Indonesia’s Push for Trade in Local Currencies and What It Means for India
Prof. Tridivesh Singh Maini
Assistant Professor of Diplomatic Practice, JSIA, OP Jindal Global University
Indonesia’s Push for Trade in Local Currencies and What It Means for India
Indonesia has spent the last several years encouraging its trade and investment partners to settle in local currencies instead of the US dollar. Two instruments carry most of this effort. The Local Currency Transaction (LCT) framework allows businesses in Indonesia and in partner countries to invoice and settle trade and investment flows in their own currencies, so that these transactions no longer have to pass through the dollar. The Quick Response Code Indonesian Standard (QRIS) is a QR payment standard introduced by Bank Indonesia, and it is now being extended to cross-border payments as part of the same infrastructure (Isaac, 2026).
The numbers have moved quickly. Bank Indonesia’s Governor, Destry Damayanti, has put the expected value of LCT transactions in 2026 at roughly US$55 billion, more than twice the figure for 2025 (GNA, 2026). India is one of the partners Jakarta is working to bring further into the system. The two countries signed a central bank agreement on local currency settlement in 2024, and in July 2026 their leaders announced that India’s Unified Payments Interface (UPI) and QRIS would be linked.
This article looks at how the LCT framework has developed, where India fits, how the effort relates to the wider debate among BRICS members about reducing dollar dependence, and what limits remain. The argument is that local currency settlement is better understood as a way of widening options and managing risk than as a break with the dollar, and that India and Indonesia have good reasons to treat it in that way.
The LCT Framework and QRIS
Indonesia introduced the LCT framework in 2018 (Isaac, 2026). Bank Indonesia defines LCT as the bilateral settlement of transactions using each party’s home-country currency (Bank Indonesia, 2025). The framework covers a wide range of sectors, including manufacturing, electricity, gas, transportation, trade, and services. Its policy design rests on three pillars: flexible foreign exchange regulation, stronger monitoring and supervision, and a network of Appointed Cross Currency Dealers, which are the banks that quote and settle between rupiah and partner currencies (Isaac, 2026).
The partner list has grown in steps. By the end of 2025, Indonesia had LCT arrangements with Malaysia, Thailand, Japan, China, South Korea, and the United Arab Emirates (Isaac, 2026). Bank Indonesia added South Korea in September 2024 and the UAE in January 2025, widened its arrangements with Malaysia and Thailand to cover portfolio investment from March 2025, and signed a memorandum of understanding with China (Bank Indonesia, 2025). Governor Damayanti has described the current partner group in simple terms:
We are currently collaborating with about six to seven countries, using our respective local currencies for transactions with these key partners. This year, we estimate the total value of these transactions will reach US$55 billion, a significant increase from approximately US$25 billion last year. (Antara, 2026a)
The effort is coordinated across government. A national LCT task force brings together Bank Indonesia, the economic affairs ministry, the financial services authority, and the ministries of finance, industry, trade, state-owned enterprises, and foreign affairs, among others (Bank Indonesia, 2025). Officials have also asked ministries to push LCT use in mining, minerals, oil and gas, and agriculture (Bank Indonesia, 2025).
QRIS as Payment Infrastructure
QRIS works on a different layer from LCT. LCT handles settlement between businesses and between banks, while QRIS lets individuals and small merchants pay by scanning a code. Reporting on Bank Indonesia’s work treats QRIS as part of the infrastructure that supports LCT and its regional rollout (Isaac, 2026). The practical effect is that a visitor from a partner country can pay a street vendor in Indonesia from a home-country payment app, with the conversion handled between the two payment systems and not through a third currency. This is the use case Indonesia and India now hope to bring into operation.
Growth in Transaction Volumes
Bank Indonesia reported that LCT transactions totaled US$11.7 billion in the first half of 2025, compared with US$4.702 billion in the first half of 2024. The number of customers using LCT rose by about 45% over the same period (Bank Indonesia, 2025). Growth continued into 2026. Transactions in January and February 2026 came to about US$8.45 billion, against US$3.21 billion a year earlier, an increase of roughly 163%. The average number of monthly LCT users rose from 9,720 in 2025 to 16,030 in 2026 (Isaac, 2026).
One report states that LCT trade reached US$49 billion by August 2026, which would be close to double the US$25.7 billion recorded for the whole of 2025 (NewKerala, 2026). The Governor’s own forecast, given at a forum in Jakarta on October 26, is that the year will end at US$55 billion, again more than double the roughly US$25 billion of 2025 (GNA, 2026). China has contributed to this rise, but Indonesia has also been working to increase local currency trade with Japan, Malaysia, Thailand, South Korea, and the UAE (Bank Indonesia, 2025; Isaac, 2026).
