With the dirham pegged at 3.6725 to the US dollar, rupee-dirham trade trims conversion costs but leaves Indian traders' dollar exposure largely intact.
MUMBAI: Trade between India and the UAE settled in rupees and dirhams has entered “double digits,” Union Minister of Commerce and Industry Piyush Goyal said on 28 September 2026. He spoke after co-chairing the 14th meeting of the India–UAE High-Level Joint Task Force on Investments with Sheikh Hamed bin Zayed Al Nahyan, Member of the Executive Council of the Emirate of Abu Dhabi. According to the minister, adoption is rising as exporters, importers and banks better understand its cost benefits.
The claim lands within a larger ambition. Bilateral trade reached $101.25 billion in FY26, including $76.2 billion in non-oil trade, and both sides have now set a target of $200 billion by 2032. Additionally, Goyal said the UAE has invested $25 billion in India and intends to deploy another $25 billion in the near term across sectors such as energy, logistics, ports, AI and food security. Its long-term vision stands at $100 billion.
How the settlement works
Goyal described the mechanics plainly. Indian exporters can receive payment in rupees, while Emirati exporters can receive dirhams. Balances that pile up in either currency can then be converted into US dollars every three to six months.
Underneath sits a system built over four years. In July 2022, the RBI allowed foreign banks to open Special Rupee Vostro Accounts (SRVAs) with authorised Indian banks. Then, on 15 July 2023, then RBI Governor Shaktikanta Das and CBUAE Governor Khaled Mohamed Balama signed two MoUs in Abu Dhabi, in the presence of Prime Minister Narendra Modi and UAE President Sheikh Mohamed bin Zayed Al Nahyan. One created a Local Currency Settlement System, while the other set out to link payment and messaging systems.
In practice, an Emirati importer paying in rupees hands dirhams to a UAE bank, which converts them at a direct market rate. Consequently, the trade needs one currency conversion instead of two, avoiding the traditional rupee-to-dollar-to-dirham route. The UAE bank’s rupee account at an Indian lender such as SBI or PNB is then debited to pay the Indian exporter.
Four years of loosening rules
The RBI has steadily eased this framework. In August 2025, it let authorised banks open SRVAs without prior central bank approval. Two months later, it allowed surplus balances to flow into corporate bonds, NCDs and commercial paper, beyond government securities and T-bills. Most recently, a consolidated circular on 17 July 2026 merged five directives and aligned payment timelines with contract terms. Notably, the investment route gives foreign holders a use for rupees beyond trade.
Retail rails run alongside
Beyond commercial trade, retail links are maturing. India’s UPI now connects with the UAE’s AANI instant payment system. Similarly, RuPay cards and the UAE’s JAYWAN scheme, built on RuPay technology, are accepted across each other’s networks. These links serve more than 3.5 million Indians living in the UAE and about 6 million Indian tourists who visit each year. Meanwhile, a direct link between India’s SFMS messaging system and the CBUAE network aims to carry trade messages without third-country intermediaries.
The dollar has not left the room
One structural fact tempers the story. The dirham is pegged at 3.6725 per US dollar, so the rupee-dirham rate moves in step with the rupee-dollar rate. As a result, Emirati firms face little currency risk, while Indian traders carry roughly the same exposure as before. The gain lies mainly in cutting out one conversion and its spread. Likewise, the periodic conversion of surplus balances into dollars shows the system works alongside the dollar rather than replacing it.
Double digits of what?
The headline figure also needs context. Goyal did not specify whether “double digits” refers to a share of total trade, a growth rate or an absolute value. If it means share, local-currency settlement would cover over $10 billion of trade, which would likely require participation from large energy deals. However, no public data yet confirms whether crude and LNG purchases from ADNOC use the system. Similarly, it is unclear whether services or UPI remittances are counted. Without monthly SRVA settlement data from the RBI, independent verification remains difficult.
What to watch
Several indicators will sharpen the picture. RBI bulletins and Commerce Ministry releases could offer disaggregated data, while follow-up ministerial briefings may define the metric. HPCL’s 10-year LNG contract with ADNOC, starting in 2028, will test whether energy trade shifts. Furthermore, observers will track whether the model extends to Saudi Arabia or ASEAN partners, and how the RBI’s digital rupee and the UAE’s Digital Dirham fit in.
The road to $200 billion
For now, the India–UAE corridor offers a working example of targeted rupee settlement without full capital account convertibility. Encouragingly, the regulatory groundwork is largely in place. The next set of numbers, and how they are defined, will show how much of the path to $200 billion runs through rupees and dirhams.
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