The launch of international trade in Indian rupees could lead to annual savings of $30-36 billion in hard currency and widen the scope for such trades with countries in the region, easing pressure on exchange rate, experts told ET. The mechanism, which can be kicked off without delay with Russia, may be favourable for Indian government bonds as well. Under the rupee payment mechanism, a surplus balance held in a special vostro account can be used to invest in the local capital market by entities based in India's trading partners. When a country is facing a record high current account deficit, such rupee-denominated trades with select countries save dollar outflows on account of imports, said chief economist Madan Sabnavis. Sabnavis said that the move should also bring in rupee investments in local asset classes, including bonds and equity. A vostro account is held by a bank on behalf of another. In April and May, India's imports to Russia totaled $2.5 billion each - $30 billion on an annual basis. Analysts expect this to swell to a monthly average of $3 billion over the fiscal year, or $36 billion in all. B Prasanna, head of global markets, said that this could potentially reduce India's hard currency flows to the extent of $3 billion per month, while providing Russia with INR currency reserves to be deployed in India and provide welcome demand for India bonds. The window opens up the possibility for countries such as Russia, Iran or even Sri Lanka to engage with New Delhi while they are facing global economic sanctions or need financial aid. The expansion of the basket of key currencies to seven or eight, including our local unit from five currently, is needed to internationalise the rupee, according to Sabnavis. The dollar, the euro, the renminbi and the pound are the currencies that form the majority of the world's forex reserves. The dollar remains the world's top reserve currency, but its dominance has eroded to some extent. At the end of the 2022 calendar year, the greenback accounted for just over 60% of its allocated reserves, down from 65% in the same period in 2016 according to the FT. India's trade deficit, or excess of imports over exports, swelled to a record $25.63 billion in June, driven by imports of petroleum, coal and gold. Exports were muted, causing the gap to widen. When the bulk of India-Russia trade comes under this INR settlement route, Russia's surplus and India's deficit will remain as INR balances of Russian banks with India's banking system, and will be invested in Indian assets, such as government securities, said Ananth Narayan, associate professor at the SP Jain Institute of Management and Research. In the first two months of FY 23 the net trade was $4.78 billion as India's imports from Russia increased to $5.04 billion in April and May, according to Bank of Baroda Economic Research data.