India and the United Arab Emirates (UAE) signed a memorandum of understanding on Saturday to enhance trade settlement in rupees and dirhams. Indian Foreign Minister Vinay Mohan Kwatra stated that Prime Minister Narendra Modi’s visit to Abu Dhabi was a “turning point in the partnership between India and the UAE.” In addition to facilitating trade in both currencies, the two countries will connect India’s Unified Payments Interface (UPI) with the Instant Payment System in the UAE (IPP).
Prime Minister Narendra Modi said, “This is a very important step in India-UAE cooperation. It paves the way for enhanced economic collaboration and makes international financial transactions easier.”
Furthermore, the two countries announced plans to establish a branch of the Indian Institute of Technology in Abu Dhabi in collaboration with the Indian Institute of Technology in Delhi. This effort aims to enhance technology and innovation links between India and the UAE. Modi told the UAE President and Abu Dhabi’s Crown Prince, Sheikh Mohamed bin Zayed Al Nahyan, “Through the expansion of our bilateral relations, you have made a significant contribution. Every person in India considers you a true friend.”
Prior to the recent agreement between India and the UAE for trade settlement in rupees and dirhams, Indian refiners were required to purchase US dollars to buy oil. For nearly 48 years, many international buyers had to pay for Saudi Arabian crude oil in US dollars. However, that has recently started to change. In January, Saudi Arabia’s Finance Minister Mohammed Al-Jadaan announced the kingdom’s readiness to trade in currencies other than the US dollar.
While the recent agreement between Modi and Al Nahyan streamlines operations, several Indian refiners have already begun moving away from the US dollar and opting for the UAE dirham when purchasing Russian oil. Among the companies that have adopted the dirham are Reliance Industries, Bharat Petroleum, and Nayara Energy. Initially, there were some challenges, with reports indicating that the State Bank of India (SBI) faced difficulties in these settlements. However, since February, the SBI has successfully settled payments in dirhams.