India’s rupee trade mechanism with Russia may soon be put in place as State Bank of India (SBI) agrees to be the facilitating bank. However, the Russian government is yet to decide on the correspondent Russian bank, reported Business Line.
SBI, in an emailed statement, clarified, “RBI vide its circular on July 11, 2022, has authorized all the banks in India, including the State Bank of India to open Special Rupee Vostro account to promote invoicing in Indian Rupee. Accordingly, SBI is making necessary arrangements and processing requests received from various banks, including Russian banks, duly following RBI guidelines and our policies and procedures. SBI, as such, has not been identified as a nodal bank.”
“Russia may decide on the correspondent Russian bank to partner with SBI for rupee trade in the next 15 days. Once rupee trade starts, we will not have to worry about currency devaluation,” said A Sakthivel, President, FIEO.
Exports to Russia could increase by $5 billion per annum once the rupee payment mechanism is put in place as there is a lot of demand for Indian goods from the country, per estimates made by FIEO.
“While the Russia-Ukraine war is a setback to exports in the short run, we are looking to increase our exports to Russia once the rupee payment mechanism gets operationalised,” Sakthivel said.
After the country attacked Ukraine in February this year, several Western nations including the EU and the US imposed sanctions against several Russian banks and banned them from using the SWIFT messaging system.
While payments for exports to Russia has taken place using alternative currencies such as the Chinese yuan or the dirham since February, exporters say that the going has been tough.
Operationalisation of the rupee trade mechanism, rolled out by the RBI in July this year to enable invoicing of exports and imports in Indian rupee will result in seamless payments though the transportation issue would also need to be sorted out.