The Reserve Bank of India (RBI) and the Central Bank of UAE (CBUAE) have signed two Memorandums of Understanding (MoUs) in Abu Dhabi to strengthen financial ties between the two countries. The first MoU focuses on establishing a framework to promote the use of local currencies, specifically the Indian rupee (INR) and the UAE Dirham (AED), for cross-border transactions. This framework aims to create a Local Currency Settlement System (LCSS) that would facilitate the use of INR and AED for bilateral transactions. The LCSS would enable exporters and importers to invoice and pay in their domestic currencies, promoting trade and investments between India and the UAE. It would also optimize transaction costs and settlement time, benefiting individuals, businesses, and remittances from Indians residing in the UAE.
Cooperation in Payment and Messaging Systems
The second MoU focuses on cooperation between the RBI and the CBUAE in interlinking their payment and messaging systems. This collaboration includes linking their Fast Payment Systems, namely the Unified Payments Interface (UPI) of India and the Instant Payment Platform (IPP) of the UAE. Additionally, the MoU aims to link the respective Card Switches, such as RuPay switch and UAESWITCH, to facilitate the acceptance and processing of domestic card transactions between the two countries. Furthermore, the RBI and the CBUAE will explore the integration of their payments messaging systems, specifically the Structured Financial Messaging System (SFMS) of India and the UAE’s messaging system.
Enhancing Cross-Border Financial Transactions
These MoUs between the RBI and the CBUAE are significant steps towards enhancing financial cooperation and seamless cross-border transactions between India and the UAE. The establishment of a framework for the use of local currencies and the integration of payment and messaging systems will contribute to a more efficient and cost-effective cross-border funds transfer process. It will also foster greater economic cooperation, trade, and investments between the two countries.
Important Information Table
| Topic | Details |
|---|---|
| Framework for Use | Establish a Local Currency Settlement System (LCSS) |
| of Local Currencies | Enable INR and AED transactions for bilateral trade |
| Payment and Messaging | Link Fast Payment Systems (UPI and IPP), Card Switches (RuPay and |
| Systems Cooperation | UAESWITCH), and explore integration of messaging systems (SFMS) |
| Cross-Border Funds | Enable fast, convenient, safe, and cost-effective cross-border funds |
| Transfers | transfers for users in both countries |
| Bilateral Financial | Facilitate bilateral financial messaging and strengthen cooperation |
| Messaging | between the two countries |
| Economic Cooperation | Foster greater economic cooperation, trade, and investments between |
| India and the UAE |
These MoUs between the RBI and the CBUAE reflect their commitment to enhancing financial collaboration and promoting a closer economic partnership between India and the UAE. The initiatives outlined in the MoUs will contribute to facilitating smoother cross-border transactions, boosting economic growth, and strengthening the bilateral relationship between the two countries.
