At least 15 Russian banks are in advanced talks with Indian lenders to facilitate bilateral business in their respective local currencies, the Economic Times reported on August 22 citing people familiar with the matter.
The lenders are currently working on building a reference exchange-rate framework between the rupee and the rouble, it reported.
Russian lenders, including Petersburg Social Commercial Bank, Zenit Bank, and Tatsotsbank, are likely to open these customised trade accounts. India's Bank of India, Canara Bank, and UCO Bank are likely to be the local partners.
Other Russian lenders like Centro Credit Bank, Bank Soyuz and MTC Bank (that are not under global economic sanctions) are negotiating with their local counterparts, such as the State Bank of India, IndusInd Bank, Bank of Baroda, and Yes Bank.
According to the report, Indian Banks’ Association (IBA) is engaged in facilitating these discussions, whereas, the Indian Economic Trade Organization (IETO) is coordinating with local companies that are keen on trade with Russia.
It further adds that banks and the respective regulators are considering setting up a customized common reference exchange rate.
RBI on July 11 gave the go-ahead for a rupee-denominated settlement mechanism for international trade.
Previously, under RBI’s exchange control regulations, international trade (except for those done with Nepal and Bhutan) has to be settled in fully convertible currencies such as the US dollar, the Sterling Pound, Euro and Yen. This latest notification allows trade to be billed and settled in Indian Rupee.The RBI has said this is to promote exports from India and because there is an increasing interest to trade in Indian rupee. Experts have said that the trade-settlement mechanism is to further trade with Russia, which has been cut off from its dollar reserves in the US, UK and the EU.