India has signed an agreement with the UAE that will allow it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions, reported Reuters.
During a visit by India's Prime Minister Narendra Modi to the UAE on Saturday, the two countries also agreed to set up a real-time payment link to facilitate easier cross-border money transfers.
The agreement was exchanged between Khaled Mohamed Balama, Governor of the Central Bank of UAE and Shaktikanta Das, Governor of the Reserve Bank of India (RBI).
A second MoU was exchanged between the two for cooperation regarding the links of rapid payment systems, cards and messaging systems.
The two agreements will enable "seamless cross-border transactions and payments, and foster greater economic cooperation", said a statement from the Reserve Bank of India on Saturday.
The two central banks agreed to link India's Unified Payments Interface (UPI) and UAE's Instant Payment Platform (IPP). Such arrangements, which are a growing trend in Asia, typically lower the cost of payments.
India, the world's third biggest oil importer and consumer and whose central bank last year announced a framework for settling global trade in rupees, currently pays for UAE oil in dollars.
Bilateral trade between the two countries was $84.5 billion in the year from April 2022 to March 2023.
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