Reserve Bank of India and Central Bank of the UAE sign two MoUs to
(i) establish a Framework to Promote the Use of Local Currencies for
Cross-border Transactions and
(ii) cooperation for interlinking their
payment and messaging systems
The Reserve Bank of India (RBI) and the Central Bank of UAE (CBUAE)
signed two MoUs today in Abu Dhabi for (i) establishing a Framework to
Promote the Use of Local Currencies viz. the Indian rupee (INR) and the
UAE Dirham (AED) for cross-border transactions; and (ii) cooperation for
interlinking their payment and messaging systems. The MoUs were signed
by the Governor of the Reserve Bank of India, Shri Shaktikanta Das and
the Governor of the Central Bank of UAE, H.E. Khaled Mohamed Balama. The
MoUs were exchanged between the two Governors, in the august presence
of the Honourable Prime Minister of India, Shri Narendra Modi and His
Highness Sheikh Mohamed Bin Zayed Al Nahyan, President of the UAE.
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. The MoU covers all current account transactions and
permitted capital account transactions. Creation of the LCSS would
enable exporters and importers to invoice and pay in their respective
domestic currencies, which in turn would enable the development of an
INR-AED foreign exchange market. This arrangement would also promote
investments and remittances between the two countries. Use of local
currencies would optimise transaction costs and settlement time for
transactions, including for remittances from Indians residing in UAE.
Under the MOU on ‘Payments and Messaging Systems’, the two central
banks agreed to cooperate on (a) linking their Fast Payment Systems
(FPSs) – Unified Payments Interface (UPI) of India with Instant Payment
Platform (IPP) of UAE; (b) linking the respective Card Switches (RuPay
switch and UAESWITCH); and (c) exploring the linking of payments
messaging systems i.e., Structured Financial Messaging System (SFMS) of
India with 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
linking of Card Switches will facilitate mutual acceptance of domestic
cards and processing of card transactions. The linkage of messaging
systems is aimed to facilitate bilateral financial messaging between the
two countries.
The two MoUs are aimed at facilitating
seamless cross border transactions and payments, and foster greater
economic cooperation between the two countries.
