India and UAE signed historic Memorandum of Understanding on LCS system

India and UAE signed historic Memorandum of Understanding on LCS system

• In a significant move to strengthen economic ties, India and the United Arab Emirates have signed a historic Memorandum of Understanding on the Local Currency Settlement (LCS) system. This groundbreaking agreement, signed between the Reserve Bank of India and the Central Bank of the UAE, aims to revolutionize cross-border transactions between the two nations.
• The LCS system allows for the use of the Indian Rupee  and UAE Dirham  in bilateral trade, marking India's first-ever LCS arrangement. This innovative system is expected to have a transformative impact on transaction costs and processing time while also increasing reliance on local currencies. The agreement comes as a significant milestone in the rapidly evolving India-UAE relationship, in line with the Vision Statement unveiled by the two leaders during their virtual summit in February 2022.
• This landmark agreement signifies not only the deepening economic ties between India and the UAE but also sets a precedent for other countries to explore local currency settlement mechanisms. The LCS system is anticipated to have a ripple effect on global economic engagements, encouraging the use of local currencies and fostering greater financial independence.

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Published date : 17 Jul 2023 05:25PM