The two countries will test a new payment mechanism using rupee settlements, New Delhi says
India will start using the rupee in trade deals with Russia from next week, local media reported on Monday, citing Federation of Indian Export Organizations (FIEO) head Ajay Sahai.
The two nations will test 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 allowed the use of the national currency in international trade deals last month in a bid to promote exports and reduce the rupee’s reliance on the dollar. The country’s central bank, the Reserve Bank of India, had previously asked Indian lenders to introduce additional provisions for import and export transactions in rupees.
“A number of issues have been resolved. Exporters and importers have started approaching banks for account opening,” Sahai told Indian newspaper Mint.
Russia and India to start trading rupees
Settlements between Russia and India would be made using so-called vostro accounts. A Vostro account is usually opened in a domestic bank on behalf of a foreign bank and holds the latter’s assets on deposit in the currency of the country where the money is deposited, in this case the rupee.
“About ten or eleven vostro accounts have been opened”, an unnamed government official told the outlet. “For example, there are six vostro accounts opened in IndusInd Bank, which means that six different Russian banks have opened accounts in the bank”, says the official.
Rupee settlements are expected to help boost mutual trade and simplify Russian oil supplies to India, which have increased significantly since March.
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