The Reserve Bank of India (RBI) has announced that trade transactions between India and the Maldives can now be settled in their respective local currencies—the Indian Rupee (INR) and the Maldivian Rufiyaa (MVR). This move is in addition to the existing Asian Clearing Union (ACU) mechanism, which facilitates net multilateral settlements among participating countries.
The ACU, established in 1974, includes central banks and monetary authorities from Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka. Under this arrangement, transactions are typically settled in U.S. dollars or euros. However, the RBI’s new directive enables businesses in India and the Maldives to bypass third-party currencies and conduct transactions directly in INR and MVR.
This decision follows a Memorandum of Understanding (MoU) signed between the RBI and the Maldives Monetary Authority (MMA) in November 2024 to promote local currency usage in bilateral trade. The agreement was designed to reduce dependence on foreign exchange reserves and simplify trade processes between the two nations.
With the implementation of this new settlement framework, businesses in both countries are expected to benefit from reduced transaction costs, quicker processing times, and greater financial stability in cross-border trade. By eliminating the need for an intermediary currency, the change could make trading more efficient and cost-effective.
The RBI has issued a circular advising Authorized Dealer Category-I banks to inform their clients and ensure compliance with the updated settlement guidelines. The move is part of India’s broader strategy to internationalize the rupee and strengthen economic partnerships with neighboring nations.
This initiative is expected to boost bilateral trade relations, support businesses engaged in cross-border transactions, and reinforce financial cooperation between India and the Maldives. With immediate effect, traders can now opt for local currency settlements, marking a significant step toward enhancing economic integration between the two countries.
