Source : ET NOW
Citing sources with knowledge of the matter, Business Standard reported talks were underway among these countries, and the central bank’s measures announced on Monday were the first step in that direction. “The next step is settling trade transactions in bilateral currencies. Both countries will accept each other’s currency. China is already trading with Russia without dollars,” the financial daily quoted the source as saying. the source added.
The RBI has introduced an additional system of payment and settlement of export and import bills in rupees, in a move to reduce reliance on US dollar transactions, primarily because of the Russia-Ukraine conflict that led to massive curbs imposed on Moscow by western countries. Several Russian banks have been removed from the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
The war in Ukraine and the West’s response may have accelerated this process. However, there were already signs of the dollar losing its dominance as the global currency for trade. Last month, the International Monetary Fund’s blog said that central banks were no longer holding as many dollars in their reserves as before.
Further, the blog, citing the IMF data on the currency composition of official foreign exchange reserves, mentioned that the share of dollar in global forex reserves, which has been declining for more than two decades, fell below 59 per cent in the fourth quarter of last year.
Analysts are of the view that the RBI’s measures were aimed at easing deals with Russia, which accounts for more than 10 per cent India’s crude oil imports. Ananth Narayan, associate professor at the S P Jain Institute of Management and Research and senior India analyst at Observatory Group, told the publication: “If India does start to convert trade with Russia under this route, it can potentially pay for a chunk of its oil imports in INR… This would ease India’s hard currency outflow substantially.”Currently, one Russian ruble equals 1.35 rupees, and the rupee hit a record low for a third straight session 79.66 per dollar.