Russian Importers Can Pay For Indian Goods In Rupees Via India Based Ruble-Rupee Vostro Bank Accounts

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Indian exporters are expecting shipments to Russia to be settled in rupees next week, the first time the new system will be tested since the Reserve Bank of India launched it earlier this year.  This comes in the backdrop of increased inquiries from sanctions-hit Russia for products such as drugs and automobile parts as Ukraine conflict enters its 10th month.

“A number of issues have been sorted out. Exporters and importers have begun approaching banks for opening of the accounts,” Ajay Sahai a director of the Federation of Indian Export Organisations (FIEO) has said. “Trade settlement with Russia under the new payment system is expected from next week for some shipments. The difference with Iran is that India is not importing oil and fertilizers (from Iran) like we are doing with Russia; so, the Vostro account is dry. Similar kinds of sanctions are on Iran too.” Sahai added. Vostro accounts are held by a bank on behalf of another Russian bank, and this forms a key part of correspondent banking. This enables Russian exporters to pay in Rubles, have their India account in Rupees, and settle accounts with Indian sellers.

This becomes significant in Russia-India commerce amid a widening trade gap between Russia and India. While Russia has swiftly become India’s top oil supplier, Indian exports to Russia have been declining as exporters are wary of western sanctions and the lack of a smooth payment mechanism.

“As of now, five to six banks have been allowed to open Vostro accounts to facilitate international trade settlement in rupees. About 10-11 Vostro accounts have been opened. For example, six vostro accounts have been opened in the IndusInd Bank which means six different Russian banks have opened accounts in the bank.” An Indian government official has emphasized.

Indian exporters are having to bear a small increase in the cost of shipping goods to Russia with state-run Sberbank charging a 4% premium on settling these trades, at a time India’s trade deficit with Russia has ballooned.

When rupees accumulate in a bank, converting it to a desirable foreign exchange and taking it back to the host country—Russia—is their responsibility. Sometimes, this conversion—rupee to dollar or dollar to ruble —might prove to be costly due to currency fluctuation. But as and when the exports grow, they won’t face the conversion risk. At that time, the premium should come down.

Sahai said there have been a lot of inquiries. “Russia requires almost everything under the sun. But these are just inquiries at the stage. How many will translate into an order will depend on a number of factors. Because right now, they are exploring if we can supply the product or not. There are other countries looking into the business. So cost, competitiveness and several factors will play a role. Indian exporters have a diversified market; so, whenever they take a call, they will factor in all the issues. They have exposure in Europe and the US. Russian importers have only shared the product list and not the quantity.”

Dezan Shira & Associates have offices in New Delhi and Mumbai and can assist with trade between Russia and India. We recommend due diligence on the Indian exporter is carried out and can assist with checks. Please contact Maria Kotova at for assistance.

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During these uncertain times and with sanctions in place, our firm helps Russian companies relocate to Asia. We also provide financial and sanctions compliance services to foreign companies operating in Russia. Additionally, we offer market research and advisory services to foreign exporters interested in doing business in Russia as the economy looks to replace Western-sourced products. For assistance please email or visit