Iranian IRR_INR system using IDBI bank was stopped working recently as announced by Iranian Saman Bank officials. Iran was using IRR- INR system for import and export of foods and pharma products from and to India. This root was very helpful for traders of such products to deal with in legal framworks by the help of Iranian and Indian banking systens.
Though India has always maintained that its bilateral relations with Iran stand on their own and are not influenced by India’s relations with any third country, ever since the US imposed sanctions on Iran, New Delhi could not engage in dollar-denominated trade with the country. Hence, a rupee-rial trade mechanism was put in place in 2018.
Under this IRR-INR system, oil refineries from India would deposit rupees in the two designated banks – UCO Bank and IDBI Bank – for import of crude oil from Iran and the fund was used to clear dues of exporters from the country to Iran. However, since there have been no oil imports by India since May 2019 due to Western sanctions, the accumulations in the rupee-rial accounts have been depleting drastically and therefore, dipping into that fund may no longer be an option.
“When oil was being purchased, there was a lot of balance in the account, but now there is hardly any balance left,” a senior official at UCO Bank told BusinessLine.
Revival of mechanism
The best option available according to traders was the revival of rupee-rial mechanism. According to Sujit Patra, Secretary, Indian Tea Association, the revival would help boost tea exports from India to Iran, particularly at a time when there is a crisis in Sri Lanka.
“We have urged the Commerce Minister to take this (revival of rupee-rial mechanism) up with the Central Bank of Iran and RBI. If this can be done then it will give a big boost to tea exports,” he said.
Iran is one of the major markets for Indian orthodox tea, accounting for nearly 21 per cent of the country’s total exports of tea. Orthodox tea accounts for less than 10 per cent of the country’s annual tea production, which is close to 1,300 mkg. However, nearly 90 per cent of the 110 mkg of orthodox produced each year is exported.
Ref: thehindubusinessline