A Note on the Figures
These numbers should be read with some care. The reports cover different periods, and they do not always say whether they count trade only or also investment and other flows. A cumulative figure of US$49 billion by August and a full-year forecast of US$55 billion would imply a slower pace in the last four months of the year than in the first eight, which suggests that the two figures are not measured on exactly the same basis. The direction is clear, since every source shows LCT volumes rising sharply, but the exact level depends on which series is used.
India and Indonesia: From Agreement to Operation
The 2024 Memorandum of Understanding
India and Indonesia have been strengthening their economic and strategic relationship for some time, and local currency trade has become one part of that effort. On March 7, 2024, the Reserve Bank of India (RBI) and Bank Indonesia signed a memorandum of understanding to set up a framework for using the Indian rupee and the Indonesian rupiah in cross-border transactions. It was signed by Shaktikanta Das, then Governor of the RBI, and Perry Warjiyo, Governor of Bank Indonesia (Reserve Bank of India, 2024).
The framework covers current account transactions, permissible capital account transactions, and other economic and financial transactions that the two sides agree on. Under it, exporters and importers can invoice and pay in their domestic currencies. The RBI said this could support the development of a rupee-rupiah foreign exchange market and lower transaction costs and settlement times, and it described the agreement as a key milestone in bilateral cooperation between the two central banks (Reserve Bank of India, 2024).
The July 2026 Visit and the Payment Link
The agreement moved closer to practice during Prime Minister Narendra Modi’s state visit to Indonesia in July 2026. After his meeting with President Prabowo Subianto, the two governments issued a joint statement that referred to local currency trade in the following terms:
Both leaders welcomed the progress towards the operationalisation of guidelines on Local Currency Transaction (LCT) between the Reserve Bank of India and Bank Indonesia and noted that this would further promote trade and investment between India and Indonesia and deepen financial integration between the two economies. (Press Information Bureau, 2026)
The visit also produced an announcement on payments. Modi and Prabowo said that QRIS and UPI would be integrated, so that Indonesian QR codes would work for transactions in India and UPI codes would work in Indonesia. India’s ambassador to Indonesia, Sandeep Chakravorty, told reporters in Jakarta on July 7 that the work was at an advanced stage and that he hoped integration would be completed by the end of 2026. Technical discussions between the payment system operators of both countries were already under way (Antara, 2026b).
The payment link matters for more than convenience. It gives travelers and small businesses a direct way to transact, and it should strengthen tourism and people-to-people ties, which Modi himself pointed to when announcing the plan (Antara, 2026b). Governor Damayanti has also said that India wants to take part in both LCT and QRIS, which suggests that the central bank channel and the retail payment channel are being developed together.
Local Currencies and the BRICS Debate
Indonesia’s push comes while BRICS members are debating how far to go in reducing dollar dependence. President Prabowo, speaking at the BRICS Summit in New Delhi in September 2026, said that trade and currency should not be weaponized. The New Delhi declaration that followed the summit supported work on faster and cheaper cross-border payments, including the linking of payment systems and wider use of local currencies (Strohecker, 2026).
A common BRICS currency, however, has been ruled out in practice. A report released by the BRICS+ Thinking platform, and co-authored by Gregory T. Chin, Danny Quah, and Jim O’Neill, the former Goldman Sachs economist who coined the BRICS acronym, argues that a joint cross-border payments mechanism is feasible but that a shared currency is not. In their assessment, a common currency would require dramatic reforms, including greater central bank independence, a common monetary authority, and fewer restrictions on capital flows. They also note that members show no enthusiasm for delegating policy autonomy to a common central bank (Strohecker, 2026). The report adds that Russia and India have both downplayed the prospect of a common currency, and that US President Donald Trump has threatened 100% tariffs on members that create one.
The distinction between a payments system and a currency union is useful for reading Indonesia’s approach. LCT does not ask any government to give up control over monetary policy. Each central bank keeps its own currency and its own rate decisions, and the framework only changes the currency in which a given trade is invoiced and settled. That is a far smaller step than a common currency, and it is the reason arrangements of this kind have advanced while the more ambitious proposals have not.
Why Indonesia Is Pursuing Local Currency Trade
Indonesia has followed a pragmatic foreign policy and has tried to keep good relations with both China and the West, the United States in particular. Like many developing countries, it has been working to diversify its economic relationships. Bank Indonesia’s own explanation for LCT points to exchange rate stability: using local currencies for exports, imports, and investment is meant to reduce reliance on the dollar and to support the rupiah amid volatile global markets (GNA, 2026). Its 2025 release names US reciprocal tariff policy, geopolitical tensions, and the Indonesia-EU Comprehensive Economic Partnership Agreement as part of the setting in which the framework is being expanded (Bank Indonesia, 2025).
