseas?

A resident company can borrow:

(a) any amount of foreign currency from its overseas non-bank related companies. This is to facilitate efficient management of financial resources within the corporate group; and

(b) up to RM100 million in aggregate from other non-residents, including non-resident financial institutions.

C. Hedging of current account transactions

9. What is the objective of allowing a resident to enter into anticipatory hedging on

* current account transactions ?

The flexibility to allow a resident to hedge any amount of his anticipated current account transactions with an onshore bank is to enhance effective risk management. (Previously the resident can hedge anticipated current account transactions only up to the cumulative amount in the preceding 12 months.)

* Current account transactions are trade activities in goods and services, income and current transfers as defined in the Balance of Payment Manual, 5th Edition, 1993, International Monetary Fund.