NEW DELHI: India and Indonesia will soon begin to trade in local currencies.
The Reserve Bank of India (RBI) and Bank Indonesia (BI) on Thursday signed and exchanged a Memorandum of Understanding (MoU) to establish a framework to promote the use of local currencies (Indian Rupee (INR) and Indonesian Rupiah (IDR)). The MoU was signed in the presence of RBI governor Shaktikanta Das and Bank Indonesia Governor Perry Warjiyo.
The MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions agreed upon by both countries.
"This framework would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of INR-IDR foreign exchange market. Use of local currencies would optimize costs and settlement time for transactions," said the RBI.
This collaboration marks a key milestone in strengthening bilateral cooperation between the RBI and BI as use of local currencies in bilateral transactions will eventually contribute to promoting trade between the two nations.
"This bilateral will also contribute in deepening financial integration between India and Indonesia and strengthen the long historical, cultural and economic relations of India with Indonesia," said BI.
Indonesia is the second largest trading partner of India in the ASEAN region. Bilateral trade increased from $6.9 billion in 2007 to $38.84 billion in 2023. Indonesia occupies the 33rd position in FDI equity inflows into India with a cumulative FDI of $648.39 million (April 2000 to March 2023).