Russia agrees to 5-year lock in for investments against rupee debt

Moscow: Following Russian president Vladmir Putin's directive to his government to resolve the rupee-debt issue expeditiously and amicably with India, Russia has agreed to a five-year lock in period for rupee debt investments in joint ventures based in India. This clears the decks for boosting bilateral economic relations utilising the rupee debts owed to the former Soviet Union, prior to the creation of CIS states.

Russia and India are close to signing all general letters of exchange on India's debt, Sergei Storchak, Russia's deputy finance minister, announced in Moscow today. India had asked for the introduction of a lock-in period during which the joint ventures could not be sold, Storchak said, adding that the lock-in period would be for five years.

He said Russia had already signed the letter and India would do so by the end of this week.

India has agreed to the utilisation of this fund by Russia for investments in India. Storchak said that since 1993 India has been repaying the Soviet-era debts by transferring Indian rupees to Russian Vnesheconombank account with the Reserve Bank of India.

In keeping with the credit terms, rupees could be used only for commodity procurements in India, with the re-export of these commodities being prohibited.

With better integration in to the global economy, this financing option had lost favour with Indian exporters and Russian importers. As a result, the equivalent of $1 billion has accumulated with the Reserve Bank of India, Storchak said, adding that Moscow and New Delhi have now reached an understanding under which the rupee debt can be used for Russian investments in the Indian economy through joint ventures.