According to The Economic Times, the mechanism has been worked out after US sanctions against Iran's financial sector, including the central bank, caused problems for inter-country clearing mechanisms.
The report added that the rupee account is likely to be created by an Iranian private bank with the state-run UCO Bank to receive payments from Indian oil companies.
“In turn, Iran would pay for its imports from Indian exporters in local currency from the UCO Bank account,” the paper quoted an unnamed Indian official as saying.
Iran's private banks will be used for such transactions as they are still not under US sanctions, the report added.
“It is learnt that names of Iranian private banks such as Bank Parsian and Karafarin Bank were discussed at the meetings between bureaucrats and regulators,” the The Economic Times said.
Though UCO Bank chairman, Arun Kaul, declined to comment, experts believe that the bank is likely to gain substantial floating funds once this rupee-payment mechanism becomes operational.
India plans to pay 45 percent of its USD 12.68-billion annual oil imports from Iran in rupees and the modalities are now being finalized by the central banks of the two countries.
On February 12, The Economic Times reported that during his latest visit to the US, Indian Foreign Secretary Ranjan Mathai reiterated New Delhi’s decision to go on with Iran oil imports while also stressing cordial relations between the two countries.
The US, Israel and their European allies accuse Iran of diversion in its peaceful nuclear program and have used this as an excuse to pass four rounds of international sanctions against the country at the UN Security Council.
Refuting the claims, Tehran insists that as a member of the International Atomic Energy Agency and signatory to the Nuclear Non-Proliferation Treaty, it is fully entitled to peaceful applications of nuclear energy.
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