India and Mauritius Collaborate on Local Currency Trade Initiative

India and Mauritius have signed an MoU to facilitate local currency trade through the INR-MUR Local Currency Settlement (LCS) System. This agreement aims to reduce reliance on foreign currencies, enhance bilateral trade, and promote the Indian Rupee as a global currency. The MoU also includes establishing an INR Clearing Centre in Mauritius.

The central banks of India and Mauritius have formalized their collaboration by signing a Memorandum of Understanding (MoU) aimed at facilitating trade in local currencies. This agreement was executed in the presence of Indian Prime Minister Narendra Modi and Prime Minister of Mauritius, Navinchandra Ramgoolam, during a state visit on March 12, 2025, as confirmed by the Reserve Bank of India (RBI).

The MoU establishes a framework for the implementation of the INR-MUR Local Currency Settlement (LCS) System, thereby reducing reliance on foreign currencies for cross-border transactions. This system is designed to enhance the exchange markets of both nations, boosting bilateral trade, direct investments, remittances, and fostering economic stability.

Key provisions of the MoU include the establishment of an INR Clearing Centre in Mauritius and integrating the Indian Rupee (INR) as a settlement currency within the Mauritius Automated Clearing and Settlement System. Consequently, local commercial banks will be able to maintain INR accounts at the Bank of Mauritius, facilitating smoother transaction processes.

Furthermore, the INR Clearing Centre will extend its services to the Common Market for Eastern and Southern Africa’s Regional Payment and Settlement System (COMESA), with Mauritius positioning itself as a pivotal clearing jurisdiction on the African continent. The initiative seeks to mitigate risks in bilateral trade by promoting local currency settlements.

Previously, the Reserve Bank of India has enabled trade using local currencies by allowing selected banks to open Special Rupee Vostro Accounts (SRVA) for foreign correspondent banks. This system has already facilitated trade in local currencies with multiple countries, as domestic banks offer international banking services through these accounts.

Since 2022, the RBI has promoted domestic currency transactions to bolster global trade, focusing on enhancing exports from India. This evolution is part of India’s broader strategy to internationalize the Indian Rupee, aiming for widespread global acceptance as a medium of exchange.

The recent MoU between India and Mauritius signifies a strategic move towards enhancing bilateral trade through local currency settlements. By enabling the use of the INR and MUR for transactions, the agreement not only reduces dependency on hard currencies but also aims to position Mauritius as a major player in regional trade settlements. This cooperative framework supports India’s aspiration to internationalize the Indian Rupee and encourages economic growth and stability for both nations.

Original Source: www.aninews.in