Team Blitz India
INDIA and the United Arab Emirates (UAE) have signed a Memorandum of Understanding (MoU) to set up a framework to strengthen the use of local currencies for cross-border transactions.
The agreement, inked during Prime Minister Narendra Modi’s stopover in Abu Dhabi on way back from France, shows that New Delhi is keen to hedge exchange rate risks in the rupee-based trade to limit losses to Indian exporters.
The pact allows opening and use of correspondent accounts for the benefit of financial institutions in both countries, promotes direct exchange rates between the two national currencies, and provides options for liquidity management in accordance with the laws and regulations of the two countries.
It also helps cut transaction costs by eliminating dollar conversions. Bilateral trade between the two countries was around $85billion in 2022-23. At present, India, the world’s third-biggest oil importer, pays for UAE oil in dollars.
The pact is part of India’s efforts to enhance the acceptability of rupee in international trade. Apart from starting trade settlement in their respective national currencies – Rupee and Dirham –it also links their fast payment systems to make international financial interactions simpler.
