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July 18, 2023
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MOU between India & UAE for use of local currencies to settle bilateral transactions

India and the United Arab Emirates (UAE) recently inked a Memorandum of Understanding (MoU) to establish a framework for utilizing their respective local currencies in settling bilateral transactions, signifying a significant step toward bolstering economic ties. This development seeks to implement a Local Currency Settlement System that fosters the use of the Indian Rupee (INR) and the UAE Dirham (AED) in bilateral trade.

The move is particularly promising for Non-Resident Indians (NRIs) for several reasons:

  1. Optimized Transaction Costs: The utilization of local currencies streamlines transaction expenses and reduces settlement times for various transactions, including remittances from Indian expatriates living in the UAE. This enhancement is set to benefit NRIs by making remittance processes more efficient and cost-effective.

  2. Promotion of Investments and Remittances: This arrangement is poised to encourage investments and remittances between the two nations, offering NRIs additional avenues for financial engagement and wealth management.

In addition to the MoU concerning rupee trade, India and the UAE have also sealed an agreement to interlink their fast payment systems. The linkage between India's Unified Payments Interface (UPI) and the UAE's Instant Payment Platform (IPP) will empower users in both countries to conduct swift, convenient, secure, and cost-efficient cross-border fund transfers.

As part of a second MoU, India and the UAE have committed to collaborating in the integration of their Card Switches, namely RuPay switch and UAESWITCH. This initiative is expected to enable the mutual acceptance of domestic cards and facilitate the processing of card transactions. Furthermore, the linkage of payment messaging systems is designed to streamline bilateral financial messaging between the two nations, creating a seamless financial ecosystem