India and UAE have developed a robust relationship in terms of trade and payment systems and have further decided to explore CBDCs for better outcomes.
India and UAE have had a cordial time-tested relationship for many years now. Both countries have now agreed to take their levels of cooperation and partnership to higher levels by signing an MoU recently for collaboration in financial services. Both countries have agreed to conduct pilot projects of their respective central bank digital currencies and eventually use a CBDC bridge for improving trade and remittances and improving the technical cooperation between the two countries.
An official statement released by the Reserve Bank of India stated, ‘Under the MoU, the two central banks will collaborate on various emerging areas of FinTech, especially Central Bank Digital Currencies (CBDCs) and explore interoperability between the CBDCs of CBUAE and RBI. CBUAE and RBI will jointly conduct proof-of-concept (PoC) and pilot(s) of bilateral CBDC bridge to facilitate cross-border CBDC transactions of remittances and trade.’
For facilitating payments, India and UAE have also been working on a rupee-dirham arrangement, which could help ease hurdles in cross-border payments for trade and other purposes. The Indian embassy in UAE has tweeted about the recent development, sharing a photograph of the representatives of the central banks of the two countries.
Both India and UAE have been developing their own CBDCs, which are expected to help increase trade between the two countries by easing the current payment system. The UAE is also one of the biggest sources of remittances for India. The latest MoU could play an important role in increasing the present levels of trade and become a model for other countries.