The Reserve Bank of India and the Central Bank of the United Arab Emirates (UAE) have signed two MoUs for the use of local currencies for cross-border transactions and interlinking their payment and messaging systems.
The MoU aims to put in place a Local Currency Settlement System (LCSS) to promote the use of Indian Rupee (INR) and UAE Dirham (AED) bilaterally. “The MoU covers current account transactions and permitted capital account transactions.” the press release stated.
This would enable exporters and importers to invoice and pay in their respective domestic currencies, which would enable the development of an INR-AED foreign exchange market and promote investments and remittances between the two countries.
Furthermore, the two countries have agreed to link their payment systems, which include the Unified Payment Interface (UPI) of India with the Instant Payment Platform (IPP) of UAE. Furthermore, the countries will also link their respective Card Switches (RuPay Switch and UAESWITCH) as well as payment messaging systems.
Linking of UPI and IPP will enable users in both countries to make fast, convenient, safe and cost-effective cross-border funds transfer, while linkage of Card Switches will enable use and acceptance of domestic cards and processing of card transactions.
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