Russian Firms Procure $4 Billion in Indian-Made Arms, Settle Transactions in Indian Rupee

India Defense

Russian Firms Procure $4 Billion in Indian-Made Arms, Settle Transactions in Indian Rupee

India , Russia 

Russian exporters leverage idle funds in Indian rupees to purchase $4 billion worth of Indian defence equipment and other imports, facilitated by Vostro accounts, amid efforts to enhance bilateral trade ties with India.

In recent developments, Russian exporters engaging in trade with India have made significant transactions amounting to nearly $4 billion. These transactions encompassed the procurement of Indian-made defence equipment, armaments, and other imports, alongside investments in Indian securities. These expenditures were made possible through funds that had been dormant in their Vostro accounts.

Vostro accounts serve as a pivotal mechanism to facilitate trade between Russia and India, leveraging the Indian rupee for transactions. Managed by domestic banks on behalf of foreign counterparts, these accounts enable various trade-related activities, including forex settlements, cross-border payments, and investments in different markets.

Until October, Russian exporters had approximately $8 billion resting in Vostro accounts, intended to bolster trade ties between the two nations. However, due to limited investment opportunities within India, a substantial portion of these funds remained unutilized.

Reports indicate that in the span of just six months, around 50% of the funds held in Vostro accounts were deployed for various trade-related purposes. While the exact figures remain elusive due to the complexity of transactions, insiders familiar with the matter confirm a significant utilization of funds during this period.

The Reserve Bank of India (RBI) had earlier sanctioned the opening of Special Rupee Vostro Accounts (SRVAs) for 20 banks operating in India, thereby facilitating bilateral trade in local currencies with partner banks from 22 countries, including Russia. This initiative aimed to streamline trade transactions and enhance economic cooperation between India and its international counterparts.

The surge in rupee deposits in Russian Vostro accounts correlates with India's heightened imports of affordable Russian crude oil amidst Western sanctions on Moscow. Russia's substantial contributions to India's crude oil supply further solidify their economic ties.

Moreover, Russian funds in Indian rupees have found their way into investments in Indian government treasury bills. However, regulatory restrictions prohibit such funds from being invested in corporate debt instruments.

Efforts are underway by both Indian and Russian authorities to address the issue of accumulating rupee payments in Vostro accounts. These funds are also being utilized to settle Indian exports, further facilitating the bilateral trade relationship.

In 2023, India's exports to Russia amounted to $4.06 billion, while imports totaled $60.60 billion, underscoring the significance of their economic partnership.

In essence, the recent utilization of idle funds in Vostro accounts highlights the dynamic nature of Indo-Russian trade relations and the mutual benefits derived from strategic economic cooperation. As both nations continue to explore avenues for enhancing bilateral trade, the efficient utilization of available resources remains paramount for sustaining this symbiotic partnership.

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