The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a memorandum of understanding (MoU) on Thursday, March 7, to establish a framework to promote the use of local currencies for cross-border transactions, according to a statement.
The MoU was signed by RBI Governor Shaktikanta Das and Bank Indonesia Governor Perry Warjiyo.
“The MoU on establishing a framework for cooperation in the area of cross-border transactions in local currencies between India and Indonesia aims to promote the use of INR (Indian Rupee) and IDR (Indonesian Rupiah) 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,” the RBI said in the statement on March 7.
It added that 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. The use of local currencies would optimise costs and settlement time for transactions.
“This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BI. Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural and economic relations between India and Indonesia,” the RBI stated.
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