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India and Malaysia on Sunday agreed to bolster cooperation in defence, security, and trade, including the interlinking of digital payment systems and trade settlement in local currencies, with Prime Minister Narendra Modi and his Malaysian counterpart, Anwar Ibrahim, focusing on synergies to drive economic development in both countries.

Prime Minister Narendra Modi with Malaysian Prime Minister Anwar Ibrahim during the exchange of MoUs, in Kuala Lumpur, (PMO via PTI)Modi concluded a two-day visit to Malaysia by holding talks with Anwar that focused on cooperation in priority sectors such as trade, infrastructure, security, maritime issues, clean energy, agriculture, education, healthcare and tourism. They also discussed ways to bolster collaboration in new areas such as semiconductors and AI.

In addition to an agreement between India’s NPCI International Payments Limited (NIPL), a subsidiary of the National Payments Corporation of India (NPCI), and Malaysia’s PayNet on cross-border payments, the two sides agreed to advance discussions between the Reserve Bank of India and Bank Negara Malaysia on trade settlement in local currencies. The two sides also agreed to open the first Indian consulate in Kota Kinabalu, Sabah.

Modi noted at a joint media interaction with Anwar that he chose Malaysia as the destination for his first foreign trip this year as he was unable to travel to Kuala Lumpur for the Asean Summit in 2025. He pointed to increased cooperation in energy, infrastructure, and manufacturing, and to enhanced mutual investments in the digital economy, biotechnology, and IT, and said: “Guided by strategic trust, we will chart a pathway towards economic transformation.”

“In the field of security, we will strengthen cooperation in counter-terrorism, intelligence-sharing and maritime security. We will also further expand defence cooperation,” he said, speaking in Hindi.

Anwar called for two-way trade to be increased from the current level of $19 billion by leveraging India’s “spectacular” economic growth. “Malaysia will benefit immensely if we could secure more ways and opportunities to collaborate with India,” he said. “One remarkable feat is this decision to use local currencies as far as possible.”

The two leaders discussed the review of the Asean-India Trade in Goods Agreement (AITIGA), overseen by a body co-chaired by India and Malaysia. “We are in agreement that the review of the Asean-India Trade in Goods Agreement should be completed at the earliest,” Modi said.

P Kumaran, secretary (East) in the external affairs ministry, told a media briefing that the review of AITIGA will be done by consensus to achieve overall liberalisation of 80% of tariff lines. Another goal is to achieve liberalisation of at least 70% of tariff lines for every Asean member country, he said.

Least developed countries (LDCs) will be offered concessions and the rules of origin, for long a concern for India in the context of Chinese goods routed through Asean states, will be improved. India and Asean are hopeful of concluding the review over the next few months, Kumaran said.

Modi and Anwar also discussed regional and global issues, including the Indo-Pacific situation, the Russia-Ukraine conflict, and the situation in Gaza. Modi noted that the Indo-Pacific is emerging as the engine of global growth, and said: “We are committed, together with Asean, to promote development, peace and stability across the Indo-Pacific.”

Anwar thanked Modi for his “firm commitment to support all peace efforts” across the world, including efforts to end the Russia-Ukraine conflict and for peace in Gaza. “His commitment to support the peace process is unequivocal, and I must…express my appreciation,” he said.

Both leaders strongly condemned all forms of terrorism, including cross-border terrorism, and a joint statement said both countries back “zero tolerance of terrorism” and concerted global efforts to combat terror in a comprehensive and sustained manner. “We will continue to support all efforts for peace. And our message on terrorism is clear: No double standards. No compromise,” Modi said.

The leaders further agreed to counter radicalisation and violent extremism, combat terror financing, and prevent the use of new technologies for terrorist purposes through cooperation in information and knowledge sharing. Acknowledging links between terrorism and transnational organised crime, they agreed to cooperate in countering transnational crime by sharing information. They also agreed to strengthen cooperation in combating terrorism, including at the UN and the Financial Action Task Force (FATF).

In addition to the agreement between NIPL and PayNet on cross-border digital payments, the two sides finalised 10 other agreements, including cooperation in semiconductors, disaster management, combating corruption, UN peacekeeping operations, vocational training, and health and medicine. There were also agreements on security cooperation between India’s National Security Council Secretariat and Malaysia’s National Security Council, and between India’s Employees’ State Insurance Corporation and Malaysia’s Social Security Organisation on social security programmes and activities for Indian citizens insured in Malaysia.

Kumaran told the media briefing that forging links between UPI and PayNet involves several technical steps, including onboarding banks in both countries, software alignment, and collaboration with merchants. The linkage will help tourists and workers send remittances, and the system will include safeguards, such as limits on transfer amounts.

India and Malaysia are part of a broader multi-point connectivity project for digital payments, Project Nexus, which also includes Singapore and a few other countries in the region, Kumaran said.

Trade settlement in local currencies, being handled by the RBI and Malaysia’s central bank, is “a matter of priority”, he said. “We will be acting very actively in the coming months on this to have this operationalised,” he added.