The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a memorandum of understanding (MoU) on Thursday for setting up a framework to promote local currencies— the Indian rupee and the Indonesian rupiah—for cross-border transactions.
According to RBI, the MoU aims to promote the two currencies bilaterally.
“The MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions as agreed upon by both countries. This framework would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-IDR foreign exchange market,” RBI said in a release.
The central bank said the use of local currencies would optimise costs and settlement time for transactions.
The RBI said this collaboration marks a key milestone in strengthening bilateral cooperation between the two banks.
It said the use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia. The decision will also deepen financial integration and strengthen the historical, cultural and economic relations between the two countries, RBI added.
