Can we now use rupees in the UAE?

Buying oil, international remittance and even UPI transactions… we might be able to use rupees for all this in the UAE soon.

Transcript

00:00India and the UAE might soon sidestep the dollar and trade with each other using rupees and dirhams.

00:06Prime Minister Narendra Modi was part of the signing of two MOUs during his day-long visit to the UAE.

00:13The first was an agreement between the Reserve Bank of India and the UAE Central Bank

00:18that created a framework to promote local currencies for international exchanges.

00:22This would allow both importers and exporters to pay in their own currency,

00:28increase investments and remittances, while at the same time reduce transaction costs and settlement times.

00:36PM Modi said that the trade between India and the UAE was at $85 billion in 2023

00:42and was growing at roughly 20% per year.

00:45A large part of this trade, about $36 billion worth, was in oil and gas.

00:51India is the third-largest importer of oil in the world and the UAE is its fourth-largest supplier.

00:57So if all goes well, we would likely be paying for oil in rupees.

01:01But this isn't the first time India tried to negotiate a local currency trade deal with another country.

01:06Until May, India and Russia too were trying to settle bilateral trade in rupees.

01:12But since India imports far more from Russia than it exports there,

01:17the Russians would end up with a surplus of $40 billion in rupees each year.

01:22They allegedly didn't want to hold so much rupees and wanted to be paid instead in Chinese yuan,

01:28their hums and other currencies.

01:30While India also had a similar trade gap with the UAE, it wasn't always like that.

01:36Even as recently as 2018, India was exporting more to the UAE than it was importing from them.

01:42This MOU with the UAE was a giant move towards internationalising the rupee

01:48and shielding the Indian economy from global shocks by bringing down the dependency on the dollar.

01:53Usually in such deals, the two central banks periodically settled the surplus of either currency at a fixed exchange rate.

02:01Even China had signed more than 30 agreements to internationalise the yuan.

02:06The RBI has also allowed 60 banks from 18 countries to open a special account

02:11through which they can settle transactions in rupees.

02:14These countries include Germany, Israel, UK, Russia, Singapore and New Zealand.

02:20You can pause the screen to read the rest.

02:22The second MOU signed was aimed at interlinking the two countries' fast payment systems,

02:26i.e. India's UPI or Unified Payments Interface and the UAE's Instant Payments Platform.

02:44from different countries. I would certainly say countries where we have a substantial trade,

02:51where we have a big Indian community, where we have actually these volumes of transactions

03:01between that country and India, these are natural candidates for UPI.