 "money, cash, rupees")
The Reserve Bank of India (RBI) and Indonesia’s central bank on Thursday signed an agreement in Mumbai to promote cross-border local currency transactions.
It is India’s second such local currency trade agreement after the UAE.
RBI governor Shaktikanta Das and Perry Warjiyo, governor of Bank Indonesia (BI), signed a memorandum of understanding (MoU) for “establishing a framework for cooperation in the area of cross-border transactions in local currencies between India and Indonesia”, said RBI in a statement. The agreement “aims to promote the use of INR (Indian Rupee) and IDR (Indonesian Rupiah) bilaterally”.
The MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions agreed upon by the two countries.
The arrangement would enable exporters and importers to invoice and pay in their domestic currencies, helping the development of an INR and IDR foreign exchange market. Use of local currencies would optimise costs and settlement time for transactions.
“This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BI. Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural and economic relations between India and Indonesia,” said the statement.
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In July, RBI and the Central Bank of UAE (CBUAE) signed two MoUs in Abu Dhabi to establish a framework to promote bilateral trade in their currencies and to interlink payments and messaging systems.
After the West imposed sanctions on Russia for invading Ukraine in February 2022, many other countries sought to reduce their dependence on the US dollar for trade settlement. The INR trade settlement mechanism, introduced by RBI in July 2022, was a move in that direction.
