WHY IN NEWS
Two memoranda of understanding (MoU) were signed between the Reserve Bank of India and the Central Bank of the United Arab Emirates.
- These MoUs will take India a step closer to increasing circulation of the rupee in the Gulf region.
- The first agreement between the RBI and the UAE Central Bank will establish a framework to “promote the use of local currencies (rupee and dirham) for cross border transactions”.
- The other MoU between the two central banks is aimed at interlinking their “payment and messaging systems”.
- This will strengthen cooperation in the payment systems area by enabling integration between cross-border transactions between the UAE and India.
- Such cooperation will also include the mutual acceptance of domestic card schemes by interlinking national card switches.
- This will result in lowering transaction costs and making it easier to convert the currency.
India-UAE Bilateral Ties
- India-UAE trade rose to $85 billion in 2022.
- According to the External Affairs Ministry, UAE is India’s third-largest trading partner for 2022-23 and India’s second-largest export destination.
- Bilateral trade has increased by approximately 15% since the entry into force of the CEPA on 1 May 2022.