State-owned UCO Bank is in the process of opening a special Vostro account with Russia’s Gazprombank for settlement of trade in Rupee against the backdrop of sanctions imposed by western countries on Russia following its invasion of Ukraine. “The deal between UCO Bank and Gazprombank comes as the Reserve Bank of India implements a system to facilitate international payments through special Vostro accounts to promote trade in Rupee,” UCO Bank MD &CEO Soma Shankara Prasad told PTI on Wednesday.
Under the Rupee Drawing Arrangements (RDAs), the bank of a partner country opens a special INR VOSTRO account with a bank in India. Prasad said the bank is in the process of opening this special Vostro account with the Russian lender.
“We have received approval from RBI for opening a Vostro account with Gazprombank and currently the process is in progress,” Prasad said without giving a timeline for completion of the same.
“We have asked for certain papers from them and it depends on how soon they send them to complete the process.”
The Kolkata-headquartered bank already has a Vostro account-based facility with Iran.
However, this time the Vostro account with Russia is not exclusive, unlike in the case of Iran in the past, Prasad said.
“This is not done for the sake of profitability. For national interest, we want to promote trade in Rupee. This will promote Rupee as an international currency,” Prasad said.
Gazprombank, or GPB, is a private-owned Russian bank, the third largest bank in the country by assets. UCO Bank has received about 15 applications from different countries to open Vostro accounts.
“There are about 15 applications from different countries. I can only recall Italy as of now,” Prasad added.
Earlier this month, the Reserve Bank and Ministry of Finance asked top management of banks and representatives of trade bodies to push exports and import transactions in Rupee.
They want the banks in India to connect with their foreign counterparts for opening special Rupee Vostro accounts to facilitate cross-border trade in Indian currency rather than the popular mode of the US dollar.
Currently, a large part of bilateral trade between India and Russia is getting settled in the rupee due to sanctions imposed by the US and Europe following Moscow’s attack on Ukraine.
“Indian importers undertaking imports through this mechanism shall make payment in INR which shall 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,” RBI had said.
Apart from UCO Bank, Yes Bank is also said to have tied up with Russia’s Petersburg Social Commercial Bank (PSCB) to facilitate trade settlement in the Indian currency.
Queries sent to Yes Bank to ascertain the same remained unanswered till the time of going to press.
Source: Economic Times