A Memorandum of Understanding was signed on Thursday by Bank Indonesia (BI) and the Reserve Bank of India to encourage the use of local currencies for bilateral transactions.

According to a release from RBI, the Memorandum of Understanding (MoU) was signed here to provide a framework to encourage the use of local currencies, specifically the Indonesian Rupiah (IDR) and the Indian Rupee (INR), for cross-border transactions.

By allowing exporters and importers to issue invoices and make payments in their own currencies, this framework would facilitate the growth of the INR-IDR foreign currency market.

"Use of local currencies would optimize costs and settlement time for transactions," the central bank stated.

Governors Perry Warjiyo of Bank Indonesia and Shaktikanta Das of the RBI signed the Memorandum of Understanding.

"The MoU on establishing a framework for cooperation in the area of cross-border transactions in local currencies between India and Indonesia, aims to promote the use of INR and IDR bilaterally," the Reserve Bank of India stated.

The partnership, according to the central bank, represents a significant turning point in the development of bilateral cooperation between the RBI and BI. 

It further stated that using local currencies in bilateral transactions will eventually help to advance commerce, develop financial integration, and bolster the long-standing historical, cultural, and economic ties between Indonesia and India.