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A mutual understanding has been established between India and Indonesia with the signing of a memorandum to interconnect their rapid payment systems, India’s Unified Payments Interface (UPI) and its Indonesian equivalent. This linkage will enable cross-border transactions through these two systems, which are notably well-received in their home countries.
This agreement was inked by the Reserve Bank of India and Bank Indonesia at the third G20 Finance Ministers and Central Bank Governors (FMCBG) meet in Gandhinagar, India. Indian Finance Minister Nirmala Sitharaman and Indonesian Finance Minister Sri Mulyani Indrawati were present as witnesses during the signing.
According to Sitharaman, the agreement will spur trade and investments between India and Indonesia. It is also anticipated to advance the application of local currencies for cross-border dealings.
The UPI is an immediate payment system that permits users to make instant transactions to businesses and individuals via their bank accounts. This system is the leading payment system in India, boasting over 500 million users.
The BI-Fast Payment System, launched in 2021, serves as the Indonesian equivalent to the UPI, providing real-time payment capabilities.
The integration of these two systems will make possible real-time cross-border transactions, trimming down costs and time associated with international payments. It is also set to simplify cross-country trade for businesses and individuals.
The pact between India and Indonesia is part of a wider initiative to encourage the use of domestic currencies in cross-border transactions to minimize dependence on the US dollar and foster financial stability.
This progressive step of India and Indonesia towards strengthening cross-border payment systems in the region holds immense potential to stimulate trade and investments, and to encourage the use of domestic currencies in cross-border dealings.