RBI, Indonesia's central bank, signed local currency trade agreements.

The Reserve Bank of India and Indonesia's central bank signed a pivotal agreement in Mumbai to facilitate cross-border transactions using local currencies, marking India's second such arrangement after the UAE. The memorandum of understanding between RBI Governor, Mr. Shaktikanta Das, and Bank Indonesia Governor, Mr. Perry Warjiyo covers current account transactions, permissible capital account transactions, and other economic and financial transactions. This initiative allows exporters and importers to conduct transactions in their domestic currencies, fostering the development of a more robust foreign exchange market for these currencies and optimizing transaction costs.

This collaboration is a significant stride in strengthening bilateral cooperation, with the potential to promote trade between India and Indonesia while deepening financial integration. Furthermore, it aligns with a global trend where countries, in response to geopolitical developments like the West's sanctions on Russia, seek alternatives to the US dollar for trade settlements. The INR trade settlement mechanism, introduced by the RBI in July 2022, underscores a strategic move to reduce dependence on the US dollar in international trade transactions.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.