India, UAE sign pact to use local currencies to settle bilateral trade
Reserve Bank of India (RBI) and Central Bank of UAE (CBUAE) Sign MoUs for Cross-Border Transactions and Payment System Integration. In a significant move to enhance bilateral financial cooperation, the Reserve Bank of India (RBI) and the Central Bank of UAE (CBUAE) have signed two Memoranda of Understanding (MoUs). These agreements aim to facilitate cross-border transactions and interlink their payment systems, creating a more seamless and efficient financial ecosystem between India and the UAE.
Establishing a Local Currency Settlement System (LCSS)
The first MoU focuses on the establishment of a Local Currency Settlement System (LCSS). This system enables the use of India’s rupee (INR) and UAE’s dirham (AED) for bilateral transactions, promoting the development of an INR-AED foreign exchange market. The initiative allows exporters and importers to invoice and pay in their domestic currencies, eliminating the need for currency conversions. This move provides greater convenience and flexibility to businesses engaged in trade between India and the UAE.
Linking Unified Payments Interface (UPI) with Instant Payment Platform (IPP)
The second MoU involves the integration of India’s Unified Payments Interface (UPI) with UAE’s Instant Payment Platform (IPP). This linkage enables fast and secure cross-border funds transfers, promoting efficient and convenient payment solutions between the two countries. Users in both India and the UAE can benefit from seamless and cost-effective transactions, fostering closer economic ties.
Connecting Card Payment Networks and Payments Messaging Systems
Additionally, the RBI and CBUAE have agreed to connect their card payment networks, specifically RuPay switch and UAESWITCH. This collaboration allows for the acceptance of domestic cards in both countries, ensuring smooth and hassle-free processing of card transactions.
Furthermore, the RBI and CBUAE are exploring the possibility of linking their payment messaging systems. The integration of India’s Structured Financial Messaging System (SFMS) with the UAE’s messaging system aims to simplify bilateral financial messaging and enhance communication between the two nations.
Prime Minister Narendra Modi’s Visit to the UAE
These MoUs were signed during Prime Minister Narendra Modi’s official visit to the UAE, underscoring the commitment of both countries to deepen their bilateral ties. These strategic collaborations between the RBI and CBUAE seek to foster greater financial cooperation, boost trade relations, and promote economic growth between India and the UAE.
Conclusion
The signing of these MoUs between the RBI and CBUAE marks a significant milestone in strengthening financial cooperation and promoting seamless cross-border transactions between India and the UAE. The establishment of a Local Currency Settlement System, integration of payment systems, and the exploration of further collaborations in card payment networks and messaging systems demonstrate the commitment of both nations to foster greater financial integration and facilitate economic growth.
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