India s state-owned will soon open a special rupee account with Russia s Gazprombank to facilitate trade between the two countries, a top official said.
The bank has received the necessary approval from the Reserve Bank of India to open a special rupee vostro account, according to Soma Sankara Prasad, the managing director and chief executive officer at UCO Bank, told Bloomberg News in a phone interview.
In the past, the payment bank has been used as a payment bank for oil imports from sanctioned Iran. Gazprombank has so far been spared the harsher sanctions Russia has faced for its invasion of Ukraine.
Prasad said there is no clear time line on when transactions can begin, because they will put in place operational modalities before opening the account with the Russian counterpart.
Trade between India and Russia has flourished in the past few months despite the threat of sanctions due to the war in Ukraine. The Commerce Ministry said that the total imports of items such as sunflower oil, fertilizers, silver, printed books, coriander seeds, and furniture items rose more than 61% during the April to July period to $2.1 billion, from $1.3 billion a year earlier.
The price of crude rose fivefold to $13.3 billion from $2.6 billion a year ago, as it continued to dominate bilateral trade.
In July, the RBI allowed Indians to open special rupee vostro accounts with lenders of other countries to settle overseas trades in the Indian currency. A vostro account is set up to allow a foreign lender to act as an agent or provide services as an intermediary for a bank back home to execute wire transfers, withdrawals and deposits for customers.
The Kolkata-based bank has received about 14 -- 15 applications from different countries for opening special vostro accounts under the RBI circular.
Prasad said that this facility will only be sanctioned by RBI and will only be used for non-sanctioned banks.
State Bank of India, which is the country's largest lender, said earlier this month it was opening special rupee accounts to handle Russian trade settlements in local currency, but is not the main bank for such business.