RBI strives to settle trades in local currencies

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- The government is determined to take steps to internationalize the rupee and reduce dependence on the dollar

- Efforts to settle trade between India and UAE in Rupee-Dirham

Mumbai: The Reserve Bank of India (RBI) is requesting local banks to convince their clients (traders) to settle trade between India and the United Arab Emirates (UAE) in rupees or dirhams. This request has come as part of the internationalization of the rupee and reducing dependence on the dollar.

The Reserve Bank is trying to settle trade with countries with which India has a trade deficit in local currencies.

India had a trade deficit of $21.62 billion with the UAE last financial year. Which was equal to 8.20 percent of the total deficit.

The Local Currencies Settlement Mechanism for making payments through local currencies for cross-border trade has been established under the July 15 Memorandum of Understanding between the two countries.

Settlement in local currency may reduce dollar outflows. The Reserve Bank has requested banks in the country to encourage clients to settle trades in Rupee-Dirham, Reserve Bank sources said.

The Reserve Bank is expected to set a target for how much trade between India and the UAE takes place in local currency.

A system of local currencies will save trade costs and time and increase reliance on local currencies. Indian Oil Corporation Ltd. under Local Currency Settlement (LCS) method. A report last week said that the first deal of crude oil was concluded between Abu Dhabi National Oil Company. The sale of one million barrels of crude oil is covered under this deal. Exact figure of local currency settlement volume in foreign trade is currently not available.

UAE is India's fourth largest supplier of crude oil and second largest supplier of LNG and LPG. In the last financial year, there was a trade of petroleum products worth 35.10 billion dollars between the two countries.

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