RBI And CBUAE Sign Agreements To Boost Cross-Border Transactions In Local Currencies

The Reserve Bank of India (RBI) and the Central Bank of the UAE (CBUAE) inked two agreements on Saturday in Abu Dhabi to create a framework for cross-border transactions in local currencies and the interconnection of payment and messaging system, PTI reported

The agreements were exchanged between the two governors in front of Sheikh Mohamed Bin Zayed Al Nahyan, the president of the UAE, and Narendra Modi, the Indian prime minister, according to a statement from the Reserve Bank.

The MoUs aim to foster collaboration in interconnecting payment and messaging systems while establishing a framework to facilitate cross-border transactions using the Indian rupee (INR) and the UAE dirham (AED) as local currencies.

India has been actively advocating for the use of local currencies in cross-border transactions as a means to reduce reliance on the US dollar.

The signed MoU between India and UAE aims to establish a comprehensive Local Currency Settlement System (LCSS), fostering the bilateral use of INR and AED in transactions.

All current account transactions and authorised capital account transactions are covered by the MoU, according to the central bank.

Utilising local currencies would reduce transaction fees and settlement times for all transactions, including remittances from Indians living in the United Arab Emirates.

The two central banks agreed to work together to link their Fast Payment Systems (FPSs) - Unified Payments Interface (UPI) of India and Instant Payment Platform (IPP) of the UAE - as well as their respective Card Switches (RuPay switch and UAESWITCH). They also agreed to explore linking their payments messaging systems, Structured Financial Messaging System (SFMS) of India and 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 RBI said.

Additionally, the interconnection of Card Switches will speed up the processing of card transactions and mutual acceptance of domestic cards.

The integration of communications systems aims to make it easier for the two nations to communicate financially on a bilateral basis.