The two countries will be testing a new payment mechanism using rupee settlements, New Delhi has said
India will start using the rupee in trade settlements with Russia starting next week, local media outlets reported on Monday, citing the head of the Federation of Indian Export Organizations (FIEO), Ajay Sahai.
The two nations will be testing a new payment mechanism for the first time since it was approved by the State Bank of India, a state-owned commercial bank, in September.
The Indian government permitted the national currency to be used in international trade settlements last month in an effort to promote exports and reduce the rupee’s dependence on the dollar. The country’s central bank, the Reserve Bank of India, had earlier called on Indian lenders to introduce additional arrangements for import and export transactions in rupees.
“A number of issues have been sorted out. Exporters and importers have begun approaching banks for opening of the accounts,” Sahai told India’s Mint newspaper.
Settlements between Russia and India will reportedly be carried out using so-called vostro accounts. A vostro account is typically opened at a domestic bank on behalf of a foreign bank and keeps the latter’s holdings on deposit in the currency of the country where the money is deposited, in this case rupees.
“About ten or eleven vostro accounts have been opened,” an unnamed government official told the media outlet. “For instance, there are six vostro accounts opened in IndusInd Bank which means six different Russian banks have opened accounts in the bank,” the official specified.
Settlements in rupees are expected to help boost mutual trade and simplify Russian oil supplies to India, which have risen substantially since March.
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