India asks local banks to de-dollarize UAE trade: Report
The BRICS founding member recently started purchasing oil from the UAE using local currencies as part of a wider push towards de-dollarization
The Reserve Bank of India (RBI) has started asking local banks to drop the US dollar in transactions with the UAE and instead use the Emirati dirham or Indian rupee, sources familiar with the matter told Reuters.
"The RBI has asked banks to encourage clients and corporates to initiate INR-AED trades gradually, instead of using the dollar," a treasury official at a private bank told the British news outlet.
Indian foreign exchange dealers were informed of this new status quo during a seminar this month by an RBI official.
The unnamed sources claimed the decision by New Delhi is part of a “broader aim of promoting settlement in local currencies with countries with which India has a trade deficit." Furthermore, the move is expected to boost the rupee's global reach and reduce the outflow of dollars from the country.
According to government data, India's trade deficit with the UAE stands at $21.62 billion, equaling 8.2 percent of the country's total deficit.
This latest development is part of a growing de-dollarization trend sweeping the Global South.
Earlier this month, India and the UAE started settling bilateral trade in their local currencies. This was a result of an agreement signed last year between the RBI and the UAE Central Bank to promote “the use of local currencies (rupee and dirham) for cross border transactions.”
The UAE is India’s fourth largest supplier of oil and the second largest provider of natural gas, “which makes de-dollarization particularly significant,” the Hindustan Times noted last month.
Recently, Pakistan paid for its first imports of discounted Russian crude oil in Chinese currency, marking a significant shift in the South Asian country’s policy of paying for exports in US dollars.
Many countries across the region have begun to embark on this path, including Iraq, which in May issued a ban on the use of US dollars in both business and personal transactions.
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