The Reserve Bank of India (RBI) and the Central Bank of the UAE decided to advance their economic cooperation by allowing exporters and importers from either side to invoice and pay in their respective domestic currencies, the rupee and the dirham, while collaborating on a messaging system that could replace SWIFT (Society for Worldwide Interbank Financial Telecommunication), the system widely used to transfer money internationally.
During PM Modi's visit to Abu Dhabi, RBI governor Shaktikanta Das and his UAE counterpart Khaled Mohamed Balama signed an MoU that is thought to be intended to protect traders from exchange rate fluctuations while opening up opportunities for Emirati businesses to invest in India given that the UAE has a trade surplus with India.
The UAE is among India’s top three trading partners and is home to many Indian workers, besides being a major destination for Indian tourists.
Describing the MoUs as an important aspect of cooperation between the two nations, Modi said, “It paves the way for enhanced economic collaboration and will make international financial interactions simpler. Our bilateral trade has grown by 20%. For the first time, we have achieved $85 billion trade and soon we will achieve the target of $100 billion. If we decide, we can cross this milestone before the G20 summit.”
The actions coincide with a movement away from the dollar during the Russia-Ukraine conflict, which compelled nations to look at alternate payment channels to maintain trade lines. Industry sources claim that a sizable portion of India's trade with Russia is settled in dirhams. Separately, the government and RBI are also trying to internationalise the rupee and had, on last count, allowed 60 banks from 18 countries to settle transactions in rupee through a special account. The MoU with the UAE takes the initiative a step further.