India took a step closer to increasing circulation of the rupee in the Gulf region by signing two memoranda of understanding (MoUs) between the Reserve Bank of India and the Central Bank of the United Arab Emirates.
The first MoU aims to promote the use of local currencies (rupee and dirham) for cross-border transactions, establishing a framework for this purpose, according to the External Affairs Ministry.
The second MoU focuses on interlinking the payment and messaging systems of the RBI and the UAE Central Bank.
The leaders expressed their interest in strengthening cooperation in the payment systems area, aiming to enable more efficient integration of cross-border transactions between the UAE and India.
The cooperation will include the mutual acceptance of domestic card schemes by interlinking national card switches, enhancing access to payment services for citizens and residents of both countries.
These agreements align with the trend of conducting business in local currencies, which gained acceptance since the start of the Ukraine crisis in February 2022.
Indian entities have also started making payments in yuan to Russian energy majors, further enhancing the use of local currencies.
Benefits for India
Increased circulation of the rupee
Strengthened economic ties
Enhanced access to payment services
Reduced reliance on foreign currencies
Geopolitical advantages
Overall, the MoUs provide opportunities for India to expand its economic presence in the Gulf region, strengthen trade ties, and reduce reliance on foreign currencies.
They offer potential benefits for businesses, individuals, and the overall Indian economy.
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