The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a Memorandum of Understanding (MoU) on Thursday for establishing a framework to promote the use of local currencies - the Indian Rupee (INR) and the Indonesian Rupiah (IDR) for cross-border transactions.

The MoU was signed by the Governor of the Reserve Bank of India, Shaktikanta Das and the Governor of Bank Indonesia, Perry Warjiyo.

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 MoU covers all current account transactions, permissible capital account transactions and any other economic and financial transactions as agreed upon by both countries.

"This framework would enable exporters and importers to invoice and pay in their respective domestic currencies, which in turn would enable the development of an INR-IDR foreign exchange market. Use of local currencies would optimise costs and settlement time for transactions," RBI said in a statement.

This collaboration marks a key milestone in strengthening bilateral cooperation between RBI and BI.