Mumbai: The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a Memorandum of Understanding (MoU) in Mumbai for establishing a framework to promote the use of local currencies viz the Indian Rupee (INR) and the Indonesian Rupiah (IDR) for cross-border transactions on March 7.

The MoU was signed by the Governor, Reserve Bank of India Shaktikanta Das and the Governor of Bank Indonesia 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 and IDR bilaterally.

The Memorandum of Understanding 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.

According to the Bank Indonesia, the Use of local currencies would optimise costs and settlement time for transactions.

According to the press statement released by the Bank Indonesia on March 7, this collaboration marks a key milestones in strengthening bilateral cooperation between RBI and BI.

It further said in its statement that more extensive use of local currencies in bilateral transactions will ultimately contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural and economic relations of India with Indonesia.

Posting on the social media platform X, the Reserve Bank of India (RBI) wrote on March 7:

"Reserve Bank of India (RBI) and Bank Indonesia (BI) today signed and exchanged a Memorandum of Understanding for establishing a framework to promote the use of local currencies (INR and IDR), in the presence of Governor, RBI Shaktikanta Das @DasShaktikanta and Governor, BI Perry Warjiyo.

The MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions as agreed upon by both countries."