India on Saturday moved a step closer to increasing circulation of the rupee in the Gulf region with the signing of two memoranda of understanding (MoU) between the Reserve Bank of India and the Central Bank of the United Arab Emirates.
The signing of these agreements was witnessed by UAE President Sheikh Mohamed bin Zayed Al Nahyan and Prime Minister Narendra Modi, who was on a day-long visit to the Gulf country on his way back from France.
The first agreement between the RBI and the UAE Central Bank will establish a framework to “promote the use of local currencies (rupee and dirham) for cross border transactions”, the External Affairs Ministry said in a statement.
The other MoU between the two central banks is aimed at interlinking their “payment and messaging systems”, the Ministry said.
Also Read Explained | Why are India-Russia trade payments in crisis?
“The leaders expressed their interest in strengthening cooperation in the payment systems area by enabling integration between cross-border transactions between the UAE and India more efficiently. Such cooperation will also include the mutual acceptance of domestic card schemes by interlinking national card switches. Integration between these systems will enhance access to payment services for the benefit of the citizens and residents of the two countries,” a Joint Statement issued after the visit read.
The two agreements between the central banks came in the backdrop of Indian entities commencing payment in yuan to Russian energy majors and are likely to enhance the trend of doing business in local currencies that gained greater acceptance since the beginning of the Ukraine crisis in February 2022.
Apart from the MoUs on trade in local currencies, the two leaders also witnessed the signing of an MoU on establishing a branch of the Indian Institute of Technology-Delhi in Abu Dhabi. Mr. Modi also met Dr. Sultan Al Jaber, President-designate of CoP28 and Group CEO of Abu Dhabi National Oil Company.
“Dr. Jaber briefed Prime Minister on UAE’s approach to this important meeting. Prime Minister conveyed India’s full support to UAE for its COP-28 Presidency,” the Ministry said.
This was the fifth visit by Mr. Modi to the UAE. India-UAE trade rose to $85 billion in 2022. According to the External Affairs Ministry, UAE is India’s third-largest trading partner for 2022-23 and India’s second-largest export destination.
“Bilateral trade has increased by approximately 15% since the entry into force of the CEPA on 1 May 2022,” the Ministry said.
The discussion also included the agenda of the groupings such as the I2U2 (India, Israel, UAE and USA) and the UAE-France-India trilateral cooperation under which both sides are in collaboration with other powers.
