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India and the UAE opt to use rupees instead of dollars for commercial transactions.

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India has signed an agreement with the UAE that allows it to trade in rupees rather than dollars, furthering India’s efforts to reduce transaction costs by phasing out US currency transfers.

During Indian Prime Minister Narendra Modi’s visit to the UAE on Saturday, the two countries also agreed to establish an instant payment channel to facilitate cross-border money transfers.

A statement released by the Reserve Bank of India said the two agreements will ensure “smooth cross-border transactions and payments and further economic cooperation”, noting that India currently pays for UAE oil in dollars.

India is the world’s third-largest oil importer and consumer, and its central bank last year announced a settlement structure for global trade in rupees.

The volume of bilateral trade between India and the UAE reached $84.5 billion in the fiscal year from April 2022 to March 2023.

On Friday, Reuters quoted an official with knowledge of the details as saying “India may conduct first settlement transactions in rupees for Emirati oil with the Abu Dhabi National Oil Company (ADNOC).”

The Reserve Bank of India said the two central banks have agreed to link India’s UBI to the UAE’s IBB instant payment platform. Such arrangements, which are a growing trend in Asia, often reduce settlement costs.

Modi arrived in Abu Dhabi on Saturday for a one-day visit and met with UAE President Sheikh Mohammed bin Zayed Al Nahyan.

Source: Reuters.

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