RBI and CBUAE signs 2 MOUs to facilitate seamless cross border transactions and payments
the Reserve Bank of India (RBI) and the Central Bank of the United Arab Emirates (CBUAE) signed two memorandums of understanding on Saturday in Abu Dhabi to establish a framework for promoting the use of local currencies in cross-border transactions; and collaboration to connect their payment and messaging systems.
The two MoUs aim to facilitate seamless cross-border transactions and payments, and promote greater economic cooperation between the two countries.
The MoU on Establishing a Framework for the Use of Local Currencies in Transactions between India and the UAE, aims to put in place a Local Currency Settlement System (LCSS) to promote the bilateral use of the Indian Rupee/INR and the UAE Dirham/AED.
The MOU covers all permitted current account and capital account transactions. The establishment of the LCSS would enable exporters and importers to issue invoices and pay in their local currencies, which in turn would enable the development of the INR-AED foreign exchange market, according to an RBI statement.
This arrangement would enhance investments and financial transfers between the two countries. The use of local currencies will improve transaction costs and settlement time for transactions, including remittances from Indians residing in the UAE.
Under the Memorandum of Understanding on ‘Payments and Messaging Systems’, the two central banks have agreed to cooperate on (a) linking Rapid Payment Systems (FPSs) – Unified Payments Interface (UPI) in India with Instant Payment Platform (IPP) in UAE; (b) link the respective card adapters (RuPay and UAESWITCH); and (iii) exploring linking Payments Message Systems – Structured Financial Messaging System (SFMS) for India to the UAE messaging system.
“Linking UPI-IPP will enable users in either country to conduct cross-border money transfers that are fast, convenient, secure and cost-effective. Linking card adapters will facilitate mutual acceptance of local cards and processing of card transactions. Linking messaging systems aims to facilitate two-way financial messaging between the two countries.
The MoUs were signed by Reserve Bank of India Governor Shaktikanta Das and UAE Central Bank Governor Khalid Mohammed Balama. Memorandums of understanding were exchanged between the governors in the presence of Indian Prime Minister Narendra Modi and UAE President Sheikh Mohammed bin Zayed Al Nahyan.