Historic agreement signed between UAE and India to trade directly in Dirhams and Rupees

A momentous agreement has been signed between India and UAE to facilitate businesses to execute directly in each other’s currencies. This will eliminate the involvement of any other foreign currency.

The elimination of middle currencies will lead to large savings for both the countries and swift direct trade transactions.

This deal is in addition to the other agreements and memoranda of understanding which were signed during Prime Minister Narendra Modi’s just-concluded two-day visit to Abu Dhabi and Dubai, told Navdeep Suri, Indian’s Ambassador to the UAE.

Suri further told that “There were two other agreements that have been finalized. One is a currency swap agreement where India and UAE — it is an agreement between the two Central Banks — and the agreement has been completed and it is going to be exchanged through letters. Under this, businesses from the two sides will be able to trade directly in rupees and in dirhams and not have to go through US dollars which means that there is a saving for the business community. It makes trade between the two countries more competitive,”

Another agreement that has been finalized and will be signed soon is "between the Financial Intelligence Units which commits both countries to work more closely together in money laundering, in preventing money laundering that takes place," Suri reported.

While the dirham has a fixed peg to the US dollar, the currency swap agreement between the UAE and India could favorably impact trade and facilitate direct business transactions between two nations saving the cost of conversion at every step.

The rationale for the currency swap agreement is evident from UAE-India trade figures. From a mere $182 million in 1982, the current level of bilateral trade amounted to about $53 billion (Dh194.5 billion), according to a joint statement released at the end of Modi’s visit.

The UAE and India will undertake a number of agreements that will reinforce their historical trade relationship further. The key strategic areas of focus would be security, defense, space technology and energy.