Amid uncertainty over India’s oil import possibilities from Iran after May 2 when the waivers to US sanctions on Iran are withdrawn, state run IDBI BankNSE -2.17 %has stepped-up efforts in this direction by creating Iran trade processing cells in 3 Indian cities.
IDBI received the nod to handle import-export transactions with Iran in early March.
“IDBI Bank will shortly start setting up processing cells in Delhi, Ahmedabad and Kolkata. The bank already has a centre in Mumbai. The Indo-Iran trade settlements can be done at any of IDBI’s branches and these three centres will be the processing units,” a senior bank source said.
“Direct payments can be routed through the Iranian banks when a trader checks out with his IDBI Bank account number.”
Alhough IDBI got the mandate to handle the Iran import-export setlements in first week of March, however, due to the delay in receiving funds into the Iranian “vostro” accounts, the bank could not operationalise the trade settlement mechanism. Now with the receipt of some funds, the process will start, the source added.
According to the mechanism agreed by the two countries, Iranian banks will open “vostro” accounts with IDBI Bank in India, and payments by Indian importers, including oil companies and exporters, will be deposited into these accounts in rupees.
The bank will have designated trade finance officers in these cities to facilitate business transactions for Indian exporters dealing with Iran. IDBI Bank has also received started receiving funds from Iraninan banks for the export settlements of Iran, the source said.
It is still premature to say whether there will be oil imports from Iran or not post May 2, he added.
The IDBI Bank has become the second bank permitted process Iran trade settlements, after UCO BankNSE 0.27 %, which was the only one handling rupee payments till now.
IDBI would also aim at easy funds allocation and direct settlement of export bills for exporters, including those dealing in rice and tea, the source said.
Its expansion into the bilateral banking space comes at a time when there are demands for creating similar bilateral mechanism in Indian rupees with other countries with which the banking route is either not available or has become deactivated.
India used to pay Iran for the oil in euros using European banking channels. But this channel was blocked from November 2018 onwards owing to the US sanctions.
Iran currently is India’s third-largest oil supplier after Iraq and Saudi Arabia. It was India’s second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions relegated Iran to the seventh spot in the subsequent years.
In 2013-14 and 2014-15, India bought 11 million tonnes (MT) and 10.95 MT of crude, respectively, from Iran.
The India-Iran bilateral trade increased to $13.8 billion in 2017-18, from $12.9 billion in the previous fiscal. However, India’s exports to the Gulf nation were only worth $2.5 billion.