India-Maldives Pact to Boost Local Currency Transactions

Why in the news?

RBI and Maldives Monetary Authority signed an MoU to promote using Indian Rupee and Maldivian Rufiyaa for cross-border transactions, enhancing trade and deepening economic ties.

India-Maldives Pact to Boost Local Currency Transactions

MoU Between RBI and Maldives Monetary Authority:

  • The Reserve Bank of India (RBI) and the Maldives Monetary Authority (MMA) signed a Memorandum of Understanding (MoU).
  • The agreement promotes the use of local currencies—the Indian Rupee (INR) and Maldivian Rufiyaa (MVR)—for cross-border transactions.
  • Governors Shri Shaktikanta Das (RBI) and Mr. Ahmed Munawar (MMA) signed the MoU.

Key Features of the Framework:

  • Encourages the use of INR and MVR in:
    • Current Account Transactions: Day-to-day international trade.
    • Permissible Capital Account Transactions: Investments and financial flows.
    • Other agreed economic and financial activities.
  • Facilitates exporters and importers to invoice and settle transactions in domestic currencies.
  • Aims to develop trading in the INR-MVR currency pair in the foreign exchange market.

Benefits and Impacts:

  • Optimised Costs: Reduces transaction costs and settlement times.
  • Trade Promotion: Strengthens bilateral trade between India and Maldives.
  • Economic Integration: Deepens financial cooperation and economic ties.
  • This collaboration is a significant milestone in bilateral relations, enhancing financial connectivity and boosting economic partnerships between the two nations.

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times