Iran to open accounts with Indian banks for oil payment

NEW DELHI Wed Oct 12, 2011 5:04pm IST

An employee of a gas station fills the tank of a car at a gas station in Seoul June 24, 2011. REUTERS/Truth Leem/Files

An employee of a gas station fills the tank of a car at a gas station in Seoul June 24, 2011.

Credit: Reuters/Truth Leem/Files

Related Topics

NEW DELHI (Reuters) - Iran's central bank will open accounts with two Indian banks to receive part payment for New Delhi's oil imports and use that money to pay for Indian exports, according to an industry source and newspaper report.

Indian oil firms will pay 20 percent of their dues to Iran through rupee accounts in India's state-run IDBI Bank Ltd. and UCO Bank, the source with direct knowledge of the matter told Reuters on Wednesday.

The Economic Times newspaper said the accounts would be used to pay for half of India's oil and non-oil imports from the Islamic Republic, quoting an unnamed government official.

IDBI Bank executive director RK Bansal said he was not aware of the matter, while an official at Kolkata-based UCO Bank declined to comment. The Commerce Ministry referred queries to the Finance Ministry, which was not immediately available to comment.

India and Iran have been struggling to find a permanent mechanism to settle their bilateral trade, especially since December when India's central bank scrapped a clearing house mechanism -- a move welcomed by the United States which is trying to isolate the Islamic Republic over its nuclear programme.

That led Asia's third-largest economy and the second-largest buyer of Iranian oil after China to run up a multi-billion dollar debt to Iran. Indian oil firms have begun making payments in euros via Turkish state-owned Halkbank, but no mechanism is in place to settle dues of Indian exporters.

"(Indian) oil companies will continue to pay the remaining 80 percent of their respective dues in euros through Halkbank," the source said.

About 2.7 billion euros ($3.68 bln) of Indian oil firms' payments for Iranian oil between September 2010 and December 2010 that were deposited in a German bank were stuck after the bank buckled under U.S. pressure and stopped clearing payments to Iran, the source said.

"India will help Iran use a part of these funds to open accounts in India," the source added.

The rupee accounts are expected to ensure stability in trade between India and Iran and minimise chances of any global banks backing out due to pressure from the United States.

Last week, a statement from India's finance ministry said both countries had agreed on a mechanism to ensure smooth goods trade flows, including payments to Indian exporters.

"If Halkbank stops clearing Indian payments, India may tap banks in Moscow to clear its debt to Iran," the source added.

Indian exports to Iran are valued at $2.7 billion in 2011/12 (April-March) while imports were about $10.93 billion, according to the website of India's commerce ministry.

While crude is India's main import from Iran, exports include tea, coffee, rice, soymeal, cereals and iron and steel.

($1 = 0.733 Euros)

(Reporting by Nidhi Verma; Editing by Krittivas Mukherjee)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Violence in Northeast

Reuters Showcase

Indian Super League

Indian Super League

Striker Michael Chopra joins Tendulkar-owned team in Indian Super League.  Full Article 

Banking Risk

Banking Risk

India to tighten up banking risk management - Jaitley.  Full Article 

Film Review

Film Review

‘Katiyabaaz’ turns banal reality into gripping tale.  Full Article 

Boosting Firepower

Boosting Firepower

Indian firms tool up for defence orders on Modi's 'buy India' pledge.  Full Article 

Gaza Killings

Gaza Killings

Hamas says Israel killed three top Gaza commanders.  Full Article 

New Thai PM

New Thai PM

Thai junta leader appointed PM by hand-picked parliament.  Full Article 

Tech Deal

Tech Deal

Opera's Mini browser to be installed on Microsoft phones.  Full Article 

Sharmila Released

Sharmila Released

Irom Sharmila freed after 14 years as suicide charges dropped.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage