India is exploring a rupee payment mechanism with the objective of trying to guarantee that Russian banks and firms open accounts with state-run Indian banks in order to settle trade settlement. This entire scheme is for the purposes of establishing trade with Russia and to avoid sanctions.
According to Reuters, the central government is investigating alternatives to build up a rupee payment mechanism with Russia in order to circumvent the western sanctions placed on Moscow.
Concerns about Russian fertiliser supply to India have prompted this decision, which comes as sanctions against Russia have been tightened as a result of the country’s ongoing confrontation with Ukraine.
Concerned officials revealed that the objective is to guarantee that Russian banks and firms open accounts with state-run Indian banks in order to settle trade settlement.
These accounts’ funds will serve as a guarantee of payment for trade between India and Russia. In the meanwhile, the parties involved will exchange commodities to offset the amount.
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“This is a proactive move assuming that the conflict escalates and there could be a slew of sanctions in place,” Reuters was told while speaking with a source close to the situation.
It added, “In this case we would not be able to settle the transaction in dollars and so an arrangement has been proposed to set up a rupee account, which is being considered.”
After Iran was sanctioned by the West for its nuclear weapons programme, India is said to have used such a method for commerce with the Middle Eastern country.
The talks with Russia on this subject are still in the early stages.