The Reserve Bank of India and the Bank of Indonesia on Thursday signed a Memorandum of Understanding establishing a framework to promote the use of local currencies for cross-border transactions.
“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 on Thursday.
The framework will enable exporters and importers to invoice and pay in their respective domestic currencies – the Indian rupee and the Indonesian rupiah. In turn, this will facilitate the development of a rupee-rupiah foreign exchange market, the RBI said, adding that the step would optimise costs and settlement time for transactions.
The MoU, which was signed by RBI governor Shaktikanta Das and Bank Indonesia governor Perry Warjioyo, will deepen financial integration and strengthen economic relations between the two countries, the domestic central bank said.