India, UAE discussions on rupee-dirham trade progressing very fast; outcome expected soon: Goyal

Discussions between the central banks of India and UAE on promoting bilateral trade in the rupee and dirham to reduce transaction cost is progressing at a ''very'' fast pace and an outcome is expected soon on this, Commerce and Industry Minister Piyush Goyal said on Monday.

As the top leaders of both countries are decisive, one ''can imagine good outcomes very soon'' on this, he added.

India and the UAE have already implemented a free trade agreement (FTA) in May last year to give a boost to bilateral trade and economic ties.

The central banks of both countries are discussing the standard operating procedures and modalities.

These talks were started in March 2022, and now ''it is about a year since then, but both the countries have made significant progress'', Goyal told reporters here.

The RBI and the Central Bank of the UAE have been in a ''very active'' dialogue, and the finance ministry here is also ''very'' supportive and handling the entire issue, he said.

''I am sure that given the high level of engagement on both sides, not only on Rupee-Dirham trade but also on other digital technologies becoming part of the India UAE framework. I think, we have very good things, which will be offered to both nations in the coming months,'' he added.

When asked about the timeline for this, he said the talks are ''progressing at a very fast pace''.

Goyal also said that as far as dirham-rupee bilateral trade is concerned, currently, both sides are looking at trading between the two countries only.

''Once that gets operationalised, we will see whether there is a potential to expand that further,'' he added.

The development assumes significance as India is promoting trade in domestic currency. International trade in the rupee will help reduce transaction costs for the industry, and several countries are in discussion with the RBI on this.

Last year, the RBI and the Finance Ministry had asked the top management of banks and representatives of trade bodies to push export and import transactions in the rupee.

They want banks in India to connect with their foreign counterparts for opening special rupee vostro accounts to facilitate cross-border trade in the Indian currency rather than the popular mode of the US dollar.

Several banks, including HDFC Bank and UCO Bank, have opened special vostro accounts to facilitate overseas trade in the rupee.

Sberbank and VTB Bank -- the largest and second-largest banks of Russia, respectively -- are the first foreign lenders to receive the approval after the RBI announced the guidelines on overseas trade in the rupee in July last year.

Certain African countries that are facing foreign exchange problems and issues with US Dollar and Euro mobilisation are also showing interest in the rupee (INR) trade mechanism.