RBI, UAE Central Bank Sign MoUs For Cross-border Transactions

The Reserve Bank of India and the Central Bank of UAE (CBUAE) signed two Memorandums of Understanding (MoUs) on 15 July. These agreements focus on promoting the use of local currencies for cross-border transactions and integrating their payment systems, specifically the Unified Payments Interface (UPI) with the Instant Payment Platform (IPP) of UAE. 

The first MoU establishes a framework for the use of Indian rupee (INR) and UAE Dirham (AED) in cross-border transactions. It aims to create a Local Currency Settlement System (LCSS) that covers current accounts and permitted capital account transactions. This system will allow exporters and importers to invoice and pay in their domestic currencies, promoting the development of an INR-AED foreign exchange market. The use of local currencies will reduce transaction costs and settlement time, benefiting remittances from Indians in UAE. 

The second MoU, titled 'Payments and Messaging Systems', focuses on cooperation between the two central banks in linking their Fast Payment Systems (FPSs), namely UPI and IPP. It also includes the linking of their respective Card Switches (RuPay switch and UAESWITCH) and explores the integration of payments messaging systems (SFMS) of India with the messaging system in UAE. These efforts will enable fast, convenient, secure, and cost-effective cross-border funds transfers, as well as mutual acceptance of domestic cards and processing of card transactions. The integration of messaging systems aims to facilitate bilateral financial messaging between the two countries. 

The MoUs were signed by the Governor of the Reserve Bank of India, Shaktikanta Das, and the Governor of the Central Bank of UAE, Khaled Mohamed Balama. The exchange of MoUs took place in the presence of Prime Minister Narendra Modi and UAE President Sheikh Mohamed Bin Zayed Al Nahyan.