The Reserve Bank of India (RBI) is actively encouraging local banks to facilitate trade payments between the United Arab Emirates (UAE) and India using the dirham (AED). or Indian rupee (INR), the report reported. five sources.
The strategic move is in line with the RBI's broader goal of promoting trade payments in local currencies with countries with which India has a trade deficit. By doing so, the RBI aims to enhance the global reach of the Indian rupee, the report added.
According to government data, India's trade deficit with the UAE in fiscal year 2022/23 stood at $21.62 billion, or 8.2% of the total trade deficit.
In an important step, the two countries recently agreed to facilitate trade by using the Indian rupee instead of the US dollar, to limit the dollar outflow caused by the trade deficit. commercial. Various sources in the banking industry have endorsed the RBI directive to encourage customers and businesses to gradually conduct INR-AED transactions instead of using US Dollars.
A private banking treasury official told the news agency that the RBI passed the message on to forex traders at a conference, although communication has not been reported so far.
“RBI has asked banks to encourage customers and businesses to do INR-AED transactions gradually, rather than using dollars,” the official said.
Although the RBI has not officially responded to media inquiries, a government source cited in a Reuters report said the RBI may consider setting internal targets for moving trade volumes between the two countries. India and the United Arab Emirates out of the dollar.
In addition, the central bank has expressed its commitment to assist banks in INR-AED transactions, indicating that they are very interested in increasing the volume of such transactions. Although exact data on currency trading volumes is not publicly available, some bankers have pointed out that current volumes are still relatively low.
Even so, RBI encourages large clients and corporations to participate in INR-AED transactions, especially those with stronger balance sheets. To encourage small businesses, bankers have reduced service fees to promote such transactions.
