Mumbai (Maharashtra) [India], November 22 : The Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) signed a Memorandum of Understanding (MoU) in Mumbai to establish a framework to promote the use of their respective local currencies, the Indian Rupee (INR) and the Maldivian Rufiyaa (MVR).
The MoU was signed in the presence of RBI Governor Shaktikanta Das and MMA Governor Ali Hashim on Thursday.
As per an official statement by RBI, the agreement aims to facilitate the use of INR and MVR in various economic and financial transactions between both the countries.
It covers current account transactions, permissible capital account transactions, and other agreed-upon activities. This initiative is expected to significantly reduce transaction costs and settlement time, making cross-border trade more efficient.
RBI said "This framework would enable exporters and importers to invoice and settle in their respective domestic currencies, which in turn would enable the development of trading in INR-MVR pair in foreign exchange market".
Under this framework, exporters and importers from both nations can invoice and settle trade transactions in their respective domestic currencies. This is likely to pave the way for the development of trading in the INR-MVR currency pair in the foreign exchange market.
By reducing dependence on third-party currencies, such as the US Dollar, the agreement will also optimize trade and financial operations between India and the Maldives.
The collaboration also represents an important milestone in strengthening bilateral ties between the RBI and MMA.
RBI stated "Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Maldives as well as deepen financial integration and strengthen the economic relations between India and Maldives".
This initiative highlighted the commitment of both India and the Maldives to strengthen their economic partnership and promote sustainable growth in the region.