MUMBAI: India and Maldives have taken a significant step to encourage the use of local currencies in cross-border transactions, aiming to streamline trade and deepen economic ties. Towards this initiative, the Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) signed a Memorandum of Understanding (MoU) in Mumbai on Thursday. The agreement was formalised by RBI Governor Shaktikanta Das and MMA Governor Ahmed Munawar.
Under this framework, the Indian Rupee (INR) and the Maldivian Rufiyaa (MVR) will be used for current account transactions, permissible capital account transactions, and other mutually agreed cross border transactions.
This will allow exporters and importers to invoice and settle in their respective domestic currencies, paving the way for the development of INR-MVR trading in the foreign exchange market. The adoption of local currencies is expected to optimise transaction costs and reduce settlement time.
India’s push for local currency trade
The MoU with Maldives is part of India’s broader strategy to promote the use of local currencies in bilateral trade. Similar agreements have been signed with countries such as Sri Lanka, the UAE, and Russia to facilitate trade in domestic currencies and reduce dependency on the US dollar.
These arrangements are aimed at enhancing trade efficiency, lowering transaction costs, and strengthening financial ties with key trading partners.
The collaboration with Maldives marks a new milestone in bilateral cooperation, emphasising the commitment of both nations to foster stronger economic integration. The use of local currencies is anticipated to further boost trade, deepen financial links, and fortify economic relations between India and Maldives.
