The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a Memorandum of Understanding (MoU) in Mumbai on Thursday for establishing a framework to promote the use of local currencies — the Indian Rupee (INR) and the Indonesian Rupiah (IDR) — for cross-border transactions.

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“This framework 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 optimise costs and settlement time for transactions,” per a RBI statement.

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 MoU on establishing a framework for co-operation in the area of cross-border transactions in local currencies between India and Indonesia aims to promote the use of INR and IDR bilaterally. It was signed by RBI Governor Shaktikanta Das and Bank Indonesia Governor Perry Warjiyo.

“This collaboration marks a key milestone in strengthening bilateral cooperation between the RBI and BI. The use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepening financial integration and strengthening the long historical, cultural, and economic relations between India and Indonesia,” the RBI said.