India opens up investment options for Russia to channel rupee balance

• Russia’s payment problems with India may finally be coming to an end.
• Due to allowances made by the RBI, Russian entities now have a bouquet of investment options.
• Not just government securities and bonds but equity and loans to channelise their accumulating rupee balance.

Key Highlights:

• Russian entities can invest in a whole bouquet of avenues, which the country has started to make full use
• India and Russia put in place a rupee payment system to circumvent the Western countries’ economic sanctions against Russia following its attack on Ukraine
• Under the mechanism, a number of Russian banks, opened their rupee vostro accounts with authorised dealer banks in India, for enabling rupee trade between the two countries.
• The rising unused rupee balance for Russian entities in these accounts was a big concern for Russia.
• But now the rupee balance is being gainfully invested in the country itself,
• India has also identified Russian entities to invest in, such as the Vande Bharat sleeper trains project.
• Russia is now India’s second largest import source. In 2023-24, India’s imports from Russia increased 32.95 per cent to $ 61.44 billion

Prelims takeaway

• FEMA
• India-Russia