Twenty Russian banks, including Gazprom, Rosbank, Tinkoff Bank, Centro Credit Bank and Credit Bank of Moscow, have opened rupee vostro accounts with authorised dealer banks in India to enable rupee trade between the two countries, but the mechanism is yet to take off in a big way, officials have said.

All Indian banks have been asked to appoint nodal officers to sort out issues faced by exporters in carrying out rupee trade with Russia, Director-General of Foreign Trade, Santosh Sarangi, said in an interaction with the media on Wednesday.

“All major banks have listed their nodal officers and we have shared it with the export promotion councils. If they have any problem, they will get in touch with the nodal officers,” Sarangi said.

The Indian banks that are part of the process include UCO Bank, Union Bank of India, SBI, IDBI, Indian Bank, Axis Bank, Bank of Baroda and PNB.

In July 2022, the RBI allowed international trade in rupees, creating the possibility of doing business with Russia in rupees and, in the process, bypassing the sanctions imposed by the West on Moscow. The sanctions were imposed following Russia’s attack on Ukraine in February 2022. 

India wants to secure its oil trade with Russia as its import of discounted crude from the country has risen significantly this fiscal. 

India’s imports from Russia in April-January 2022-23 increased 383.88 per cent to $37.31 billion, due mainly to its purchase of crude.

Sources said as the rupee trading mechanism was yet to take off, most of the payment for Russian oil was happening in hard currencies through Russian banks that were not under sanctions. However, since the EU has been increasingly bringing more Russian banks under sanctions, cutting them off from the SWIFT messaging system that connects banks across the globe, India and Russia are both interested in operationalising the alternative rupee trade mechanism.

The rupee trade mechanism will allow India to pay for Russian oil and fertilisers in rupees, which can be then used by Russian companies to pay for their imports from India or invest in the country.

“This is a new initiative and there are teething troubles,” Sarangi said, adding that issues such as exchange rate mechanism and repatriation of money should be settled.

“There are isolated cases where banks have started it (rupee payment). For instance, some marble exporters in Jaipur use this mechanism. But it has not been launched on a big scale. The Commerce & Industry Ministry is in touch with banks, the RBI and exporters to expedite the process,” he added.