Synopsis:
- RBI and MMA signed an MoU to allow cross-border transactions in INR and MVR.
- The framework supports current and approved capital account transactions.
- Traders can now settle payments directly in local currencies, reducing dependency on the US Dollar.
- The initiative strengthens economic cooperation between India and Maldives.
In a major step towards strengthening economic and financial ties, the Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) signed a Memorandum of Understanding (MoU) on Thursday in Mumbai. The agreement, signed by RBI Governor Shaktikanta Das and MMA Governor Ahmed Munawar, aims to establish a framework for using local currencies—the Indian Rupee (INR) and Maldivian Rufiyaa (MVR)—in cross-border transactions.
This move seeks to simplify trade settlements, reduce transaction costs, and enhance economic cooperation between the two nations.
Key Highlights of the MoU:
| Aspect | Details |
|---|---|
| Local Currency Transactions | The framework allows INR and MVR for current account and permissible capital account transactions. |
| Trade Settlement | Exporters and importers can now invoice and settle trade directly in their respective domestic currencies. |
| Foreign Exchange Development | Facilitates the development of trading in the INR-MVR currency pair in the foreign exchange market. |
| Cost and Time Optimisation | Using local currencies reduces transaction costs and settlement time. |
Benefits of the Local Currency Framework
- Optimised Trade Costs: Direct settlement in local currencies eliminates the need for third-party currencies like the US Dollar, cutting down on transaction costs.
- Improved Settlement Times: Faster processing ensures quicker payment cycles.
- Strengthened Bilateral Relations: The initiative deepens financial integration and economic cooperation between India and Maldives.
- Enhanced Trade Potential: Encouraging the use of INR and MVR promotes bilateral trade by simplifying payment systems.
The RBI highlighted that this collaboration represents a key milestone in bilateral cooperation, fostering stronger economic ties between the two nations.
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