India explores new ways for Russia to use accumulated rupee reserves

India is exploring additional avenues for Russia to utilize its accumulated rupee holdings, a senior official from the Reserve Bank of India (RBI) said, Bloomberg reports.

N. Senthil Kumar, chief general manager of the RBI’s foreign exchange department, told a business event in Mumbai that the central bank is assessing whether Russian entities can put their rupee funds to productive use within the Indian economy. He did not provide details on the specific measures or the total amount of rupee reserves held by Russia.

India became a major buyer of Russian oil following Moscow’s invasion of Ukraine in early 2022, purchasing heavily discounted barrels as other importers shunned Russian crude. This trade, partially settled in Indian rupees, has left Russia with substantial rupee holdings, which it has struggled to deploy effectively in the South Asian economy.

“We are trying to be nimble. We have a few Russian banks who are nudging us to do a lot of things,” Kumar said.

Indian refiners’ purchases of Russian oil had declined in recent months under sustained US pressure. However, imports have resumed after Washington granted India temporary permission to increase Russian crude purchases, a move aimed at offsetting disruptions in Middle Eastern supplies caused by the conflict with Iran.

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

By Vafa Guliyeva