Two Indian banks have “joined hands” with Russian lenders under the RBI’s framework for the settlement of international trade in rupees, the Reserve Bank of India (RBI) announced months ago. UCO Bank and YES Bank have partnered with “a few Russian banks” to facilitate trade settlement in Indian rupees, the official said on condition of anonymity.
According to reports from last month, several of India’s major banks are avoiding the rupee trade settlement mechanism that the RBI implemented in July out of concern that doing business with Russian businesses could subject them to sanctions from Western countries.
On July 11, the Indian central bank announced the creation of a system to settle international commerce in rupees. According to the method, all exports and imports may be valued and billed in rupees, with the market determining the exchange rate between the currencies of the two trading partners.
The move was made by the central bank amid mounting pressure on the rupee following Russia’s invasion of Ukraine in late February, which it claimed was done to assist expanding global trade and support rising worldwide interest in the currency.
The rupee is still declining against the dollar and this week crossed the 83-per-dollar threshold, so the move is only anticipated to help India in the long run.
Even though the RBI has sold record numbers of foreign currencies to try and stop the rupee’s decline, the value of the rupee has fallen by more than 10% versus the US dollar thus far in 2022.
