Abu Dhabi. The Reserve Bank of India (RBI) and the Central Bank of the UAE (CBUAE) have solidified their commitment to fostering economic cooperation and seamless cross-border transactions by signing two Memorandums of Understanding (MoUs). The MoUs, exchanged in the presence of Prime Minister Narendra Modi and UAE President Sheikh Mohamed Bin Zayed Al Nahyan, aim to promote the use of local currencies and facilitate interlinking of payment and messaging systems.
The first MoU focuses on establishing a framework to promote the use of local currencies, specifically the Indian rupee (INR) and the UAE Dirham (AED), for cross-border transactions. The creation of a Local Currency Settlement System (LCSS) will enable exporters and importers to invoice and transact in their respective domestic currencies, fostering an INR-AED foreign exchange market. By optimizing transaction costs and settlement time, this arrangement will promote investments, remittances, and bilateral trade between India and the UAE.
The second MoU centers on cooperation between the payment and messaging systems of the two central banks. This collaboration encompasses linking India's Fast Payment Systems (FPSS- Unified Payments Interface, UPI) with the UAE's Instant Payment Platform (IPP), as well as connecting their respective card switches (RuPay switch and UAESWITCH).
Additionally, the MoU explores the potential linking of India's Structured Financial Messaging System (SFMS) with the messaging system in the UAE. These integrations aim to facilitate seamless and efficient cross-border funds transfers, card transactions, and financial messaging between the two countries.
The signing of these MoUs signifies a significant step forward in promoting bilateral economic cooperation between India and the UAE. The agreements pave the way for enhanced trade facilitation, reduced transaction costs, and improved settlement times, ultimately fostering greater economic integration between the two nations. The partnerships established through these MoUs reflect a shared commitment to promoting a robust and dynamic economic relationship.
The RBI and the CBUAE's collaborative efforts seek to enable individuals and businesses in both countries to engage in fast, convenient, secure, and cost-effective cross-border transactions. By leveraging the potential of local currencies and seamlessly linking payment and messaging systems, these initiatives will contribute to the growth and prosperity of both nations.
The dual MoU signing is a testament to the strong bilateral ties between India and the UAE and demonstrates their joint pursuit of expanding economic collaboration. The agreements pave the way for a more seamless and efficient financial landscape, creating favorable conditions for businesses, investors, and individuals in both countries to thrive.
