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Business News/ News / India/  Amid barrage of western sanctions against Russia, India to soon finalise alternate payment system
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Amid barrage of western sanctions against Russia, India to soon finalise alternate payment system

A top interministerial committee examining the issue has said the government should prioritise edible oil and fertiliser imports from Russia, and the payments it owes to India

Russian President Vladimir Putin with Prime Minister Narendra Modi. Russia fulfils 2.3 per cent of the crude oil need of India.Premium
Russian President Vladimir Putin with Prime Minister Narendra Modi. Russia fulfils 2.3 per cent of the crude oil need of India.

Amid a barrage of western sanctions against Russia after it invaded Ukraine, India is in the process of setting up an alternative payments system by identifying a potential bank to keep its trade relations with Russia intact. A top interministerial committee examining the issue has said the government should prioritise edible oil and fertiliser imports from Russia, and the payments it owes to India, Hindustan Times reported.

l. The country also imports around 11-11.5 per cent of edible oil imports from the Russia-Ukraine region.

This inter-ministerial panel is examining the potential impact of the western sections against Russia, on India. Economic affairs secretary Ajay Seth is heading the committee that includes members of different ministries including consumer affairs, fertilizers, commerce, external affairs and petroleum.

The western sections against Russia are impacting the global economy; currencies of many nations, including India, have been de-valued. Rising oil prices, supply chain issues and increasing inflation have impacted the economy.

The government is of the view that a supply shortage of edible oil and fertilisers could give rise to food inflation and disrupt the farm sector in the country. 

With regard to the bank partner, as per the news daily, talks are on with the State Bank of India and UCO Bank. With the shrinking oil market for Russia amid sanctions, India may also be in a better position to negotiate the prices of its share of Russian oil.

The government may likely initiative similar payment measures as were taken during the sanctioning of Iran by the US. At that time, the Kolkata-based UCO Bank had anchored a so-called "Vostro account".

Once finalised, Russia will deposit rubles in it, while India will deposit rupees. Then the national exchange rate will be determined pegging it to an international currency.

How the arrangement will work?

Though India does not buy anything outside the country with the rupee, and it's the same with Russia's ruble, the alternative payment system will help set up a bilateral system. After setting up a payment bank, Russia will buy goods from India with rupees and India will use the rubles it'll get from Russia to pay for imports.

 

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Published: 13 Mar 2022, 06:58 PM IST
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