The RBI and the Maldives Monetary Authority on Thursday signed an agreement here for establishing a framework to promote the use of local currencies -- the Indian Rupee and the Maldivian Rufiyaa (MVR) for cross-border transactions.

The Memorandum of Understanding (MoU) was signed by Governor of Reserve Bank of India Shaktikanta Das and Governor of Maldives Monetary Authority Ahmed Munawar.

"The MoU encourages the use of INR and MVR in current account transactions, permissible capital account transactions and any other economic and financial transactions as agreed upon by both countries," the RBI said in a statement.

This framework would enable exporters and importers to invoice and settle in their respective domestic currencies, which in turn would enable the development of trading in the INR-MVR pair in foreign exchange market.

Use of local currencies would optimise costs and settlement time for transactions, the RBI added.

"This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and MMA," it said.

Use of local currencies in bilateral transactions will eventually contribute to promoting trade between India and Maldives as well as deepen financial integration and strengthen the economic relations between India and Maldives, India's central bank said.

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