India considering using local currencies to facilitate trade with Russia

India is taking a decision, which is expected to be out as early as next week, to facilitate trade with Russia using local currencies, according to people familiar with the matter.

The government is working out a mechanism on how trade can be settled in rubles and rupees as Indian exporters are awaiting payments of about $500 million that have been stuck after the sanctions on Russian banks.

The central bank as well as commercial lenders including State Bank of India and UCO Bank Ltd. are being consulted, as per the sources.

Under the proposed mechanism, ruble could be deposited into an Indian bank after converting it into rupee and vice versa. There are, however, some concerns, on how to peg the currencies, and also on ways to balance the trade as India is a net importer of Russian goods, which include defense equipment.

Russia said that it will be seeking alternative suppliers for a wide range of imports after hundreds of western companies announced they are pulling out.

New Delhi is preparing a list of items it can export to Russia to narrow the about $5 billion trade deficit it runs currently, while considering making payments for crude oil in rupee, the people said. India wants a floating exchange rate, instead of a fixed one used by the two nations three decades ago, given the ruble has crashed in recent weeks.