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NEW DELHI: As India negotiates trading in local currency with other countries, rupee-dirham trade with the UAE has commenced.
“There were a few deals right after the agreement was signed last week,” an official said, adding that under the current mechanism India and the UAE are pegging the exchange rate to the US dollar but will have a direct exchange in the coming months, official sources told TOI. Last week, during PM Narendra Modi’s visit to UAE, RBI governor Shaktikanta Das and his counterpart signed an agreement for trade in local currency, which will allow Indian exporters to get the payment in dirhams, while an Emiratiexporter can receive the proceeds in Indian rupee.
While the surplus that the UAE will have due to a positive trade balance can be exchanged into US dollars, businesses will also have the option to invest the money in India — a window that the government is hoping will beused by businesses and funds from the Gulf nation with a large Indian diaspora.
Officials said that a number of similar deals are in the works but neither the government nor RBI are willing to disclose any names. While TOIreported about Indonesia being one of the countries with which talks are currently underway, Singapore and either Brazil or Argentina could be the othercandidates. The deal with the UAE has, however, generated a lot of interest among other countries, including some in Europe, which have traditionally been in favour of using their currency. While the government had been pushing for rupee-based trade, the progress had been slower than expected although nearly 20 countries were signed. Even exporters seem more comfortable with a local currency trade arrangement.
One of the biggest advantages is cost savings as there was a cost to exchange currency first into dollars and then into, say, dirhams.
Besides, officials said, even the paperwork will be simpler given that the entire transaction was routed through SWIFT, the switching system.
“There were a few deals right after the agreement was signed last week,” an official said, adding that under the current mechanism India and the UAE are pegging the exchange rate to the US dollar but will have a direct exchange in the coming months, official sources told TOI. Last week, during PM Narendra Modi’s visit to UAE, RBI governor Shaktikanta Das and his counterpart signed an agreement for trade in local currency, which will allow Indian exporters to get the payment in dirhams, while an Emiratiexporter can receive the proceeds in Indian rupee.
While the surplus that the UAE will have due to a positive trade balance can be exchanged into US dollars, businesses will also have the option to invest the money in India — a window that the government is hoping will beused by businesses and funds from the Gulf nation with a large Indian diaspora.
Officials said that a number of similar deals are in the works but neither the government nor RBI are willing to disclose any names. While TOIreported about Indonesia being one of the countries with which talks are currently underway, Singapore and either Brazil or Argentina could be the othercandidates. The deal with the UAE has, however, generated a lot of interest among other countries, including some in Europe, which have traditionally been in favour of using their currency. While the government had been pushing for rupee-based trade, the progress had been slower than expected although nearly 20 countries were signed. Even exporters seem more comfortable with a local currency trade arrangement.
One of the biggest advantages is cost savings as there was a cost to exchange currency first into dollars and then into, say, dirhams.
Besides, officials said, even the paperwork will be simpler given that the entire transaction was routed through SWIFT, the switching system.
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