India and UAE agree on trade settlement in local currencies, linking Fast Payment Systems

Abu Dhabi: India and the UAE on Saturday agreed to start trade settlement in their currencies and link the Indian Unified Payments Interface with the Gulf country's Instant Payment Platform (IPP) as Prime Minister Narendra Modi held comprehensive talks with UAE President Sheikh Mohamed bin Zayed Al Nahyan here.

In his remarks after meeting the UAE President, Modi said India-UAE trade witnessed a 20 per cent increase since the signing of the Comprehensive Economic Partnership Agreement last year.

Modi said the agreement signed on Saturday for trade settlement in the currencies of the two countries shows the strong economic cooperation and mutual trust between the two nations.

"It is always gladdening to meet HH Sheikh Mohamed bin Zayed Al Nahyan. His energy and vision for development are admirable. We discussed the full range of India-UAE ties including ways to boost cultural and economic ties," Modi said on Twitter after the meeting.

The agreement with the UAE on trade settlement in the currencies of the two countries will boost bilateral trade and investments.

Modi said he always got the love of a brother from Sheikh Mohamed bin Zayed Al Nahyan.

"The manner in which ties between our countries have expanded, you have made a big contribution to that. Every person in India views you as a true friend," he told the UAE President.

Talking about the MoUs between the central banks of the two countries, Modi said, "This is a very important aspect of India-UAE cooperation. It paves the way for enhanced economic collaboration and will make international financial interactions simpler." Modi also noted that preparations for COP-28 to be held in the UAE are going on under the UAE President's leadership, and added that he has made up his mind to participate in the conference later this year.

According to an official statement, the Reserve Bank of India and the Central Bank of the UAE signed two MoUs for – establishing a framework to promote the use of local currencies viz. the Indian rupee (INR) and the UAE Dirham (AED) for cross-border transactions; and for cooperation for interlinking their payment and messaging systems.

The MoUs were signed by RBI Governor Shaktikanta Das and UAE Central Bank Governor Khaled Mohamed Balama, in the presence of Prime Minister Modi and Mohamed Bin Zayed.

The MoU on establishing a framework for the use of local currencies for transactions between India and UAE, aims to put in place a Local Currency Settlement System (LCSS) to promote the use of INR and AED bilaterally.

The MoU covers all current account transactions and permitted capital account transactions, the statement issued by the RBI said.

Creation of the LCSS would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-AED foreign exchange market, it said and added that his arrangement would also promote investments and remittances between the two countries.

The use of local currencies would optimise transaction costs and settlement time for transactions, including for remittances from Indians residing in UAE, the statement said.

Under the MOU on ‘Payments and Messaging Systems’, the two central banks agreed to cooperate on -- linking their Fast Payment Systems (FPSs) – Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of UAE and linking the respective Card Switches (RuPay switch and UAESWITCH).

They also agreed to cooperate on exploring the linking of payments messaging systems i.e., Structured Financial Messaging System (SFMS) of India with the messaging system in the UAE.

The Union Ministry of Education and Abu Dhabi's Education and Knowledge Department (ADEK) signed a memorandum of understanding (MoU) for setting up an IIT Delhi campus in the Gulf country.

The Indian Institute of Technology (IIT) Delhi is the second IIT to announce setting up an offshore campus after IIT Madras. Last week, IIT Madras signed an MoU for setting up a campus in Tanzania's Zanzibar.

Earlier, Modi was accorded a ceremonial welcome here at the Qasr-Al-Watan - the presidential palace - where he was greeted by the UAE President with a warm embrace. Children were seen waving the Indian tricolour as the Prime Minister inspected the guard of honour.

India and the UAE are engaged across various sectors such as trade, investments, energy, food security, science and technology, education, fintech, defence, security, and robust people-to-people ties.