INDIA-UAE: India and the UAE have reached an agreement to facilitate trade settlement using their local currencies, while also connecting the Indian Unified Payments Interface with the UAE's Instant Payment Platform. This development comes as Prime Minister Narendra Modi engaged in comprehensive discussions with UAE President Sheikh Mohamed bin Zayed Al Nahyan.
Following the meeting, Prime Minister Modi expressed that India-UAE trade has seen a notable 20% increase since the signing of the Comprehensive Economic Partnership Agreement last year. He emphasized that the agreement to conduct trade settlement in the respective currencies of the two nations signifies the robust economic cooperation and mutual trust between India and the UAE.
Expressing his appreciation for Sheikh Mohamed bin Zayed Al Nahyan, Prime Minister Modi praised his admirable energy and vision for development. They discussed a wide range of topics, including measures to enhance cultural and economic ties between the two nations. Modi took to Twitter to share his thoughts, stating, ''It is always gladdening to meet HH Sheikh Mohamed bin Zayed Al Nahyan. His energy and vision for development are admirable. We discussed the full range of India-UAE ties including ways to boost cultural and economic ties.''
The trade settlement agreement in local currencies is expected to strengthen bilateral trade and investments. Prime Minister Modi also conveyed his gratitude to Sheikh Mohamed bin Zayed Al Nahyan, acknowledging his significant contribution to the expansion of India-UAE relations. He expressed that the people of India consider him a true friend.
Highlighting the importance of the Memoranda of Understanding (MoUs) between the central banks of both countries, Prime Minister Modi emphasized the positive implications for India-UAE cooperation. These MoUs pave the way for enhanced economic collaboration and simplified international financial interactions. Furthermore, Modi commended Sheikh Mohamed bin Zayed Al Nahyan's leadership in organizing COP-28, confirming his intention to participate in the conference later this year.
As per an official statement, the Reserve Bank of India and the Central Bank of the UAE signed two MoUs. The first MoU establishes a framework to promote the use of local currencies, namely the Indian rupee (INR) and the UAE dirham (AED), for cross-border transactions. The second MoU focuses on cooperation for interlinking their payment and messaging systems.
The signing of these MoUs took place in the presence of Prime Minister Modi and Sheikh Mohamed Bin Zayed, with RBI Governor Shaktikanta Das and UAE Central Bank Governor Khaled Mohamed Balama signing on behalf of their respective institutions.
The first MoU aims to establish a Local Currency Settlement System (LCSS) that facilitates the use of INR and AED for bilateral transactions, covering current account and permitted capital account transactions. The LCSS will enable exporters and importers to invoice and make payments in their domestic currencies, fostering the development of an INR-AED foreign exchange market. This arrangement is expected to boost investments and remittances between the two countries, optimize transaction costs, and reduce settlement time for various transactions, including remittances from Indians residing in the UAE.
The second MoU, focused on 'Payments and Messaging Systems,' outlines cooperation between the central banks to link their Fast Payment Systems (FPSs) – Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of the UAE. Additionally, the MoU explores the linkage of payments messaging systems, such as the Structured Financial Messaging System (SFMS) of India with the messaging system in the UAE.
Notably, the India-UAE agreement on trade settlement in local currencies and the connection between their payment systems signifies a significant step towards strengthening economic ties and fostering mutual growth and cooperation between the two nations.
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