Read this way, local currency settlement is a form of insurance. A business that can pay in rupiah, ringgit, baht, yen, or won does not need to buy dollars at each stage of a transaction, and it is less exposed when the dollar moves sharply. The same logic applies to India. The country has been seeking to widen the use of the rupee in cross-border trade, and Indonesia, as a large ASEAN economy with a growing trading relationship with India, is a natural partner for that effort.
This does not mean either country is turning away from the United States. Several countries in the Global South, and BRICS members in particular, give weight to local currency trade, but trade in local currencies and economic ties with the United States do not have to be seen as opposites. Both countries have strong commercial interests in the US market and in dollar-based finance, and the realistic aim is to add choices, not to remove existing ones.
Challenges Ahead
Several obstacles remain, and they are worth stating plainly. The first is the pace of implementation. The RBI and Bank Indonesia signed their agreement in March 2024, and as of the July 2026 joint statement the leaders were still welcoming progress toward operationalizing the guidelines. A gap of more than two years between signature and operation shows how slowly central bank arrangements can move, even when both sides support them.
The second is market depth. A framework allows businesses to settle in rupees and rupiah, but it does not guarantee that there will be enough counterparties willing to quote both currencies at reasonable prices. The RBI itself noted that the framework could support the development of a rupee-rupiah market, which implies that such a market is not yet fully formed (Reserve Bank of India, 2024). Until it is, many firms will find the dollar cheaper and easier to use, whatever the policy intention.
The third is concentration. Much of the recent growth in Indonesia’s LCT volumes has come from a small group of partners, and China has contributed heavily. For India, the challenge is to build volume of its own in a relationship where trade is already substantial but where habits around dollar invoicing are well established. Finally, the payment link depends on technical work and regulatory approvals on both sides, and the end-of-2026 target will need to be met if the project is to retain credibility.
These points are the author’s assessment, drawn from the sources cited above, and not findings reported by those sources.
Conclusion
Indonesia’s local currency strategy has grown quickly in a short time. LCT volumes have risen from a few billion dollars in early 2024 to a forecast of US$55 billion in 2026, the partner list has expanded to include several of Indonesia’s largest trading partners, and QRIS is extending the same idea to retail payments. India’s role in this is still taking shape, but the 2024 central bank agreement, the 2026 joint statement, and the planned QRIS and UPI link show that both governments want it to grow.
The BRICS discussion shows both the appeal and the limits of the idea. There is broad agreement that cross-border payments should be faster and cheaper and that local currencies should play a larger part. There is no agreement on a common currency, and the evidence suggests none is coming. For developing countries, the sensible course is to take concrete steps that reduce exposure to a single currency, and to make sure these steps do not remain statements of intent. For India and Indonesia, that means finishing the operational work already announced and building real trading volume in rupees and rupiah.
References
Antara. (2026a). BI targets US$55 billion in local currency transactions in 2026. ANTARA News. https://en.antaranews.com/news/437959/bi-targets-us55-billion-in-local-currency-transactions-in-2026
Antara. (2026b, July 8). India expects QRIS-UPI integration to complete by end of 2026. ANTARA News. https://en.antaranews.com/news/421837/india-expects-qris-upi-integration-to-complete-by-end-of-2026
Bank Indonesia. (2025, July 25). Value of local currency transactions continues tracking upward trend (Press Release No. 27/162/DKom). https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_2716225.aspx
Ghana News Agency. (2026, October 27). Indonesia’s local currency transactions projected to reach 55 bln USD in 2026. https://gna.org.gh/2026/10/indonesias-local-currency-transactions-projected-to-reach-55-bln-usd-in-2026/
Isaac, J. (2026, April 14). Indonesia pushes local currency settlements as LCT volumes jump 163%. Indonesia Business Post. https://indonesiabusinesspost.com/6473/markets-and-finance/indonesia-pushes-local-currency-settlements-as-lct-volumes-jump-163
NewKerala. (2026). More countries switching from US dollar to local currencies. https://www.newkerala.com/news/a/more-countries-switching-from-us-dollar-local-currencies-179.htm
Press Information Bureau. (2026). India-Indonesia joint statement issued during the Prime Minister’s visit to Indonesia [Press release]. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2282084®=48&lang=1
Reserve Bank of India. (2024, March 7). RBI and Bank Indonesia sign MoU on local currency use (Press Release 2023-2024/2017). https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=57467
Strohecker, K. (2026, October 30). BRICS+ payments system feasible, common currency faces hurdles, report says. Reuters. https://www.kitco.com/news/off-the-wire/2026-10-30/brics-payments-system-feasible-common-currency-faces-hurdles-report