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The Reserve Bank of India (RBI) and the Bank Indonesia (BI) on Thursday signed a Memorandum of Understanding (MoU) for establishing a framework to promote the use of local currencies for cross-border transactions.

The MoU was signed by the Reserve Bank of India Governor Shaktikanta Das and Bank Indonesia Governor Perry Warjiyo.

“The MoU on establishing a framework for cooperation in the area of cross-border transactions in local currencies between India and Indonesia, aims to promote the use of INR (Indian Rupee and IDR (Indonesian Rupiah) bilaterally,” the RBI said in a statement issued on 7th of March 2024.

The RBI statement added that the MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions as 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 an INR-IDR foreign exchange market. Use of local currencies would optimise costs and settlement time for transactions,” the Reserve Bank  said.

The official statement said that the collaboration marks a key milestone in strengthening bilateral cooperation between RBI and Bank Indonesia.

“Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural and economic relations between India and Indonesia,” the statement said