India explores ways for Russia to use surplus rupee reserves, says RBI official

India is exploring additional ways for Russia to utilise its accumulated rupee reserves, a senior central bank official said.The central bank is assessing whether Russian entities can put their rupee funds to productive use in the Indian economy, said N Senthil Kumar, chief general manager in the Reserve Bank of India’s foreign exchange department, at a business event on India and Russia in Mumbai. He did not elaborate on the measures or the amount of rupees accumulated by Russia.

India emerged as a major buyer of Russian oil following the invasion of Ukraine in early 2022, snapping up heavily discounted barrels as other importers shunned Moscow’s energy.
As a result, Russia has accumulated large rupee holdings from crude sales to India, with part of the trade settled in the local currency. However, it has struggled to deploy these funds effectively within the South Asian economy.“We are trying to be nimble. We have a few Russian banks who are nudging us to do lot of things,” said Kumar on Thursday.

Purchases of Russian oil by Indian refiners declined in recent months amid sustained US pressure on the trade. Refiners are now once again snapping up Russian barrels after Washington gave the green light for India to temporarily increase imports, a move aimed at helping the country cope with disrupted Middle Eastern supplies due to the conflict with Iran.

India currently allows Russia to deploy its rupee holdings in local equities, subject to certain restrictions. “I should say that the Russians are well aware of the regulations, maybe more than us. So, they always keep telling us there are lot of avenues which are available for use of Indian Rupee,” said Kumar.