India, UAE agree to use national currencies in bilateral trade

The agreement was signed during a visit to the UAE's capital city of Abu Dhabi by India's Prime Minister Narendra Modi on Saturday. The Indian premier was making a stopover in the Emirati capital while returning to his country from a visit to Paris.

The two countries also signed another agreement, which allows them to link their fast payment systems, namely the Unified Payments Interface (UPI) of India with the Instant Payment Platform (IPP) of the UAE.

The memorandum of understanding for promoting the use of local currencies -- the Indian Rupee (INR) and the UAE Dirham (AED) -- for cross-border transactions, was signed by the governor of the Reserve Bank of India and his counterpart at the Central Bank of the UAE.

Being the first of its kind, the MoU is aimed at establishing a local currency settlement system to promote the bilateral use of the two countries' national currencies. It covers all current account transactions and permitted capital account transactions.

The new settlement system enables Indian and Emirati exporters and importers to invoice and pay in their respective domestic currencies, thus facilitating the development of a foreign exchange market between India and the UAE.

This came as the global drive toward de-dollarization rages on unabated amid growing efforts by different countries to ditch dependency on the US dollar and trade with their own national currencies.