India, Russia central banks renew talks for mechanism to expand local currency trade

NEW DELHI, Aug 15 (Reuters): The Indian and Russian central banks have renewed discussions to set a mechanism to expand local currency trade, in a move to iron out payment issues after a surge in bilateral trade since the war on Ukraine in 2022, a government source said.

The discussions between the two central banks involve setting a reference rate between two local currencies for trade instead of determining the value of currencies against the US dollar, the Indian government source said on Wednesday.

Indian central bank officials are in Russia this week to discuss settlement of payments between the country for their bilateral trade, a second banking industry source said.

Russia has emerged as the second biggest exporter to India, after China, with exports growing to $23.78 billion in the first four months of the current fiscal year starting in April, up 20.3 per cent from a year ago.

India's imports from Russia, mainly crude oil, have surged after the start of the Russia-Ukraine war, with imports touching $61.43 billion in 2023/23, up 33 per cent compared to the previous fiscal year.

To have a reference rate between the two local currencies, the currencies need to be traded over an exchange for a prolonged time, which the two countries are yet to agree on, the source said.