Mumbai: The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a memorandum of understanding (MoU) on Thursday for establishing a framework to promote the use of local currencies -- the Indian Rupee (INR) and the Indonesian Rupiah (IDR) -- for bilateral transactions between the two countries.

The MoU was signed here by RBI Governor, Shaktikanta Das and Bank Indonesia Governor, Perry Warjiyo.

The MoU on establishing a framework for cooperation in the area of cross-border transactions in local currencies between India and Indonesia aims to promote the use of INR and IDR bilaterally.

The MoU covers all current account transactions, permissible capital account transactions, and any other economic and financial transactions as agreed upon by both countries, according to an RBI statement.

This framework would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-IDR foreign exchange market.

The use of local currencies would optimise costs and settlement time for transactions, an official said.

This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BI.

The use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Indonesia as well as deepen financial integration and strengthen the long historical, cultural, and economic relations between India and Indonesia, the RBI said.

(IANS)