India will begin trade settlement in rupee with Russia soon

15 Sep 2022 , 10:20 AM

As the country’s largest lender, State Bank of India, has agreed to support the new system, India will soon begin transacting with Russia in rupees, the head of India’s exporter group announced on Wednesday.

Since Western sanctions against Moscow were put in place as a result of its invasion of Ukraine in late February, India’s exports to that country have decreased.

Shaktivel, president of the Federation of Indian Export Organizations (FIEO), an organization established by the trade ministry to promote exports, told reporters that the State Bank of India has stepped forward to facilitate rupee trade with Russia and that some other banks have also expressed interest.

In the upcoming 15 days, he said, the identity of the equivalent Russian bank may be revealed. To mitigate the effects of the devaluation of world currencies, the Reserve Bank of India created a rupee-based international trade settlement system in July.

As a similar procedure was previously employed to establish payments with Iran, which has also been subject to sanctions, the move was perceived as facilitating commerce with Russia, which has been adversely affected by those sanctions.

In the first four months of this fiscal year, from April to July, India’s exports to Russia decreased by roughly a third. Still, imports increased as refiners rushed to purchase Russian oil at a discount, according to official statistics.

To settle transactions and evade Western sanctions on Russia, Indian firms are already exchanging dollars and euros for Asian currencies. To enhance exports to Russia and raise the acceptance of the indigenous currency, Shaktivel said that the government might expand export incentives under the rupee trade system.

On Friday, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi will meet in Uzbekistan on the sidelines of the Shanghai Cooperation Organization meeting to talk about matters including fostering commerce.

According to Shaktivel, the current financial year’s Indian exports to Russia might increase to $5 billion. Comparatively, the previous fiscal year’s total was around $3.3 billion. Ajay Sahai, director general of the FIEO, stated separately that India’s overall merchandise exports for this fiscal year might increase by roughly 11% to more than $470 billion.