The Central Bank of Russia and The Central Bank of India are moving closer to an agreement to use their national currencies for trade settlements, according to a statement released by Russia’s Central Bank on Friday.
The National Banks of Russia and India said they did not see any regulatory restrictions in making settlements in rubles and rupees on trade contracts and that both banks will soon hold discussions with the business communities of the two countries, according to the report.
Ksenia Yudaeva, the First Deputy Chairwoman of the Bank of Russia and Harun Khan, Deputy Governor of the Reserve Bank of India chaired a regular meeting of the Subcommittee on Bilateral Financial and Banking Issues – a profile body within the Russian-Indian Intergovernmental Commission.
Representatives of Russian and Indian commercial banks, in addition to Russian trade representation in India attended the meeting. The parties discussed current issues in Russian-Indian cooperation in the banking sector, including issues of cooperation between Russian and Indian credit institutions.
“The sub-committee considered the conclusions and recommendations prepared by an expert working group for settlements in national currencies. The working group noted in its report to the sub-committee that there were no serious regulatory limitations for making settlements on trade contracts in rubles and rupees and offered standard settlement models which correspond on the whole to the current commercial practice of banks of the two countries. A decision was made to discuss with business community of both countries a possibility of a wider practical use of these models, as well as measures to reduce transaction costs when making settlements in national currencies.”
As a multi-national currency deal between Russia and India grows closer to fruition, the question is now when, versus if.
“The dependence on the dollar is our common headache,” said Sofyan Djalil, the Indonesian Coordinating Minister, adding that Indonesia is ready to consider mutual trade in national currencies.
On Tuesday, Russian Prime Minister Dmitry Medvedev announced that Vietnam would be joining the Eurasian Economic Union’s free trade zone and that the two nations had signed several agreements on energy cooperation and infrastructure.
In March, Turkey’s Ministry of Economy said it was considering a move to settle payments with Russia by using local currencies for major investment deals.
Turkish President Recep Tayyip Erdoğan recently proposed switching to national currencies in bilateral trade with his Iranian counterpart Hassan Rouhani.
In January, Russia and Thailand held discussions on switching to national currencies in bilateral trade.
The latest proposals come amid a growing number of emerging and frontier economies that are ramping up de-dollarization efforts.
In March, the IMF’s Deputy Managing Director Naoyuki Shinohara made a call for emerging Asian economies to actively engage in de-dollarization.
“In some cases, high dollarization can facilitate trade. But there are drawbacks, such as limiting exchange rate flexibility to mitigate against external shocks, and constraining the central bank’s ability to be the lender of last resort. Under such circumstances, consideration could be given to actively promote de-dollarization,” he said.