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With Indian banks reluctant to issue the electronic bank realisation certificates (eBRC) for exports to Russia because of their fear of annoying the US and thereby losing their US branch licenses — the Engineering Export Promotion Council (EEPC) — is in talks with two Russian banks that have operations in India to facilitate rupee trade.
The eBRC is a certificate that banks give to exporters to confirm that exports have taken place. Basically, it is proof that exports happened. Exporters submit the eBRC to the Reserve Bank of India, so that the confirmation squares off with the data in RBI’s Export Data Processing and Monitoring System (EDPMS).
Without the eBRCs, the exporter would be shown as a ‘defaulter’ in RBI’s books.
EEPC’s Chairman, Arun Kumar Garodia, told journalists on the sidelines of a press conference here that because Indian banks are not ready to give eBRCs to those who export to Russia and get the proceeds in rupees, he is in touch with two Russian banks that have branches in India – SBER Bank and VTB Bank.
He was here in connection with the 10th edition of the International Engineering Sourcing Show (IESS), which is to be held here between March 16 and 18. The event, which brings together MSMEs and foreign buyers, is being held in Chennai for the 5th time.
The problem
Most large banks in Russia are under US sanctions and export proceeds cannot be routed through them. However, there are small banks in Russia who are not yet under sanctions.
An Indian exporter has two options — either get his proceeds in hard currency through the small Russian banks that are not yet hit by sanctions or get in rupees through an Indian bank. However, no Indian bank is ready to give an eBRC. Therefore, EEPC is now in talks with the small Russian banks to figure out a mechanism by which they can issue eBRCs for rupee payments.
Garodia noted that the RBI has allowed some Russian banks to open ‘special vostro rupee accounts’ (SVRA). He expressed confidence that these issues could be resolved in a month or two, and India could have a rupee-paid export trade not only with Russia but also with some other countries like Sri Lanka, Iran and Myanmar.
FTAs
Recently, Commerce Minister, Piyush Goyal, observed that companies like Hyundai and Kia Motors were exploiting the FTA with Korea to the hilt, causing an expansion of trade deficit, but Indian companies could not make use of the FTAs with Korea and Japan, because of highly nationalistic sentiments there. In a speech that has since gone viral, Goyal said that India could not sell one tonne of steel in Korea or Japan simply because the buyers there would buy only from their own companies “even if it costs $100 more”.
Asked for a comment on this, Garodia said that these FTAs were in their “gestation period” and over time, Korean and Japanese companies in India would start buying from within India. But he agreed that nationalistic sentiments were a non-tariff barrier that Indian exporters were having to face. This could be overcome only by government-to-government talks, he said.
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