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UAE-India central banks ink MoU to consider Currency Swap agreement

Raghuram Rajan and Mubarak Rashed Al Mansoori sign a deal to consider a currency swap agreement

Dubai, Feb 16 (UITV)- The Central Bank of UAE has signed a memorandum of understanding (MoU) with the reserve bank of India in Mumbai to consider a currency swap agreement that is expected to give a major thrust to bilateral economic and trade ties.

Terms and conditions of the agreement will be firmed up through technical level discussion between the two central banks.

Mubarak Rashid Al Mansouri, Governor of the UAE Central Bank, signed the MoU on behalf of the UAE and Central Bank Governor, while Dr Raghuram Rajan signed the MoU on behalf of the Reserve Bank of India.

A currency swap is a foreign exchange derivative between two institutions to exchange the principal or interest payments of a loan in one currency for equivalent amounts, in net present value terms, in another currency.

This would mean that, depending upon the terms and conditions of the agreements, the UAE’s Indian expats may be able to convert their dirham-dominated UAE loans to rupee-dominated loans in India if they move back during the tenure of the loan.

This MoU signals a new stage of cooperation, which would strengthen economic ties between India and the UAE.

India is the UAE’s top treading partner while the Emirates is India’s third largest trading partner after the US and China. The UAE-India trade relations go back centuries.

In a statement, the RBI said that “the proposed agreement will further strengthen the close economic relationship and cooperation between India and the UAE”.

The currency swap agreement between nations can increase the competitive advantages of corporate expansion in both countries.