UAE and India have agreed to implement the use of local currencies for bilateral and cross border transactions, the announcement was made on the sidelines of India’s Prime Minister, Narendra Modi’s visit to Abu Dhabi on Saturday.
The Local Currency Settlement System (LCSS) will permit payment from exporters and importers in their respective local currencies, Indian Rupee (INR) or UAE Dirham (AED).
This move will also further enable the development of an INR-AED foreign exchange market.
At present, India pays for UAE oil in dollars.
“Creation of the LCSS would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-AED foreign exchange market,” said RBI in a release.
The Reserve Bank of India and the Central Bank of UAE have signed a Memorandum of Understanding (MoU) to promote the use of local currencies, the Rupee and Dirham, for cross-border trade and to interlink payment and messaging systems.
“This arrangement would also promote investments and remittances between the two countries. Use of local currencies would optimise transaction costs and settlement time for transactions, including for remittances from Indians residing in the UAE,” the RBI said, reported local media.
Narendra Modi’s visit will be an opportunity to identify ways to take the diplomatic and economic ties forward in various domains such as:
- Energy
- Education
- Healthcare
- Food security
- Fintech
- Defence
- Culture
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