Letter Of Credit Norm For Exports To Go

India and Russia have agreed to iron out problems in banking to propel bilateral trade and economic cooperation.

It has been agreed, in principle, that the anti-business measure of opening letters of credit (LCs) with banks before an Indian exporter can export goods to Russia will have to go.

This will involve changes in banking regulations between the two countries which will be discussed during the scheduled visit of the chairman of the Russian central bank to India.

Instead of letters of credit, exporters will now be allowed to stock consignments of goods in warehouses, initially in Moscow.

Such consignment export sales will not only curb switch trade but also reduce the time-lag between placing an order for the goods and the consignment reaching the country by ship. In the past, it has taken up to six months for goods to reach their destination.

 

The joint commission has also agreed to create a new sub-group on financial and banking matters under the working group on trade and economic cooperation to consider these issues. A high-powered banking delegation, led by the RBI and consisting of officials from the Canara, Exim Bank and ECGC, recently visited Moscow to study problems in the bilateral relationship and the financial structure in Russia.

They will also visit Tashkent before returning to Delhi on February 12.

During their talks with banking officials in Moscow, it was agreed that guarantees from Russian banks would now be accepted in India. A list of 8-10 banks is believed to have been given to the Indian officials.

There was also some progress in getting a licence for a joint venture Indian bank [between Punjab National Bank (PNB), State Bank of India and MMTC] in Moscow and a reciprocal licence for the Russian Inkom bank in New Delhi.

Another licence for a branch of Canara bank has been pending for a long time.