UAE and India to Start Trade Settlement in Local Currencies

The Central Bank of the UAE (CBUAE) and the Reserve Bank of India (RBI) have recently signed two Memoranda of Understanding (MoUs) with the objective of strengthening ties between the two countries.

The MoUs were signed in the presence of President His Highness Sheikh Mohamed bin Zayed Al Nahyan and Shri Narendra Modi, Prime Minister of the Republic of India.

The collaboration between CBUAE and RBI will involve the establishment of a framework that encourages the use of the UAE dirham and the Indian rupee, their respective national currencies, in cross-border transactions.

Furthermore, the framework aims to enhance payment services in both nations by integrating their instant payment platforms (IPPs), local payment card systems, and financial messaging systems. This integration will bring convenience to the populations of both countries and streamline cross-border transactions.

The memoranda were signed by Khaled Mohamed Balama, Governor of CBUAE, and Shri Shaktikanta Das, Governor of RBI.

The first Memorandum of Understanding (MoU) outlines a comprehensive framework that includes multiple components and strategies to facilitate the settlement of trade transactions in the UAE dirham and the Indian rupee, as per the agreements established between importers and exporters.

It also outlines the types of eligible transactions, facilitates the opening and use of correspondent accounts for the benefit of financial institutions in both countries, promotes direct exchange rates between the two national currencies, and provides options for liquidity management in accordance with the laws and regulations of the two countries.