India, UAE sign MoU for INR-AED cross-border transactions amid Modi’s Abu Dhabi visit

India, UAE sign MoU for INR-AED cross-border transactions amid Modi’s Abu Dhabi visit

The Reserve Bank of India (RBI) signed two MoUs with the Central Bank of UAE (CBUAE) to promote the use of local currencies for cross-border transaction and to link payment and messaging systems on Saturday.

The agreement was signed between the RBI Governor Shaktikanta Das and the CBUAE Governor Khaled Mohamed Balama, coinciding with Indian Prime Minister Narendra Modi’s visit to Abu Dhabi.

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“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 INR and AED bilaterally,” a statement from RBI said.

The MoU will cover all current account transactions and capital account transactions, it added. The system is expected to aid exporters and importers to invoice and pay in their respective domestic currencies, which in turn would help develop the 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,” the RBI statement said.

“This is a very important