India, Maldives Agree to Conduct Bilateral Trade in Local Currencies

New Delhi : In a significant move to enhance trade and financial ties, India and the Maldives have agreed to settle bilateral trade transactions in their local currencies—the Indian Rupee (INR) and the Maldivian Rufiyaa (MVR). This decision, which supplements the existing Asian Clearing Union (ACU) mechanism, is expected to ease trade settlements and reduce dependency on third-party currencies like the US Dollar.

According to media reports from the Maldives, the Reserve Bank of India (RBI) issued a circular on Monday confirming this initiative. The move comes as part of an agreement between the RBI and the Maldives Monetary Authority (MMA), which was formalized through a Memorandum of Understanding (MoU) signed in November last year. The framework established by this MoU is designed to facilitate seamless trade settlements in local currencies, strengthening economic cooperation between the two nations.

India is the largest trade partner of the Maldives, with bilateral trade exceeding 548 million US Dollars. Allowing settlements in local currencies is expected to significantly benefit the Maldivian economy by reducing exchange rate fluctuations, lowering transaction costs, and enhancing liquidity for businesses engaged in trade with India.

The Maldives Monetary Authority (MMA) has acknowledged that this initiative marks a major step forward in simplifying and expediting financial transactions between the two nations. By moving towards local currency trade settlements, businesses in both countries can benefit from increased efficiency and stability in their transactions, further strengthening economic ties.

The decision aligns with India’s broader push towards promoting local currency settlements in trade with its neighbors and key partners. The initiative is also expected to enhance financial cooperation, reduce dependency on global currency reserves, and support economic resilience in both nations.

For India, this move signifies an expansion of its economic diplomacy efforts, reinforcing its role as a key regional trade partner. It is also in line with New Delhi’s ongoing efforts to strengthen its economic engagement with the Maldives amid geopolitical shifts in the Indian Ocean region.