To give a boost to India’s rupee trade with sanction-hit Russia, the Reserve Bank of India (RBI) has extended its approval to as many as 14 Indian banks, including UCO, YES, SBI, HDFC, Canara and IndusInd, to open special rupee vostro accounts in partnership with correspondent banks in Russia.
But exporters say the mechanism is yet to take-off smoothly as many Indian banks were hesitating to issue Bank Realisation Certificates (BRCs) to them, in the absence of which, they could not claim export incentives and benefits offered by the government. BRCs are confirmations that exporters have received payment for their exports from buyers.
“Exporters have taken up the issue with RBI in a recent meeting that was also attended by officials from the Department of Financial Services. RBI has assured that it will sort out the matter soon,” an official tracking the matter told businessline.
Insurance cover for the export consignments to Russia is also a cause of worry for exporters, especially with Russian banks increasingly coming under European sanctions.
However, the Export Credit Guarantee Corporation (ECGC), the country’s primary export credit agency operating under the Ministry of Commerce, explained that while ECGC coverage was not available towards Russian banks appearing in EU sanction list, including VTB bank, cover would be available if the banks opened vostro accounts with Indian banks for rupee settlement.
“The RBI is doing its bit to encourage rupee trade by expediting Vostro arrangement between Indian banks and correspondent banks in Russia. But the government has to also ensure that the system works on the ground for exporters. Banks have to be urged to be not so risk averse that they do not carry out basic functions like issuing BRCs,” a Kolkata-based exporter said.
India’s imports from Russia zoomed 413 per cent in April-October 2022 to $25.12 billion compared to the same period last fiscal. However, exports to Russia increased only 2.12 per cent to $1.65 billion creating a glaring trade deficit. The government expects India’s exports to Russia to rise once the rupee trade mechanism takes off as Russian buyers can use the rupee payment for oil bought by India to make their purchases.
Russian banks which will act as correspondent banks from Russia include Gazprom, VTB, Sberbank, Ros, MTS, Tinkoff, PJSC bank and Credit Bank.