Within weeks of paying a similar amount, India will pay a second tranche of $700 million shortly to Iran to partly clear oil dues, RBI deputy governor HR Khan said on Thursday.
“As of now $1.4 billion has been cleared, $700 million paid and $700 million acquired. It’s acquired, so there will be no impact on the market,” Khan said. He, however, did not disclose the payment date and other details.
After a July deal between Iran and P+1 (composed of the five permanent members of the UN Security Council and Germany) that set the road map for the lifting of sanctions aimed at Tehran’s nuclear activities, oil dues that many countries owe to Iran are being released in a staggered manner.
India is Iran’s biggest oil client after China. Out of about $6.5 billion Indian oil refiners cumulatively owed to Iran since 2013, P+1 has given approval to India to release $1.4 billion.
The remaining amount of about $5.1 billion would be released in tranches depending on the subsequent approval of the P+1. With India’s foreign exchange reserves robust at $350 billion, the release in tranches means acquisition of foreign exchange may not put any significant pressure on the foreign exchange market. Rupee is going through a fresh bout of volatility due to slower pace of economic recovery and global uncertainties. Khan said the $1.4-billion was acquired without any
impact on the foreign exchange market.
Separately, he said the government is in discussion with various stakeholders on whether to reset the small savings rate quarterly or half-yearly for better transmission of monetary policy. Banks, which have been delaying in passing on the rate cuts by RBI, blamed it on higher interest rates offered by small savings schemes. The small savings rates are fixed every year based on a formula linked to the yields of government securities.
“One reason for the (delay in) monetary transmission is small savings rate,” he said.
RBI cut the repo rate by 50 basis points at its monetary policy review on September 29, but banks have not passed on the entire rate cut benefit to customers. Most of the banks have cut their benchmark lending rate by 25 bps.