EghtesadOnline: India’s trade with Iran is yet to be fully normalized even a year after the lifting of international sanctions on Tehran.
Indian exporters are complaining of difficulties faced by them due to some Indian nationalized banks refusing to deal with Iran-related transactions, according to the apex body for exporters in the country—the Federation of Indian Export Organizations, the English-language Indian newspaper The Hindu reported.
This is despite the Reserve Bank of India’s notification in May 2016, specifying that payment or remittance or reimbursement can be made from or to Iran in any freely convertible currency for imports from Iran and exports to that country.
According to Ajay Sahai, director general and chief executive officer of FIEO, “We have been given to understand that a few banks have already started dealing in Iran for negotiation of documents invoiced in freely convertible currency (other than the US dollar).”
According to Financial Tribune, Sahai added that, “However, some of the nationalized banks have not yet started the same, which has caused concern and inconvenience to the exporters, particularly as the balance in rupee account with the UCO Bank is fast depleting following the decision to make payment to Iran in freely convertible currency for import of oil.”
Previously, following the sanctions on Iran over its nuclear activities, both nations had agreed in 2012 that 45% of India’s oil import payments to Iran would be paid in rupees and deposited in UCO Bank as that bank hardly had an exposure to US or European Union.
In turn, Iran was to utilize that amount to pay for its imports from India. It is learnt that the balance in the rupee account may not be sufficient to cover three months of India’s exports to Iran.
A senior official in a public sector bank, however, said on condition of anonymity that there have been no problems regarding Iran-related transactions in currencies other than the US dollar.
“Exporters and importers have been advised to carry out their transactions in currencies such as the euro wherever possible,” the official said, adding that banks still have apprehensions that US regulators could take arbitrary decisions on Iran-related transactions.
India’s trade with Iran in fiscal 2016 was $9 billion, of which $6.3 billion were imports from Iran (of which $4.5 billion constituted the oil import bill), while India’s exports were worth only $2.7 billion.
Of the $5.4 billion worth imports from Iran in April-October FY’17, oil imports were $4.5 billion. India’s exports to Iran during April-October FY’17 were $1.4 billion.
Trade between these two countries were worth $16.2 billion in 2011-12 (India’s exports amounted to $2.4 billion while imports from Iran were worth $13.8 billion).
To boost India-Iran trade, FIEO in December 2016 asked RBI to allow Iranian banks such as Persia International Bank, Parsian Bank, Bank Pasargad, Bank Mellat and Saman Bank to open branches in India.