India and the Maldives have taken a significant step towards strengthening their economic partnership, with the Reserve Bank of India (RBI) authorising bilateral trade settlements in Indian Rupee (INR) and Maldivian Rufiyaa (MVR).
This development, announced on Monday, complements the existing Asian Clearing Union (ACU) mechanism and signals a broader commitment to fostering regional financial integration. The decision is rooted in a framework established through a Memorandum of Understanding (MoU) signed between the RBI and the Maldives Monetary Authority (MMA) in November 2024.
The ACU, which has served as a cornerstone for regional trade, operates as a multilateral clearing system that streamlines payment settlements among its member countries. Bangladesh, Belarus, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka are participants in this arrangement.
"In the wake of the MoU, it has been decided that India's bilateral trade transactions with the Maldives may also be settled in INR and/or MVR in addition to the ACU mechanism, as hitherto," the RBI stated in its announcement. The directive, the statement added, is to take immediate effect.
India has long been a primary trading partner for the Maldives, supplying essential commodities such as rice, sugar, and fuel. The new arrangement is expected to simplify transactions for these staples, alleviating logistical challenges and further solidifying the economic relationship between the two nations.
The introduction of local currency settlements aligns with India's broader objective of enhancing the prominence of the Indian Rupee on the global stage. This ambition was further underscored during President Dr Mohamed Muizzu's recent state visit to India, where an agreement was formalised to introduce RuPay cards in the Maldives. This initiative focused on advancing cross-border digital payment systems.