Exporters in Russia, who started trading with India using Indian rupees have recently spent USD 4 billion to buy India made defence equipment and armaments among other imports and Indian securities This amount comes from funds which were lying idle in their Vostro accounts. Till October, Russian exports held about USD 8 million in Vostro Accounts.
These accounts were set up to facilitate trade between India and Russia using Indian rupees and are managed by a domestic bank on behalf of a foreign bank. As per a report from a media agency, due to lack of investment opportunities in India, the money lying in Vostro accounts of Russian remained unspent. In a mere six months, they used only about 50 percent of these funds, the report quoted two people aware of the matter, who declined to be identified.
One of them said, the “It difficult to say the exact amount in the Vostro accounts since some transactions are very complex However, during the last six to eight months or so, a large part of the amount has been used.” Back in July 2023, the Reserve Bank of India (RBI) permitted 20 banks of the country to open SRVA of partner banks from 22 countries as part of their efforts to promote bilateral trade in local currencies. Russia was one of them.
A Vostro account allows foreign lender for transactions including forex settlements, cross border payments and investments in a different market. Russia also uses the rupee from these Vostro accounts to import goods from India.
India exports machinery, auto parts, and other engineering goods to Russia the Russia Vostro Accounts started witnessing a large amount of rupee deposits in India as it purchased increased amounts of cheap Russian crude oil following the sanctions imposed on Moscow by the West.
For the unversed, the Russia is one of the largest suppliers of crude oil in India. Russian funds (in rupees) have also been invested in government treasury bills. As per regulations such funds are not allowed to be invested in corporate debt. The report quoted a second person saying that Both New Delhi and Moscow have been working on sorting the issue of the piling up of rupee payments in the Vostro account.
Indian exports are also being settled from the Russian funds from the Vostro Account, the person added. As per recent data from the commerce ministry exports to Russia in 2023 stood at four billion rupees while imports totalled 60 billion USD.
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