India, UAE Sign MoUs to Promote Use of Local Currencies for Trade

India and the United Arab Emirates (UAE) on Saturday signed two memoranda of understanding (MoU) to promote the use of local currencies (rupee and dirham) for cross-border transactions.

The first MoU was signed between the Reserve Bank of India (RBI) and the Central Bank of the UAE (CBUAE), while the second was signed between the National Payments Corporation of India (NPCI) and the UAE Exchange Centre.

The MoU between the RBI and the CBUAE will establish a framework to promote the use of local currencies for cross-border trade, investment, and remittances. It will also facilitate the settlement of trade transactions in rupees and dirhams.

The MoU between the NPCI and the UAE Exchange Centre will enable the interlinking of their respective fast payment systems, the Unified Payments Interface (UPI) and the UAE’s Faster Payments System (FPS). This will allow for real-time, low-cost, and secure payments between India and the UAE.

The signing of these MoUs is a significant step towards promoting the use of local currencies for trade and investment between India and the UAE. It will help to reduce the volatility of exchange rates and save on foreign exchange costs.

The two countries have close economic ties, with bilateral trade worth over $60 billion in 2022. The UAE is India’s third-largest trading partner and the largest source of remittances.

The signing of these MoUs is expected to further boost trade and investment between the two countries. It will also help to strengthen the financial linkages between India and the UAE.

Benefits of using rupee and dirham for trade:

• It will reduce the volatility of exchange rates, which will help to stabilize businesses and make trade more predictable.
• It will save on foreign exchange costs, which will make trade more affordable.
• It will promote financial inclusion, as it will make it easier for businesses and individuals to access financial services in their local currency.
• It will strengthen the economic ties between India and the UAE, which will benefit both countries.

The signing of these MoUs is a positive development for India and the UAE. It is a step towards reducing the reliance on the dollar for trade and investment, and it will help to promote financial inclusion in both countries.