Iran and India have not yet settled on a bank which could clear oil payments to the sanctions-hit OPEC producer after two days of talks and with several currency options on the table.
Iran, facing increased isolation internationally, and rising global player India have been looking to end the impasse triggered five months ago when the Reserve Bank of India ended a regional clearing mechanism under U.S. pressure.
"Central bank officials of both countries are discussing which bank now," Seyed Mohsen Ghamsari, executive director for international affairs at NIOC, said on Tuesday after a meeting with Indian officials.
Earlier this year, Germany allowed India to pay for the oil via Hamburg-based EIH bank which handles international trade for Iranian companies.
But India halted that conduit in early April after discussions with German Chancellor Angela Merkel and EIH has since come under EU sanctions.
India currently owes Iran $2 billion for oil imports in recent months, he added.
Iran is India's second-biggest supplier for crude after Saudi Arabia, exporting about 400,000 barrels per day or 12 percent of the fast-growing Asian country's needs in trade worth some $12 billion a year.
Iran has offered India various options for payments, including a choice of currencies like yen, U.S. dollar, euro and Indian rupee, as well as the possibility of paying on a cargo-by-cargo basis, Ghamsari said.
Iran has not halted shipments while the talks continue but the Islamic Republic needs a quick solution as its economy is heavily dependent on oil revenues.
"We are discussing various options to solve the problem in a very short time. We have to find a mechanism for any of the options that we have discussed," said Iran's envoy to New Delhi, Seyed Mahdi Nabizadeh.
Ghamsari said it was up to India to decide which currency or currencies to use.
"India has various currencies in forex reserves. We have given them flexibility to use any currency. Now it is up to them," he added.
For India, Asia's third-largest oil consumer and battling high inflation, finding an alternative to Iranian crude could be costly and difficult as global prices flare on likely supply disruptions fuelled by conflict in Libya.
A statement from India said the two sides had agreed to continue discussions on the issue.
Other oil customers of Iran such as Korea and Japan use long-established bilateral treaties to settle trade in their local currencies.
But for India, looking for a permanent seat on the U.N. Security Council, launching such a deal could invite criticism from its ally the United States.
While the United States recognises the importance of Iranian crude to India, it also wants New Delhi to find a mechanism that does not violate international sanctions.
