India and Indonesia have reached a new deal.

India and Indonesia have decided to use their own currencies for commercial transactions instead of US dollars.

It has been decided by Bank Indonesia (BI) and the Reserve Bank of India (RBI) to enable cross-border commerce transactions in local currencies, the Indonesian rupiah (IDR) and the Indian rupee (INR).

Mumbai is where the agreement was signed on March 7.

Governors Perry Warsio of Bank Indonesia and Shaktikanta Das of the Reserve Bank of India signed the Memorandum of Understanding.

As a result, going forward, Indian Rupee (INR) and Indonesian Rupiah (IDR) will be used in cross-border trade transactions between India and Indonesia in place of US dollars (USD).

The goal of the Memorandum of Understanding (MoU) between Indonesia and India to build a mechanism for cooperation in the area of cross-border transactions in local currencies is to encourage the use of bilateral INR and IDR.

All current account transactions, authorized capital account transactions, and other mutually agreed-upon economic and financial transactions are covered by the MoU.

The mechanism facilitates the expansion of the INR-IDR forex market by allowing importers and exporters to invoice and pay in their respective home currencies.

"The use of local currencies improves costs and settlement time for transactions," the RBI stated in a statement.

The long-standing historical, cultural, and economic links between India and Indonesia will be strengthened in the end by the usage of local currencies in bilateral transactions, it stated. Trade between the two countries would also be improved.