India and UAE agreed to trade in local currencies for cross-border transactions


India and the United Arab Emirates (UAE) have agreed to use their respective local currencies for cross-border transactions. On Saturday, India and the UAE signed an agreement enabling the settlement of bilateral trade in rupees and dirhams instead of dollars. The UAE is one of India's top three trading partners and a significant destination for Indian workers and tourists. The use of local currencies would optimise transaction costs and settlement time for transactions, including for remittances from Indians residing in the UAE.

The agreement to initiate trade settlements was signed by Khaled Balama, Governor of the Central Bank of the UAE, and Shaktikanta Das, Governor of the Reserve Bank of India, in the presence of President Sheikh Mohamed and Indian Prime Minister Narendra Modi in Abu Dhabi. Both countries will also link their instant payment systems, India’s Unified Payments Interface (UPI) and the UAE’s Instant Payments Platform (IPP).

"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," - Indian Prime Minister Narendra Modi said.

The agreement aims to put in place a local currency settlement system (LCSS) to promote the use of the Indian rupee and the dirham bilaterally – Reserve Bank of India said.

As per the latest report, India could make its first rupee payment for UAE oil to Abu Dhabi National Oil Co (ADNOC). After UAE, now India is talking with Indonesia to trade in local currencies. Both countries had bilateral trade of around $39 billion last year.