18th July 2023 (6 Topics)
1
Jul
3
Jul
4
Jul
5
Jul
6
Jul
7
Jul
8
Jul
10
Jul
11
Jul
12
Jul
13
Jul
14
Jul
15
Jul
17
Jul
18
Jul
19
Jul
20
Jul
21
Jul
22
Jul
24
Jul
25
Jul
26
Jul
27
Jul
28
Jul
29
Jul
31
Jul
18th July 2023
QUIZ - 18th July 2023
5 Questions
5 Minutes
Editorials
Context:
The Reserve Bank of India (RBI) and the Central Bank of the UAE has agreed to establish a framework for enabling the use of the two countries’ local currencies for cross border transactions.
Major Highlights of this MOU:
- Permitted Transaction- As per the memorandum of understanding between the two central banks, all current account payments and certain “permitted” capital account transactions could be settled using either the rupee or the dirham.
- Reducing the dependence on a third country’s currency-The Indian rupee and the UAE dirham is aimed at promoting their use bilaterally, thus reducing the dependence on a third country’s currency such as the U.S. dollar
- Local Currency Settlement System- To facilitate settlement, the two banks are set to put in place a Local Currency Settlement System.
Benefits:
- Rupee dirham foreign exchange - The settlement mechanism would be the development of a rupee dirham foreign exchange market that would help in pricing the two currencies independent of their exchange rates with other currencies.
- No need to factor in exchange rate risks- Indian and Emirati businesses would not need to factor in exchange rate risks when quoting to supply goods or services to buyers in the other country.
- Precursor for other bilateral currency accords -The India UAE local currency settlement system could also potentially serve as a precursor for other bilateral currency accords
Measures for effective implementation:
- Stepped up investment- One possibility, as the RBI indicated, was stepped up investment by UAEbased ?rms.
- Extent of adoption- While the idea is laudable, its actual success will hinge on the extent of adoption by businesses in both nations.
- Deploy remunerative avenues- Emirati businesses need to see remunerative avenues to deploy the potential rupee ?ows should they opt to receive payments in the Indian currency.
You must be logged in to get greater insights. click here to login
Courses
Study
Notes
Home
Resources
More
