Russia starts trading in Rupee
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Moscow, Dec 29: Russia has become the first country to begin settlement of foreign trade in the rupee, giving up the dollar and euro altogether. Recently, a few transactions in the Indian currency involving Russian firms have taken place.
The Reserve Bank of India (RBI) in July this year introduced guidelines to promote the settlement of international trade in the rupee.
Financial Express in a report quoted trade sources saying more transactions in rupee are likely to take place in coming months as a sanction-hit Russia has opened a dozen-and-a-half Vostro accounts to facilitate trade. Not just Russia, Sri Lanka, and Mauritius have opened Vostro accounts to facilitate the rupee trade. Facilitating the rupee trade is expected to spur exports to Russia, which dropped by 16 percent till October this fiscal from a year ago to $1.6 billion majorly due to the delayed receipt of payments. There are about 30-35 countries, including those from Asia, Scandinavia, and Africa who have expressed interest in better understanding the rupee trade mechanism for possible adoption. India’s neighbors – Sri Lanka, Bangladesh, Myanmar, and Nepal – which have been facing a shortage of dollar reserves have also shown interest in trade settlements in rupees. India is also in talks with Southeast Asian, African, and Latin American countries to start trade settlement in the rupee. In recent months, trade with Russia has increased as it has enhanced the supply of discounted crude to India. After Russia began its invasion of Ukraine, several Western countries slapped sanctions on Moscow, putting off the SWIFT system (the system which is used by banks for payments in foreign currency). Russian banks including Sberbank, VTB, Gazprom, BCS, MTS, Tinkoff, Soyuz, Credit Europe Bank (Russia), PSCB, Ros, and JSCB have opened Vostro accounts. Of these, six accounts have been opened with IndusInd Bank and one each with UCO Bank, HDFC Bank, Union Bank of India, and Canara Bank. As per the FE report, Sberbank and VTB have opened one such account with their local branches.
Meanwhile, SBI Mauritius and People’s Bank of Sri Lanka have opened Vostro accounts with the State Bank of India (SBI). Sri Lankan banks — Seylan Bank, NDB Bank, and Commercial Bank of Ceylon — have opened Vostro accounts with Indian Bank. Bank of Ceylon has opened one such account with its branch in India.