The Indian Economic Trade Organization (IETO) is coordinating with local companies that are keen on trade with Russia. Lenders and respective regulators are also in talks to establish a customised common reference exchange rate. This will be announced daily by both the Reserve Bank of India and the Central Bank of Russia.

Indian Banks’ Association (IBA) is reportedly working to facilitate talks between over 15 Russian banks with Indian lenders so as to clear the way for bilateral business in their respective local currencies. The lenders of both the countries are in discussion to conduct trade by bypassing the established trade mechanism tied to the US dollar.

Further, the banks are working on developing a bespoke reference exchange-rate framework between the local currencies - rupee and the rouble, people in the know of the development told Economic Times.

The Russian banks engaged in talks include Petersburg Social Commercial Bank, Zenit Bank and Tatsotsbank. The lenders are among those that are likely to open these customised trade accounts with the Indian partners being Bank of India, Canara Bank and Uco Bank.

The Indian Economic Trade Organization (IETO) is coordinating with local companies that are keen on trade with Russia. Lenders and respective regulators are also in talks to establish a customised common reference exchange rate. This will be announced daily by both the Reserve Bank of India (RBI) and the Central Bank of Russia.

In international trade, the prevailing rate of a currency in relation to the US dollar is typically the peg used to derive the exchange rate with a third monetary unit.

Other Russian lenders that are said to be part of the deal include Centro Credit Bank, Bank Soyuz and MTC Bank, while the local lenders include State Bank of India, IndusInd Bank, Bank of Baroda and Yes Bank.

"A host of Russian lenders are in talks with select Indian banks as they are going through several permutations and combinations. While the rupee-denominated trade with Russia will pave the way for cheaper oil imports, small to mid-sized public sector banks will look at this as an opportunity to expand their operations," said Asif Iqbal, president, Indian Economic Trade Organisation. However, sources have indicated that the SBI might not participate in these bilateral trades due to a strong dollar-denominated balance sheet.

Meanwhile, on July 11, the RBI permitted invoicing and payments for international trade in rupees, potentially facilitating greater bilateral business with Russi, which has become prey to a wide range of Western sanctions following its fight with Ukraine.

It is worth mentioning here that India imported goods worth $4.23 billion in June from Russia, up nearly seven times compared with last year. During the same, crude oil worth $3.02 billion was reportedly imported which was nearly 71 per cent of the total imports from Russia.

Economic Times