Public sector lender UCO Bank has received the Reserve Bank of India’s (RBI’s) approval to open a special vostro account with Gazprombank of Russia for trade settlement in Indian rupees.
Key points
- UCO Bank is the first bank to receive regulator’s approval following the RBI’s decision to allow Indian banks to settle trade in Indian currency in July 2022.
- UCO Bank was chosen by the government in 2012 as the payment bank for oil imports from Iran, after the USA tightened the earlier rounds of sanctions.
- UCO Bank was chosen because of its limited global presence, which made it less vulnerable from repercussions over its involvement with then sanctioned Iran.
- Gazprombank, which was set up by world’s largest gas producer and exporter Gazprom to provide banking services for gas industry enterprises has been operating since 1990.
- On July 11, the RBI issued a circular allowing trade settlements between India and other countries, including Sri Lanka and Russia, in rupee.
- The circular said Indian importers undertaking imports through the INR trade mechanism will make payment in the same, which has to be credited into the special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier.
- The exchange rate between the currencies of the two trading partner countries to be market determined.
- Indian exporters sending out goods and services through this mechanism should be paid in rupees from the balances in the designated special Vostro account of the correspondent bank of the partner country.
