Russia found a use for billions of rupees, which Indian buyers used to pay for oil supplies, and which lay in Indian bank accounts because the Russian side did not know what to do with them.
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Hindustan Times writes that Russia has started buying Indian government securities, investing in Indian infrastructure projects, buying shares of an Indian company, and so on. That is, in essence, money returned to the Indian economy.
This decision also made it possible to remove barriers to future agreements in various areas. India expects to receive the S-400 installation in 2025 from the previously ordered batch.
Unable to carry out transactions in dollars or euros under Western sanctions imposed due to the Russian invasion of Ukraine, Russia and India have switched to settlements in rupees.
Billions of rupees have accumulated in special vostro rupee accounts (SRVA) in India after New Delhi stepped up purchases of Russian crude oil at discounted prices from 2022, even as Moscow was closed to Swift, a global payment system used by thousands of financial institutions. after the invasion of Ukraine, the publication writes.
Indian crude oil purchases have fluctuated in recent months and have been driven by demand. In April 2024, Russia’s share of Indian crude oil imports rose to nearly 40% from 30% in March, a nine-month record.
Two officials aware of the developments said that to ensure India’s energy security, domestic refiners are sourcing oil from around the world and the main factor is purely commercial – guaranteed supply and economic prices. The main suppliers are more than two dozen oil-producing countries, including Russia, which often gives good discounts.
According to officials, there were no problems related to payments in local currency. Many countries, including Russia, have SRVA in India for settlements in national currencies.
Russia is India’s second largest source of imports after China. According to official data, India imported $55.6 billion worth of goods from Russia in 2023-24 (April-February), up 37% year-on-year, mainly due to oil imports (about $46 billion). .
Other goods imported from Russia during this period were coal ($3.5 billion), fertilizers ($1.95 billion) and vegetable oil ($1.12 billion). Exports of goods from India to Russia between April 2023 and February 2024 amounted to $3.82 billion, which is 36% more than last year. The trade deficit during this period was $51.78 billion in favor of Russia, and most of this remained in about three dozen SRVAs.
SRVA is held by an Indian bank on behalf of a foreign bank in local currency and is often used for trade settlements.
We have such agreements with about two dozen countries, including Russia, Great Britain, Germany, Sri Lanka and Bangladesh,” one of the officials said.
Officials said it was impossible to determine the amounts lying in vostro accounts in individual countries, but trade agreements are concluded on commercial principles and funds in vostro accounts can be used for purposes other than trade settlements, such as investments in government securities, projects and others. permitted types of activities.
Money in SRVA is similar to foreign exchange receipts, converted into rupees. As per RBI guidelines, funds in SRVA can be used for any permitted transactions in current and capital accounts under the Foreign Exchange Management Act (FEMA), the second official said.
Funds in SRVA can also be invested in investment areas agreed between countries, subject to compliance with regulatory and legislative guidelines, he said.
The RBI created a mechanism in July 2022 to enable international trade settlements in Indian rupees, with the aim of reducing transaction costs, reducing exchange rate risks for Indian traders and avoiding a payment crisis due to unilateral sanctions imposed by countries like the US.
Source: Racurs
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