Investment in rupee denominated rupees in government bonds by Russian companies of Purant

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Mumbai: Russian banks and companies doing business with Indian banks are using this extra rupee to invest in Indian government bonds, sources in the Indian Banks’ Association said.

Investments in Indian government bonds by Russian banks and companies pose challenges in converting the rupee into rubles and consequently hinder efforts to increase non-dollar trade between the two countries.

An official of the association said that Russian surplus funds in Indian banks are being invested in the country’s government securities, thereby providing easy liquidity to Russian bondholders.

The Reserve Bank has created a special window to prevent excess trading in government bonds. In July last year, the Reserve Bank had opened up norms for settlement of trade transactions with certain countries in rupee terms.

It is noteworthy that after the invasion of Ukraine, Russia has been supplying cheap crude oil to India. A banker said the two countries were settling some deals in rupees, except crude oil.