Reserve Bank of India (RBI) has approved and implemented an agreement allowing the use of both the Indian rupee and Maldivian rufiyaa for financial transactions between the two countries. This agreement, signed between the Government of India and the Government of Maldives, aims to facilitate smoother trade and economic exchanges.

In November, the Maldives Monetary Authority (MMA) and the RBI signed a memorandum of understanding (MoU) to enable direct transactions using their respective currencies. According to an RBI circular, the new system has come into effect immediately.

Under this arrangement, businesses in both countries can now conduct transactions in their own currency for current account transactions, permitted capital account transactions, and other economic activities as agreed by the two governments. This means that companies engaged in trade between India and the Maldives can invoice and settle payments in rupees or rufiyaa, simplifying cross-border commerce.

The initiative complements the existing Asian Clearing Union (ACU) mechanism, which facilitates financial transactions between participating central banks. The ACU includes member countries such as Bangladesh, Belarus, Bhutan, Iran, Myanmar, Nepal, Pakistan, Sri Lanka, India, and the Maldives.