Kolkata/Delhi: Russia's Gazprombank has opened a special Rupee account with UCO Bank for undertaking cross-border trade transactions in the Indian Rupee, the chief of the domestic lender told PSU Watch on Friday. The move to open the special Vostro account clears the deck for settlement of payments in Rupee for trade between India and Russia, enabling cross-border trade in the Indian currency which the central bank RBI is keen to promote.
"Yes, the process is complete. Gazprombank has opened the account and it is operational," UCO Bank MD and CEO Soma Shankar Prasad said. He, however, did not divulge any transactional details for Rupee settlement, citing confidentiality.
The public sector lender has received the Reserve Bank of India's approval for the arrangement with Gazprombank of Russia for trade settlement in Indian Rupees.
The Kolkata-based lender was among the first banks to receive the regulator's approval following the RBI's decision to promote Rupee settlement.
The RBI has allowed the special Vostro accounts to invest the surplus balance in Indian government securities to help popularise the new arrangement.
According to reports, Gazprombank is only facing sectoral sanctions, and is not under the Specially Designated Nationals, or SDN, sanctions.
"This is not done for the sake of profitability. For the national interest, we want to promote trade in Rupee. This will promote the Rupee as an international currency," Prasad said.
UCO Bank already has a Vostro account-based facility with Iran.
Gazprombank, or GPB, is a privately-owned Russian lender and the third-largest bank in the country by assets.
UCO Bank has received about 15 applications from different countries to open Vostro accounts.
Earlier in September, the RBI and the Ministry of Finance had asked the top management of banks and representatives of trade bodies to push export and import transactions in Rupee.
They wanted the banks in India to connect with their foreign counterparts for opening special Rupee Vostro accounts to facilitate cross-border trade in the Indian currency rather than the popular mode of the US dollar.
"Indian importers undertaking imports through this mechanism shall make payment in INR which shall be credited into the special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier," RBI had said earlier.
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