RBI and Bank Indonesia sign MoU to promote local currency settlements

A signficant Memorandum of Understanding (MoU) was signed in Mumbai, India, on March 7, 2023, between Bank Indonesia (BI) and the Reserve Bank of India (RBI). This MoU sets the stage for the creation of a framework intended to encourage cross-border transactions between the two countries using their native currencies, the Indian Rupee (INR) and the Indonesian Rupiah (IDR). 

Governors Perry Warjiyo of Bank Indonesia and Shaktikanta Das of the Reserve Bank of India signed the Memorandum of Understanding.

The goal of the Memorandum of Understanding between Indonesia and India on creating a framework for collaboration in the field of cross-border transactions in local currencies is to encourage the usage of INR and IDR on a bilateral basis. By allowing exporters and importers to issue invoices and make payments in their own currencies, this framework would facilitate the growth of the INR-IDR foreign currency market.

"Use of local currencies would optimise costs and settlement time for transactions," the central bank stated.

Governors Perry Warjiyo of Bank Indonesia and Shaktikanta Das of the RBI signed the Memorandum of Understanding.

"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 Reserve Bank of India stated further.

The partnership, according to the central bank, represents a significant turning point in the development of bilateral cooperation between the RBI and BI. It further stated that using local currencies in bilateral transactions will eventually help to advance commerce, develop financial integration, and bolster the long-standing historical, cultural, and economic ties between Indonesia and India. 

After the UAE, this is the second such MOU with any nation. On July 15 of last year, the RBI and the Central Bank of the United Arab Emirates signed two memorandums of understanding (MoUs) to create a framework that encourages the use of local currencies for cross-border transactions and collaboration in connecting their payment and messaging systems.