Abu Dhabi

India's Prime Minister Narendra Modi pushed the de-dollarisation movement in the United Arab Emirates on Saturday as the central banks of the two nations agreed to 'establish a framework to promote the use of local currencies for cross-border transactions'. The two sides also agreed to cooperate for the interlinking of their payment and messaging systems, reflecting New Delhi's lead in prioritising the move away from the US-dominated SWIFT payments interface.

Advertisment

Also read | Brazil's President Lula seeks common BRICS currency to counter US dollar's dominance

The agreement was signed during a one-day visit to the UAE by India's Prime Minister Narendra Modi, which he described as the one aimed towards"making our planet better."

India-UAE local currency framework: What does it mean?

Advertisment

The Memorandum of Understanding signed by the Governor of the Reserve Bank of India, Shaktikanta Das and the Governor of the Central Bank of UAE, H.E. Khaled Mohamed Balama, aims to put in place a Local Currency Settlement System (LCSS) to promote the use of Indian Rupee and Arab Emirates Dirham (AED) for bilateral trade. 

"The MoU covers all current account transactions and permitted capital account transactions," an official readout by the Reserve Bank of India said.

The agreement 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.

Advertisment

"The use of local currencies would optimise transaction costs and settlement time for transactions, including for remittances from Indians residing in UAE," Reserve Bank of India added.

India's UPI, and UAE's IPP to be interlinked

The two countries also agreed to cooperate on linking their Fast Payment Systems (FPSs) — India's Unified Payments Interface (UPI) and UAE's Instant Payment Platform — as well as their respective Card Switches (Rupay switch and UAESWITCH). India and UAE will also explore the linking of payments messaging systems i.e., Structured Financial Messaging System (SFMS) of India with the messaging system in the UAE.

Also watch | De-dollarisation: 10 ASEAN countries agree to ditch the US Dollar

"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.

Bilateral trade between India and the UAE has increased from US$ 72.9 billion (Apr 21-Mar 2022) to US$ 84.5 billion (Apr 22-Mar 2023) registering a year-on-year increase of 16 per cent. 

WATCH WION LIVE HERE

You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.