Trade settlements in rupee starts with Russia, more likely to join: Report

India and Russia have begun settling bilateral foreign trade in rupee, with a few transactions involving Russian firms having taken place recently, The Financial Express reported on Wednesday, launching a process that could see both nations dropping trade settlements in dollar and euro altogether.

India is trying to promote trade settlements in the rupee with not just Russia but also Sri Lanka and Mauritius. India is also in talks with several Southeast Asian, African and Latin American nations to start the rupee trade.

Neighbouring countries like Nepal, Bangladesh and Myanmar have also shown interest. Some of these countries are struggling with depleting dollar reserves, and government officials believe this opens a great opportunity for India to promote the rupee.

The FE report, citing sources, said at least a dozen-and-a-half Vostro accounts have been opened so far to facilitate the trade in rupee with Russia, Sri Lanka and Mauritius. So more transactions are expected in the coming months.

A Vostro account is held by a bank that allows the customers to deposit money on behalf of another bank.

Trade with Russia has increased in recent months as it increased the supply of discounted crude to India. After the Ukraine war, several Western countries put sanctions on Moscow, putting off the SWIFT system (the system used by banks for payments in foreign currency). For this reason, Moscow would be interested in settling Indian trade in rupee as other modes of payments may not be available to it for the time being.

Russian banks such as Sberbank, VTB, Gazprom, BCS, MTS, Tinkoff, Soyuz, Credit Europe Bank (Russia), PSCB, Ros and JSCB have opened Vostro accounts. Six of these accounts have been opened with IndusInd Bank, and one with UCO Bank, HDFC Bank, Union Bank of India and Canara Bank. The report said that Sberbank and VTB have opened one such account with their local branches.

In July, the RBI introduced guidelines to promote the settlement of international trade in the Indian Rupee in a bid to encourage the domestic currency and curtail dollar dependency.

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