On March 7, the Reserve Bank of India (RBI) announced the signing of an agreement with Bank Indonesia to encourage the utilization of local currencies for cross-border transactions.
RBI Governor Shaktikanta Das and Bank Indonesia counterpart Perry Warjiyo formalized the Memorandum of Understanding (MoU) aimed at establishing a framework for cooperation in cross-border transactions in local currencies.
The agreement between India and Indonesia seeks to boost the bilateral use of the Indian Rupee (INR) and Indonesian Rupiah (IDR), facilitating transactions in these currencies for various economic and financial activities.
According to the RBI, the MoU encompasses all current account transactions, permissible capital account transactions, and other mutually agreed economic and financial dealings.
This collaborative framework is designed to facilitate exporters and importers to conduct transactions and settlements in their respective domestic currencies, fostering the growth of an INR-IDR foreign exchange market. Utilizing local currencies is expected to streamline costs and settlement timelines for transactions.
This initiative mirrors RBI’s efforts from last year, particularly the signing of two MoUs with the Central Bank of the UAE on July 15. These agreements aimed to establish a Framework for Promoting the Use of Local Currencies in Cross-border Transactions and to enhance cooperation for linking payment and messaging systems.
The MoU with the UAE focused on setting up a Local Currency Settlement System (LCSS) to encourage the bilateral use of the Indian Rupee (INR) and UAE Dirham (AED) for current account and permitted capital account transactions.
