Russian Foreign Minister Sergey Lavrov reiterated on September 10 that Moscow has billions of rupees in Indian banks that are currently “unusable.” Nevertheless, India has reportedly proposed multiple avenues for investing this money, as per a report by Money Control.
On September 10, as the two-day G20 summit that India was hosting came to an end, Lavrov has made an announcement at a press conference in New Delhi.
Following the establishment of the framework, India and Russia did settle their trade in rupees; nevertheless, the system did not function as expected as Moscow swiftly built a surplus amounting to billions of rupees while New Delhi’s trade deficit widened due to an increase in oil imports.
According to the most recent official statistics, India’s imports from Russia, the latter’s second-largest import source country, increased by 132 per cent to $16.04 billion in April – June mostly as a result of New Delhi’s oil purchases from Moscow.
Though there was little time for Russia and India to discuss bilateral concerns at the Leaders’ Summit this past weekend, Lavrov said that he had a conversation with his Indian counterpart S. Jaishankar earlier this week on the margins of the ASEAN Summit. The 43rd ASEAN Summit was held in Indonesia on from September 6th to 7th.
Lavrov has already brought up Moscow’s worries about an influx of Indian rupees. He previously revealed to reporters in May that both nations are talking about how to convert the rupees Moscow has accumulated into a different currency on the sidelines of the Shanghai Cooperation Organisation (SCO) meeting in Goa.
Russia may be given the opportunity to invest accumulated rupees in accordance with the framework for rupee settlement released by the Reserve Bank of India (RBI) in July 2022.
Any excess rupees maintained in Vostro accounts, according to the framework, may be used for permitted capital and current account activities, such as payments for projects and investments, management of export and import advance flow, and investment in government securities, subject to restrictions and recommendations.
To enable trading in rupees abroad and maintain the flow of crude, Indian lenders opened special vostro accounts at Russian banks, notably Sberbank PJSC and VTB Bank PJSC.
According to a Reuters report dated August 1 that quoted bankers, Russia had primarily placed its excess rupees in short-term treasury bills as opposed to longer-term government bonds. Following this, the RBI on August 10 dispelled worries about the potential withdrawal of Russian investment in local government debt, saying it did not expect the domestic liquidity situation or the rupee’s exchange rate to come under pressure from such an outflow, without disclosing how much Russia may have invested in Indian government securities.