RBI permits settlement of trade transactions with Maldives in local currencies

A MoU had been signed between RBI and Maldives Monetary Authority in November 2024 for establishing a framework to promote the use of local currencies.

Mumbai: The Reserve Bank of India (RBI) on Monday said the country's bilateral trade transactions with Maldives may also be settled in INR and/or MVR in addition to the Asian Clearing Union (ACU) mechanism.

ACU is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.

The participants include central banks and the monetary authorities of Bangladesh, Belarus, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.

A Memorandum of Understanding (MoU) had been signed between RBI and Maldives Monetary Authority in November 2024 for establishing a framework to promote the use of local currencies -- Indian Rupee (INR) and Maldivian Rufiyaa (MVR) for bilateral transactions.

"In the wake of signing of Memorandum of Understanding (MoU)...it has been decided that India's bilateral trade transactions with Maldives may also be settled in INR and/or MVR in addition to the ACU mechanism, as hitherto," the RBI said in a circular.

The RBI further said the instructions shall come into force with immediate effect.