India makes first crude oil payment to UAE in Indian rupees

India and the United Arab Emirates have started settling bilateral trade in their local currencies with India's top refiner making payment in rupees for the purchase of a million barrels of oil from the Middle Eastern nation.

Indian Oil Corp. made a payment to Abu Dhabi National Oil Company (ADNOC), according to a statement issued by the Indian embassy in UAE, Reuters quotes the Indian government sources as saying.

The transaction comes after one involving the sale of 25 kg of gold from a UAE gold exporter to a buyer in India at about 128.4 million rupees ($1.54 million).

Last month, India signed an agreement with the UAE allowing it to settle trade in rupees instead of dollars, boosting India's efforts to cut transaction costs by eliminating dollar conversions.

During a visit by Indian Prime Minister Narendra Modi to the UAE, the two countries also agreed to set up a real-time payment link to facilitate easier cross-border money transfers.

Bilateral trade between India and UAE was $84.5 billion in 2022-2023.

India and UAE have a strong oil and gas relationship and the UAE is a key partner for India's energy security. Petroleum and petroleum products form the backbone of bilateral trade between India and the UAE.

UAE is the fourth largest source of crude oil and the second largest source of LNG and LPG for India. Last year, $35.1 billion worth of petroleum products were traded between the two countries, accounting for 41.4 per cent of total bilateral trade, the release said.