RBI, CBUAE agree to encourage rupee, UAE dirham cross-border trade.
RBI, CBUAE agree to encourage rupee, UAE dirham cross-border trade. In the presence of Prime Minister Narendra Modi and UAE President Sheikh Mohamed Bin Zayed Al Nahyan, the governors signed the agreements.
MUMBAI: The RBI and CBUAE inked two agreements in Abu Dhabi on Saturday to establish a framework for cross-border transactions in local currencies and interlinking payment and messaging systems.
The Reserve Bank said the two governors exchanged agreements in the presence of Prime Minister Narendra Modi and UAE President Sheikh Mohamed Bin Zayed Al Nahyan.
The MoU establishes a framework to promote local currencies.
the Indian rupee (INR) and UAE dirham (AED) for cross-border transactions and ‘cooperation for interlinking their payment and messaging systems’.
India encourages cross-border transactions in local currencies to lessen US dollar dependence.
“The two MoUs are aimed at facilitating seamless cross-border transactions and payments and foster greater economic cooperation between the two countries,” the RBI stated.
The MoU on developing a framework for local currency transactions between India and UAE proposes to build a Local Currency Settlement System (LCSS) to promote INR and AED bilaterally.
The central bank stated that the MoU covers all current and capital account activities.
The LCSS would allow exporters and importers to invoice and pay in their local currencies, creating an INR-AED foreign exchange market. “This arrangement would also promote investments and remittances between the two countries,” it added.
Local currencies reduce transaction costs and settlement time, especially Indian remittances to UAE.
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