INDIA: The Reserve Bank of India (RBI) and the Central Bank of the UAE (CBUAE) signed two MoUs in Abu Dhabi on Saturday to establish a framework to promote the use of the Indian rupee (INR) and the UAE Dirham (AED) for cross-border transactions.
The MoUs cover all current account transactions and permitted capital account transactions. The creation of the Local Currency Settlement System (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, according to a statement issued by RBI Chief General Manager Yogesh Dayal.
This arrangement is expected to promote investments and remittances between the two countries. Besides, it would optimise transaction costs and settlement time for transactions, including remittances from Indians residing in the UAE.
Under the MOU on “Payments and Messaging Systems”, the RBI and CBUAE have agreed to cooperate on linking their Fast Payment Systems (FPSs)—the Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of the UAE.
Also, to link the respective Card Switches (RuPay switch and UAESWITCH) and to explore the linking of payments messaging systems (the Structured Financial Messaging System (SFMS) of India with the messaging system in the UAE) is part of the agreement.
The Unified Payments Interface (UPI) and Internet Printing Protocol (IPP) linkage will enable users in either country to make fast and cost-effective cross-border funds transfers.
Further, the linking of Card Switches will facilitate mutual acceptance of domestic cards and the processing of card transactions. The linkage of messaging systems is aimed at facilitating bilateral financial messaging between the two countries, the RBI statement added.
The MoUs were signed by RBI Governor Shaktikanta Das and the Governor of the Central Bank of the UAE, Khaled Mohamed Balama. The MoUs were exchanged between the two governors in the presence of Prime Minister Narendra Modi and President of the UAE Sheikh Mohamed Bin Zayed Al Nahyan.
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