Russia has become the first country to begin settlement of foreign trade in Indian rupees (INR), giving up the US 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 INR. 

The Financial Express, in a report, quoted trade sources saying more transactions are likely to take place in Indian rupees in the coming months, as a sanction-hit Russia has opened a number of vostro accounts to facilitate trade. 

Not just Russia, but Sri Lanka and Mauritius too have opened vostro accounts to facilitate INR trade.

Facilitating the INR trade is expected to spur exports to Russia, which dropped by 16% from January to October 2022 to $ 1.6 billion majorly due to the delayed receipt of payments.

There are 30-35 countries, including those from Asia, Scandinavia, and Africa, who have expressed interest in better understanding the INR trade mechanism for possible adoption.

India’s neighbours – Sri Lanka, Bangladesh, Myanmar, and Nepal – who have been facing shortages of dollar reserves, have also shown interest in trade settlements in Indian rupees.

In the recent months, trade with Russia has increased, as it has enhanced the supply of discounted crude to India. After Russia began invading Ukraine, several Western countries slapped sanctions on Moscow, cutting it 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 Financial Express, 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 the SBI. Bank of Ceylon has opened one such account with its branch in India.

(First Post)