Economy & BankingArticle 17 of 18

India and UAE step up efforts to expand rupee-dirham trade

Tuesday, 16 June 2026· 5 min read·Source: The Economic Times

India and the United Arab Emirates (UAE) are stepping up efforts to expand rupee-dirham trade — settling bilateral trade in their local currencies rather than the US dollar — officials said around June 16, 2026. Since the rupee-dirham mechanism was launched nearly three years ago, over 15% of India-UAE trade has been invoiced in local currencies. Both sides aim to boost adoption further to enable faster settlement and lower costs, despite structural bottlenecks cited by industry. Local-currency trade reduces dependence on the dollar and helps conserve foreign-exchange reserves.

Key Facts & Details

8 points

1
India and the UAE are expanding rupee-dirham (local-currency) trade.
2
Over 15% of India-UAE trade is already invoiced in local currencies.
3
The rupee-dirham mechanism launched nearly three years ago.
4
Goals: faster settlement and lower transaction costs.
5
Local-currency trade cuts dollar dependence and conserves forex reserves.

Deep Dive

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The mechanism builds on the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
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Local-currency settlement reduces exposure to dollar-exchange volatility for traders.
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The UAE is among India's largest trade partners, especially in energy and gold.

Exam Focus

India is expanding local-currency trade settlement (rupee and which currency) with the UAE?

Exam Relevance & Angle

Local-currency trade arrangements are increasingly tested economy/bilateral GA, focusing on the partner country, the currencies and the rationale (cutting dollar dependence).

Target Exams

SBI POSBI ClerkIBPS POIBPS ClerkIBPS RRB OfficerIBPS RRB AssistantRBI Grade BRBI AssistantNABARD Grade ASSC CGLSSC CHSLSSC CPORRB NTPCLIC AAONIACL AOUPSC CSEState PCS

Background & Context

Local-currency trade settlement lets two countries invoice and pay for trade in their own currencies — here the Indian rupee (INR) and the UAE dirham (AED) — instead of a third currency like the US dollar. India and the UAE launched the rupee-dirham arrangement after signing the India-UAE Comprehensive Economic Partnership Agreement (CEPA) in 2022. Such mechanisms reduce conversion costs and dollar dependence, support the internationalisation of the rupee, and help conserve foreign-exchange reserves. The RBI has enabled similar rupee-based trade arrangements with several countries through special accounts.