Those with knowledge of the situation claim that India is working towards an initial agreement on a rupee-dirham payment mechanism with the United Arab Emirates as early as January as the South Asian country seeks to diversify away from the dollar and strengthen bilateral economic ties.
The persons, who asked to remain anonymous because the specifics are private, claimed that representatives from the central banks of the countries met last week to examine technical options. According to the sources, the system will include payments for oil and gas purchases. Outside of regular business hours on Tuesday, representatives of the Indian central bank and foreign ministry did not respond to requests for comment, while the finance ministry could not be reached. India’s central banks according to Sunjay Sudhir, India’s ambassador to the UAE, a framework to enable rupee-dirham commerce will be discussed in order to reduce transaction costs. Requests for comment to the UAE central bank, foreign ministry, and government media office went unanswered. The initiative broadens a July announcement that permits international transactions to be completed in rupees, which was probably first intended to make it simpler for Indian businesses to conduct business with nations under sanctions like Russia and Iran. Yet, as the Indian rupee declines and bilateral agreements strengthen cooperation, urgency has grown.
India has suggested opening special vostro accounts to facilitate trading, and any remaining funds, if any, will either be settled in hard currency or can be used for other purposes. by the participating country to invest in domestic stocks or treasury bonds, according to two of the witnesses.
According to Reserve Bank of India Deputy Governor T Rabi Sankar, India’s efforts to internationalise the rupee are not intended to challenge the supremacy of the US dollar. According to a study by the Federal Reserve Bank of New York, despite the possibility that financial penalties against Russia would drive other nations to stop using the dollar, the dollar will continue to hold the top spot on the international stage.
