India, UAE in talks for Rupee-Dirham denominated bilateral trade
India and UAE are in talks for a Rupee-Dirham-denominated bilateral trade, said Sunjay Sudhir, Indian Ambassador to UAE, adding that both the countries will find it beneficial. Both countries may soon conduct bilateral trade in their own denomination.
The central banks of both countries are working on standard operating procedures and modalities to facilitate trade in rupees and dirhams. Sunjay Sudhir, said that the objective is to reduce the transaction cost.
The Ambassador said the talks started on September 1, 2022.
“Both countries find this beneficial. India has shared a concept paper with UAE. Central Banks of both countries are discussing. The objective is to reduce the transaction cost,” the Indian Ambassador to UAE said.
This development followed the Reserve Bank of India’s (RBI) announcement — a mechanism to settle payments for international trade in rupees, especially for India’s exports.
It is widely believed if the mechanism fructifies then it may go a long way in internationalizing the Indian currency rupee in the long run.
A currency can be termed “international” if it is widely accepted worldwide as a medium of exchange.
SBI Research, in a report in early July, said, an interesting development is taking place in the global currency market as there has been a significant jump in trade in oil and other commodities in currencies such as the Renminbi, Hong Kong Dollar, and Arab Emirates Dirham.
In the report, SBI Research said the Reserve Bank of India (RBI) should make a conscious effort to internationalise the Indian currency rupee amid disruptions in payments caused by the ongoing Russia-Ukraine war.
