New Delhi: Russia has vast amounts of reserves of Indian currency due to the payments for defence deals with India, a senior commerce ministry official said on Monday.
In his recent visit to India, Russian foreign minister Sergey Lavrov had said that Russia has accumulated billions of rupees in Indian banks which it cannot use. Financial Express reports that the Director General of Foreign Trade (DGFT) told journalists that “Under Special Rupee Vostro Accounts they do not have any reserves. Reserves are only on account of some of the defence procurement and sales”.
According to Bloomberg, about $2 billion in payments from India to Russia is stuck over the last year, and Russia has decided to stop supplying credit for about $10 billion worth of spare parts as well as two S-400 missile-defence system batteries that are yet to be delivered. Russia is India’s largest supplier of defence equipment.
Refusing to give the details about the quantum of the reserve held by Moscow, the official said, “On that account I would not be knowing what exactly are the reserves and what is the mechanism of dealing with that. That is the conversation (dealing with reserves) Department of Economic Affairs and the Ministry of Defence will be having”.
In July last year, the Reserve Bank of India (RBI) allowed trade settlement in local currency between India and other countries. Under this mechanism, the traders importing from foreign countries can pay in rupee, which would be credited to the special Vostro accounts of the correspondent bank of the partner country.
Announced with great fanfare by the Modi government, the expectation was that Russia would accept rupee payments for its crude oil supplies to the country. However, Russia has not agreed to take rupee payments for its oil exports to India as it does not know what to do with the rupee balance in the Vostro account as the bilateral trade is heavily skewed in Russia’s favour.
Some public sector importers have resorted making payments to Russia in UAE Dirham while some private Indian importers have also made payments in the Chinese currency, Yuan, according to some media reports.