NEW DELHI (Agencies): Russian exporters, who have begun trading with India using Indian rupees, have recently spent nearly $4 billion on Indian-made defense equipment and armaments, among other imports and Indian securities. This expenditure comes from funds that were previously idle in their Vostro accounts.

As of October, Russian exporters held approximately $8 billion in Vostro accounts. These accounts, managed by a domestic bank on behalf of a foreign bank, were established to facilitate trade between Russia and India using Indian rupees.

According to a report by Mint, due to a lack of investment opportunities in India, the money in the Vostro accounts of Russian exporters remained unspent. In just six months, they used only about 50% of these funds.

In July 2023, the Reserve Bank of India (RBI) allowed 20 banks operating in the country to open 92 Special Rupee Vostro Accounts (SRVAs) of partner banks from 22 countries to promote bilateral trade in local currencies. Russia was among these countries.

A Vostro account enables a foreign lender to conduct transactions, including forex settlements, cross-border payments, and investments in a different market. Russia also uses the rupee from these Vostro accounts to import goods from India, which exports machinery, auto parts, and other engineering goods to Russia.

The Russian Vostro account began witnessing a large deposit of rupees as India increased its purchase of cheap Russian crude oil following the sanctions imposed on Moscow by the West. Russia is among the largest suppliers of crude oil to India.

Russian funds, in rupees, have also been invested in Indian government treasury bills. As per regulations, such funds are not allowed to be invested in corporate debt.

Both New Delhi and Moscow have been working on resolving the issue of the accumulation of rupee payments in the Vostro account. “Indian exports are also being settled from the Russian funds from the Vostro account,” added a source.

According to recent data from India’s commerce ministry, exports to Russia in 2023 stood at $4.06 billion, while imports totaled $60.60 billion.

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