“Extra efforts” are required by Indian banks and companies dealing with Russia to fully utilize the potential of the rupee-ruble payment settlement mechanism, Moscow’s envoy to New Delhi, Denis Alipov, said at an event on Monday.
Speaking about trade between the two countries – which has increased significantly in the past year and a half, hitting an all-time high of over $43.8 billion in the first eight months of 2023 – Alipov noted that payment problems still hinder trade.
“Some extra efforts are needed by companies and banks to explore” how they can work with the mechanism involving the national currencies, he said, according to PTI news agency. The diplomat stressed the need for Indian banks and exporters to resolve the issue, and said the payment mechanism requires fine-tuning – adding that Indian banks are willing to cooperate.
Moscow and New Delhi established the framework to settle transactions last year, after bilateral trade was hampered by US-led sanctions on Russia, which impacted critical supplies from Russia to India, including defense items such as S-400 Triumph air defense systems, fertilizers, minerals, and other goods.
Russian and Indian officials have said, however, that the rupee-ruble settlement mechanism failed to gain traction as anticipated, mainly due to a trade imbalance. As New Delhi ramped up oil purchases from Russia, Moscow quickly amassed a surplus of over $40 billion due in special vostro accounts which Indian banks hold for Russian banks in the domestic currency.
In September, Russian Foreign Minister Sergey Lavrov announced that he had discussed the issue with his Indian counterpart. “In the current situation, Russia has billions of rupees accumulated in the accounts of Indian banks, and we are discussing how they can be used. And our Indian friends have conveyed that they will suggest the promising areas where these funds can be used as investments,” he said at a press conference in New Delhi on the sidelines of the G20 leaders’ summit.
Lavrov added that bilateral agreements with India, including in the defense sector, are progressing as planned despite the difficulties related to payments caused by the sanctions.
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