India, UAE sign MoU to begin trade settlement in their currencies

The MoUs were signed by RBI Governor Shaktikanta Das and the Governor of the Central Bank of UAE, Khaled Mohamed Balama

July 15, 2023

RBI, Central Bank of UAE sign MoUs on promoting local currencies, interlinking payment systems

On Saturday, Prime Minister Narendra Modi held talks with UAE President Sheikh Mohamed bin Zayed Al Nahyan, who received him at the airport on his arrival from France. During the meeting, PM Modi and the UAE President announced that their countries have agreed to begin trade settlements in their currencies.

In a tweet, the PMO said: “Prime Minister Modi had a wonderful meeting with Sheikh Mohamed bin Zayed Al Nahyan. Their discussions focused on enhancing India-UAE ties in a host of sectors, including trade, economy, culture as well as people-to-people connect.”

“This is a very important aspect of India-UAE cooperation. It paves the way for enhanced economic collaboration and will make international financial interactions simpler,” PM Modi said in a tweet in reply to the Reserve Bank of India (RBI) commenting on MoUs between the two nations.

The RBI and the Central Bank of the UAE on Saturday signed two MoUs to establish a framework to promote the use of local currencies for cross-border transactions and cooperation for interlinking their payment and messaging systems.

The MoUs were signed by RBI Governor Shaktikanta Das and the Governor of the Central Bank of UAE, Khaled Mohamed Balama. The MoUs were exchanged between the two Governors, in the presence of PM Modi and Sheikh Mohamed Bin Zayed Al Nahyan.

Sharing the details of the two MoUs, the RBI in a statement said the MoU on establishing a framework for the use of local currencies for transactions between India and UAE, aims to put in place a local currency settlement system (LCSS) to promote the use of Indian Rupee and AED bilaterally.

It said that the MoU covers all current account transactions and permitted capital account transactions. It further said that the 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.

“This arrangement would also promote investments and remittances between the two countries. Use of local currencies would optimize transaction costs and settlement time for transactions, including for remittances from Indians residing in UAE,” it said.

It also said that under the MoU on ‘Payments and Messaging Systems‘, the two central banks agreed to cooperate on linking their fast payment systems (FPSs) – Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of UAE and linking the respective Card Switches (RuPay switch and UAESWITCH) and exploring the linking of payments messaging systems i.e., Structured Financial Messaging System (SFMS) of India with the messaging system in the UAE.

“The UPI-IPP linkage will enable the users in either country to make fast, convenient, safe, and cost-effective cross-border funds transfers. The linking of Card Switches will facilitate the mutual acceptance of domestic cards and the processing of card transactions. The linkage of messaging systems is aimed to facilitate bilateral financial messaging between the two countries,” the RBI said.

It further said that the two MoUs are aimed at facilitating seamless cross-border transactions and payments and fostering greater economic cooperation between the two countries.

The Prime Minister in a tweet also said that he had a very productive meeting with Sultan Al Jaber, the President-designate of COP28UAE (the 28th session of the UN Climate Change Conference of Parties in the UAE).

“Our discussions focused on ways to further sustainable development. Highlighted India’s contribution in this direction, in particular our emphasis on Mission LiFE,” Modi said, attaching a picture of the meeting.

Commenting on the MoU done for the establishment of the IIT Delhi campus in Abu Dhabi, Modi said: “This marks a significant stride in our educational internationalization and is a testament to India’s innovation prowess. Education is the bond that unites us, it’s the spark that ignites innovation. Together, we will leverage this power for mutual prosperity and global betterment.”

Before leaving for India from his one-day visit to UAE, Modi said: “Concluding a productive UAE visit. Our nations are working together on so many issues aimed at making our planet better. I thank HH Sheikh Mohamed bin Zayed Al Nahyan for the warm hospitality.”

The Indian Prime Minister arrived in Abu Dhabi on Saturday and was warmly welcomed at the airport by Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan.

This was PM Modi’s fifth visit to the UAE.

[With Inputs from IANS]

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