Trade settlement with Russia in rupees to start next week: Report

Five to six banks have been allowed to open Vostro accounts for rupee trade settlement and 10-11 such accounts have been opened so far

For the first time since the trade settlement in rupee was introduced by the Reserve Bank of India (RBI), the payments for shipments to Russia will be settled in rupees next week. This is in the backdrop of an increasing number of inquiries for drugs and auto parts from Russia, a report by Mint said. 

"A number of issues have been sorted out. Exporters and importers have begun approaching banks for opening of accounts...So, trade settlement with Russia under the new payment system is expected from next week for some shipments. The difference with Iran is that India is not importing oil and fertilizers (from Iran) like we are doing with Russia; so, the Vostro account is dry. Similar kinds of sanctions are on Iran too," Federation of Indian Export Organisations (FIEO) director general Ajay Sahai told Mint.

The experts said that it would address the issue of India's widening trade deficit with Russia. Indian exports are finding it difficult to reach Russia amid western sanctions. On the other hand, oil imports have risen substantially since March. 

The exporters are also bearing the additional cost of shipping goods to Russia as Sberbank has been charging a 4 per cent premium on settling these trades. Rupee settlement will reduce this burden on Indian exporters. 

The report added that five to six banks had been allowed to open Vostro accounts for rupee trade settlement, and 10-11 such accounts have been opened so far. 

"With Russia, our imports are 10 times the exports. But there is a very good chance of increasing our exports to Russia. That's because when they are holding much of the Indian rupees, either they will want to invest in capital in India or they will increase our exports," an official told Mint.