Till October, Russian exporters held about $8 billion in Vostro accounts. Due to a lack of investment opportunities in India, the money held in the Vostro accounts of Russian exporters remained unspent read more
Exporters in Russia, who started trading with India using Indian rupees, have recently spent nearly $4 billion to buy India-made defence equipment and armaments, among other imports and Indian securities. This amount come from funds which were lying idle in their Vostro accounts.
Till October, Russian exporters held about $8 billion in Vostro accounts. These accounts were set up to facilitate trade between Russia and India, using Indian rupees and are managed by a domestic bank on behalf of a foreign bank.
As per a report by the Mint, due to a lack of investment opportunities in India, the money held in the Vostro accounts of Russian exporters remained unspent.
In a mere six months, they used only about 50 per cent of these funds, the report quoted two people aware of the matter, who declined to be identified.
One of them said, “It is difficult to say the exact amount in the Vostro accounts since some transactions are very complex. However, during the last 6-8 months or so, a large part of the amount has been used.”
Back in July 2023, the Reserve Bank of India (RBI) permitted 20 banks operating in the country to open 92 SRVAs of partner banks from 22 countries as part of efforts to promote bilateral trade in local currencies. Russia was one of them.
A Vostro account allows a foreign lender for 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.
India exports machinery, auto parts and other engineering goods to Russia.
The Russian Vostro account started witnessing a large amount of rupee deposited in as India purchased increased amounts of cheap Russian crude oil following the sanctions imposed on Moscow by the West.
For the unversed, 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.
The report quoted a second person saying that both New Delhi and Moscow have been working on sorting the issue of the piling up of rupee payments in the Vostro account.
“Indian exports are also being settled from the Russian funds from the Vostro account," the person added.
As per recent data from India’s commerce ministry, exports to Russia in 2023 stood at $4.06 billion, while imports totalled $60.60 billion.
Distinct_Blueberry on May 11st, 2024 at 14:19 UTC »
The so called "report" or article is basically down to these few words "spent nearly $4 billion to buy India-made defence equipment and armaments, among other imports and Indian securities".
There are no more details. My view is Firstpost, being the rag that it is, is angling for traffic through provocative headlines.
This is largely based on another, much detailed report published about a week ago, which found that about $4 billion of Russian assets in India had been used, either through investment or conversion into UAE dirham. https://www.hindustantimes.com/india-news/russia-tackles-accumulation-of-rupees-through-investments-101714911069752.html
Firstpost appears to have copied the same report, but added "arms" to make it more provocative.
Edit: Also, $4 billion over six months is not exactly a fungible amount. A deal like this in weapons would be very visible. The more I think of it, the less this report makes sense.
CoolDude_7532 on May 11st, 2024 at 13:36 UTC »
Is this really true? I can’t find many other sources
donutloop on May 11st, 2024 at 07:55 UTC »
Submission statement
In a significant development in the bilateral trade dynamics between Russia and India, Russian firms have utilized approximately $4 billion from their Vostro accounts to purchase arms and other defense equipment made in India. This move, detailed in a recent report by Firstpost, comes as these funds were largely unspent due to limited investment avenues within India. The article also explores the broader implications of these transactions, highlighting the use of Indian rupees in trades, a strategy aimed at bypassing traditional currency routes amidst international sanctions on Russia. Further, the piece sheds light on the operational aspects and the scale of Vostro accounts which have been pivotal in facilitating the exchange of goods including machinery and auto parts, alongside investments in Indian government securities. This transaction is part of a larger narrative of strengthening trade relations that use local currencies, promoting a shift from dollar-centric trade systems.