The Reserve Bank of India (RBI) and the Bank of Indonesia on Thursday signed a Memorandum of Understanding for establishing a framework to promote the use of local currencies viz, the Indian Rupee (INR) and the Indonesian Rupiah (IDR) for cross-border transactions. The MoU was signed by the Governor of Reserve Bank of India, Shaktikanta Das and the Governor of Bank of Indonesia, 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 and IDR bilaterally,” the RBI said in a statement.
It covers all current account transactions, permissible capital account transactions and any other economic and financial transactions as agreed upon by both countries. This framework, RBI added, 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. Use of local currencies would also 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,” RBI further added.
This is the second such MOU with any country after the UAE. Last year, on July 15, RBI had signed two MoUs with the Central Bank of the UAE to establish a framework to promote the use of local currencies for cross-border transactions and cooperation for interlinking their payment and messaging systems.