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Crude oil import from Iran took $7 billion pressure off on the rupee in the last 13 months, said Arun Kaul, CMD of UCO Bank, here on Wednesday.
UCO Bank is the only Indian designated bank under the rupee-payment mechanism with Iran.
“Indian crude oil import from Iran by IOC under the mechanism was worth $7 billion in little more than a year till date. All of it was done in rupee-term saving dollar during a period when the Indian currency saw a steep fall against the greenback,” he told Business Line .
He said it was difficult to measure the real “gain” that rupee had made by avoiding the dollar outgo though the mechanism, but it was “significant”.
Had the mechanism not been in place, $7 billion outgo pressure could have pushed down rupee further during 2012-13, said currency experts.
“Interventions by RBI for currency stabilisation are also costly considering current monetary economic parameters,” said a treasury head of foreign bank. The recent decline in the rupee has been particularly sharp despite interventions. It fell from (54 in April this year) by approximately 7.5 per cent so far this year.
UCO Bank, backed by its tie-ups with five Iranian banks, began carrying out settlements of dues in April 2012.
According to Uday Mitra, advisor to the UCO Bank on the mechanism, the net gain for India after adjusting exports to Iran under this mechanism during the period was $3.5 billion. The remaining rupee deposits are expected to be adjusted in an accelerated way during the current fiscal through higher exports to Iran.
Kaul, at a FIEO event, said that a proposal for Rupee-Rial parity was being considered by the two countries.
Going by the trend in the first quarter, the total trade between the two countries in FY2014 is likely to be around $6.5 billion, up from $4.6 billion, the bank officials said.
The five Iranian banks involved under the mechanism included Persian Bank, Pasargad Bank and Saman Bank. Sixteen branches of UCO Bank, majority of them in the western and northern region, handle payments under the mechanism.
jayanta.mallick@thehindu.co.in
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