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Which Countries are signed historic Memorandum of Understanding on LCS system?
A)
India and UAE
B)
India and UK
C)
India and France
D)
India and USA

Correct Answer :   India and UAE


In a significant move to strengthen economic ties, India and the United Arab Emirates have signed a historic Memorandum of Understanding (MoU) on the Local Currency Settlement (LCS) system. This groundbreaking agreement, signed between the Reserve Bank of India and the Central Bank of the UAE, aims to revolutionize cross-border transactions between the two nations.

The LCS system allows for the use of the Indian Rupee  and UAE Dirham  in bilateral trade, marking India's first-ever LCS arrangement.

This innovative system is expected to have a transformative impact on transaction costs and processing time while also increasing reliance on local currencies. The agreement comes as a significant milestone in the rapidly evolving India-UAE relationship, in line with the Vision Statement unveiled by the two leaders during their virtual summit in February 2022.

Under the LCS system, traders and businesses will have the flexibility to choose the payment currency based on mutual agreement, providing a seamless and efficient mechanism for cross-border transactions. This move is set to reduce dependence on international currencies and further strengthen economic cooperation between India and the UAE.

Additionally, the LCS system enables the use of surplus balances in local currencies for investment in various local currency assets, such as corporate bonds, government securities, and equity markets, creating new avenues for growth and collaboration.

The signing of the LCS agreement took place during the recent visit of Honorable Prime Minister Shri Narendra Modi to the UAE. Prime Minister Modi was warmly welcomed by HH Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the Crown Prince of Abu Dhabi, further reflecting the depth of bilateral relations between the two countries. This significant step is expected to amplify the preferential terms already established by the Comprehensive Economic Partnership Agreement (CEPA), bringing new opportunities for trade and investment..

Source : AIR

Published On : July 16, 2023
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