From Russian funds with love: Plan mooted to tap rupee balance in special accounts
Russian funds tap into the stranded rupee balance generated in the trade between the two countries? In the course of negotiations, some of the Russian financial institutions have sounded out the Reserve Bank of India (RBI) on a mechanism that would let them use the rupees lying in special accounts in India for investment in stocks and securities here.
Till now, 10 institutions from Russia, including its biggest lender, have registered as foreign portfolio investors (FPIs) with Sebi. But they have made little investments — probably, due to the hurdles in cross-border payments caused by US sanctions in the wake of Russia’s war with Ukraine.
If, however, RBI permits the flow of rupees from the trade balance pool to the rupee accounts of Russian FPIs, the latter can invest the amount in securities listed on Indian exchanges. Under the framework suggested, the FPIs could match a transfer of rupees from the pool by paying the equivalent in roubles to Russian companies that have exported to India but are reluctant to accept payments in rupees.
“If India were to allow funding of FPI accounts of Russian FPIs through INR stuck in vostro accounts in India, it could be a win-win for India and Russia,” said Siddharth Shah, partner at law firm Khaitan & Co.
Would Need Green Signal From RBI
“For India,” said Shah, “more global investments into the market, which may continue to remain invested for a much longer tenure, should create a significant inflow in terms of foreign investment. For the Russian entities, it would
