Russian banks and companies who have trade surpluses with Indian lenders are using those rupee funds to invest in domestic government debt, the head of the Indian Banks' Association (IBA) said on Tuesday.
Investments by Russian banks and companies in Indian government bonds underline challenges in converting rupees into roubles, which has hampered attempts to widen non-dollar denominated trade between the two nations.
IBA chief Sunil Mehta is the first senior official to confirm that Russian funds in Indian banks were being invested into government securities as it gives them the advantage of easy liquidity.
"They have surplus of money. They have invested (in local bonds). RBI has opened the window that whatever trade surplus they have, you can invest in government bonds," Mehta said.
The move comes after the Reserve Bank of India last year outlined norms for international trade settlements in rupees, while also allowing any rupee surplus balance held locally to be invested in government bonds and treasury bills.
"Initially, if you go for any investment, you will go for a shorter duration because you don't know how long this crisis will last," Mehta said.
