The Reserve Bank of India (RBI) and the Bank of Mauritius (BOM) have inked an agreement to create a framework to encourage cross-border transactions using the Indian Rupee and the Mauritian Rupee (MUR).

The central bank stated that RBI Governor Sanjay Malhotra and BOM Governor Rama Krishna Sithanen G C S K signed the Memorandum of Understanding (MoU).

Last week, Prime Minister Narendra Modi and Dr. Navinchandra Ramgoolam, were present at the exchange of the Memorandum of Understanding documents in Port Louis, Mauritius.

"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.

The MoU intends to encourage the use of INR and MUR in bilateral commerce, according to the RBI.

All current account and capital account transactions that have been approved by both nations are covered by the MoU.

 

By allowing importers and exporters to invoice and pay in their home currencies, the framework would facilitate the growth of a market for the INR-MUR pair.

Using local currencies would optimize transaction costs and settlement times.

In the long run, local currencies in bilateral transactions are believed to improve the historical, cultural, and economic ties between Mauritius and India, increase commerce between the two countries, and deepen financial integration.

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"This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BOM," RBI said.