The two countries are now stepping up efforts to expand the local currency trade settlement adoption, aiming for faster trade facilitation and cost reduction rather than de-dollarisation, sources said, even as industry flagged slow adoption due to structural bottlenecks.
Authorities are focusing on onboarding more banks, simplifying procedures and widening participation to make cross-border transactions more efficient, Indian ambassador to the UAE Deepak Mittal told ET.
“More than 15% of the trade has been invoiced in local currencies between July 2023 and March 2026. The settlement is actually doing well despite the headwinds. Businesses in their feedback have pointed to paperwork requirements, duplication of processes, or procedural delays. We are looking at how to simplify those processes and reduce friction points,” said Mittal.
According to industry executives, the adoption largely remains confined to oil and precious metals-related transactions, with a larger share of invoicing still taking place in the UAE dirham rather than the Indian rupee.
The Indian ambassador said the system was gaining momentum, with central banks and regulators now focusing on simplifying processes and reducing friction for businesses.
The renewed focus comes amid India’s broader push to internationalise the rupee and expand the use of local currencies in cross-border trade, particularly among major trading partners with strong financial linkage. The UAE is India’s third largest trading partner, with bilateral trade crossing $100 billion in each of the last two years.”We are also looking at onboarding more banks, standardising procedures and reducing paperwork. The central banks on both sides, along with commercial banks and stakeholders, are working on solutions,” Mittal said.
The India-UAE Local Currency Settlement System was launched in July 2023 to reduce dependence on the US dollar, lowering transaction costs and strengthening financial connectivity between the two nations.
The Reserve Bank of India facilitates bilateral trade settlements in local currencies through the Special Rupee Vostro Account (SRVA) framework, allowing businesses to invoice and settle cross-border transactions directly in the rupee or the UAE dirham, lowering exchange costs and bypassing the need for the US dollar. Under the mechanism, UAE importers pay in dirhams or rupees, which are routed through SRVAs in India, allowing Indian exporters to be paid directly in rupees without converting every transaction into US dollars.
“The idea is to popularise the system among business communities on both sides. There will be engagement through chambers of commerce and roadshows,” said Mittal.