RBI, Bank of Mauritius join hands to promote trade in local currencies
With an aim to establish a framework to promote trade in the local currencies, the Reserve bank of India (RBI) and Bank of Mauritius have signed Memorandum of understanding (MoU). The MoU will culminate in the implementation of the INR-MUR Local Currency Settlement (LCS) System to reduce dependency on hard currencies for cross-border transactions. The LCS system will help both parties to further develop their respective exchange markets and facilitate bilateral trade and settlement, financial market development, direct investment, remittances, economic growth and stability. The system will promote the use of the INR and MUR for all current account transactions and permissible capital account transactions between both the countries.
The MoU also provides for cooperation to create an INR Clearing Centre in Mauritius, and the inclusion of the INR as a settlement currency in the Mauritius Automated Clearing and Settlement System. The clearing centre will ultimately be extended to the Common Market for Eastern and Southern Africa’s Regional Payment and Settlement System (COMESA), for which the Bank of Mauritius is the settlement bank. Besides, it is proposed that the INR be included as a settlement currency, the initiative will promote Mauritius as a jurisdiction for clearing and settlement in INR on the continent. The RBI has cleared the way for trade using Indian Rupee by allowing authorized banks in India to open Special Rupee Vostro Accounts (SRVA) of correspondent banks of the trading partner.
In 2022, RBI to promote the growth of global trade with an emphasis on boosting exports from India and to attract increasing interest in the rupee implemented an arrangement allowing transactions in domestic currencies. India has been working towards making the Indian Rupee a global currency and allowing international trade settlement. This mechanism will help in internationalizing the Indian currency in the long run. Until now, the country has been able to do rupee-denominated trade with a few countries and is in close coordination with several others to implement the same arrangement.
