india russia trade: UCO Bank opens special rupee account with Russia’s Gazprombank

Russia’s Gazprombank opened a special rupee account with state-owned UCO Bank, paving the way for bilateral trades between Moscow and New Delhi, sources told ET. The move would help increase imports of cheaper oil from Russia.

Earlier, the Reserve Bank of India (RBI) came out with a bespoke special rupee account for bilateral trades between rupee and any other currencies besides the US dollar. Gazprombank is only facing sectoral sanctions, but is not under the Specially Designated Nationals, or SDN, sanctions.

UCO Bank and Gazprombank did not comment immediately.

The RBI, on July 11, allowed invoicing and payments for international trade in rupees, potentially facilitating greater bilateral business with Russia that is facing a wide range of Western sanctions and is virtually cut off from standard cross-border payment platforms.

The move paved the way for settlement of payments in rupees for trades between Indian and Russia by giving greater flexibility in the operation of vostro accounts that Russian banks open with Indian banks for the purpose. A vostro account is one a foreign bank opens with an Indian bank in domestic currency i.e. rupees.

A ‘special’ tag to the rupee vostro account permits usage of surplus balance in Indian government securities. Experts in the field believe that UCO, which has little exposure to the US market, is the suitable candidate for bilateral trade payments between India and Russia as it won’t affect its business due to US sanction on the Russian bank.