NEW DELHI 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)
Trending On Reuters
Economies across large swathes of the globe could shrink dramatically by mid-century as fresh water grows scarce due to climate change, the World Bank reported. Full Article