The MoU was signed following the US letting India and seven other nations to keep buying Iranian oil despite reimposed sanctions in November 2018.
Notwithstanding the latest escalation in tensions between the US and Iran, Indian exporters to the Gulf nation are unlikely to face any problem in getting their payments in rupee at least till this fiscal-end. Uco Bank currently has “availability of funds” in its rupee accounts, which had been opened to facilitate India-Iran trade settlements, to make payments “at least for sometime” to Indian exporters, according to a senior bank official.
“It depends on the availability of funds. But, at least I don’t think there is any immediate problem for making payments,” the official said when asked whether Indian exporters will have any problem in getting their payments in the rupee under the ‘Rupee Payment Mechanism’.
Notably, India and Iran had signed an agreement during the end of the last year for oil import payments in rupee. The MoU was signed following the US letting India and seven other nations to keep buying Iranian oil despite reimposed sanctions in November 2018. According to the pact, Indian oil companies made rupee payments in Uco Bank accounts, and 50% of those funds were earmarked for making payments for exports from India to Iran.
Uco Bank has been facilitating bilateral banking trade transactions with Iran under the ‘Rupee Payment Mechanism’ since February 2012 as mandated by the government and the RBI. “The funds (in Uco Bank’s rupee accounts) are basically freezed, whatever has come has come. Because, the rupee inflow was on account of imports from Iran. Imports from Iran were mainly in terms of crude oil. That is gone now. So, the inflow has already stopped… almost nil. It is only the outflow for exports which are being made to Iran,” the Uco Bank official said.
Iran is a key trading partner of India. It imports basmati rice, cereals, tea, coffee, spices and organic chemicals, among others. “The only problem is once this money, whatever is there in the rupee accounts, exhausts, then again we would have to think what payment mechanism has to be put in place,” the official said, adding Indian exporters to Iran would not face any problem in getting their payments in the rupee at least till the end of this fiscal.