Indonesia and India's de-dollarisation agenda means settling more bilateral trade in rupiah and rupees instead of US dollars. The Reserve Bank of India and Bank Indonesia signed a memorandum of understanding on 07 Mar 2024 to build that framework. It reduces dollar intermediation as an option; it does not replace the dollar for most cross-border contracts.
What does de-dollarisation mean for Indonesia and India?
It means using local currencies, not the US dollar, to invoice and settle part of the trade between the two countries.
Bank Indonesia describes the policy as local currency transactions (LCT), an arrangement with partner central banks that lets exporters and importers invoice and pay in their own currencies. Bank Indonesia says it is expanding LCT with partner countries to reduce reliance on the US dollar, and the RBI-BI framework also aims at a deeper INR-IDR currency market. The dollar remains widely used for invoicing in global commodity and financial markets, so for most contracts this is an added option rather than a replacement.
What did the RBI and Bank Indonesia agree?
They signed an MoU in Mumbai on 07 Mar 2024 establishing a framework to promote the use of the Indian rupee (INR) and the Indonesian rupiah (IDR) for cross-border transactions.
According to the Reserve Bank of India press release and the Bank Indonesia news release, the framework covers current account transactions, permissible capital account transactions and other transactions the two countries agree, and would let exporters and importers invoice and pay in domestic currencies, which could support development of an INR-IDR foreign exchange market. An MoU sets a framework; each bank's rules and the commercial banks' operational set-up determine what a company can do on a given day.
How far has local currency settlement progressed?
Bank Indonesia reports that LCT volumes have grown sharply across its partner corridors, though its published material described India as at an earlier stage than the corridors already operating.
In its February 2026 investor presentation, Bank Indonesia reported total LCT transactions in 2025 of roughly USD 25.7 billion equivalent, about 1.6 times the 2024 total of around USD 16.3 billion (recomputed: 25.74 / 16.28 = 1.58). The same material lists six operating partner countries (Malaysia, Thailand, China, Japan, South Korea and the United Arab Emirates) and described India and Singapore as being at the stage of finalising operational guidelines. That status may have moved since publication, so confirm it with your bank or Bank Indonesia before planning around an INR-IDR route.
| Item | Position reported by Bank Indonesia |
|---|---|
| RBI-BI MoU | Signed 07 Mar 2024, Mumbai |
| LCT total, 2025 | About USD 25.7 billion equivalent |
| LCT total, 2024 | About USD 16.3 billion equivalent |
| Operating corridors named | Malaysia, Thailand, China, Japan, South Korea, UAE |
| India and Singapore | Operational guidelines being finalised (confirm current status) |
What changes for companies trading between Indonesia and India?
The practical changes are in invoicing currency, hedging, bank selection and documentation, not in the underlying tax rules.
- Invoicing and contracts. Specify the currency, the reference rate source and the settlement date. A rupee or rupiah invoice shifts exchange-rate risk to whichever party carries the foreign currency.
- Banking. Check whether your Indonesian and Indian banks support the local currency route, and what documentation they require for each transaction.
- Hedging. Rupiah and rupee markets are less liquid than dollar markets. Compare the cost and availability of hedges before moving contracts away from the dollar.
- Intercompany pricing. Changing the currency of an intercompany charge does not change the arm's-length requirement. Document the pricing currency, the rate used and the reason for the change, and keep the transfer pricing file consistent. Our corporate tax compliance guide outlines the wider obligations for foreign-owned groups.
- Records. Reconcile settlement amounts to invoices in the functional currency used for Indonesian books.
Exchange rates for non-USD currencies are published by Bank Indonesia on its reference rate page. Always state the rate and the date when converting figures in reports.
What are the limits and risks?
Local currency settlement lowers dollar dependence only where both sides can actually transact in it at an acceptable cost.
Liquidity, quoting spreads, bank readiness and counterparties' own treasury policies decide whether a corridor is used. An MoU does not change customs, tax or foreign-exchange reporting obligations in either country. Indonesia's broader trade posture is covered in our note on Indonesia's role in international trade organisations.
Next step
Currency choices in cross-border contracts feed into intercompany pricing and documentation. JCSS Indonesia advises on this through its cross-border and transfer pricing service. This article is general information, not tax or legal advice.
Frequently asked questions
What is de-dollarisation in plain terms?
It is the practice of reducing reliance on the US dollar for invoicing, settlement and reserves. For Indonesia and India it takes the form of local currency settlement: paying bilateral trade in rupiah and rupees through bank arrangements, while the dollar continues to be used widely elsewhere.
When did the RBI and Bank Indonesia sign the local currency MoU?
They signed it in Mumbai on 07 Mar 2024, according to the RBI press release. It sets a framework to promote INR and IDR use in cross-border transactions, covering current account and permissible capital account transactions. It is a framework agreement, so operational readiness depends on the banks involved.
Can I invoice Indonesian-Indian trade in rupees or rupiah today?
It may be possible, but check with your bank. Bank Indonesia's published material described India as still finalising operational guidelines when its corridors with six other countries were already operating. Availability, documentation and pricing vary by bank, so confirm before changing contract currency.
Does invoicing in local currency change tax treatment?
The currency of invoicing does not change the underlying tax rules, but it affects exchange gains and losses, records and, for related parties, the transfer pricing documentation. Document the currency choice and the rate source, and have the tax treatment reviewed for the specific transaction.
Where can I find official exchange rates?
Bank Indonesia publishes reference rates for non-USD currencies, including INR, on its website. Use the published rate and state the date whenever you convert amounts. For tax filings, check which rate the specific rule requires rather than assuming one rate fits every purpose.
General information only, not legal or tax advice for your specific facts. Regulations change; confirm the current position with JCSS Indonesia before acting.