Two Indian banks have asked exporters to complete their financial transactions with Iran by August.
New Delhi: Two Indian banks have asked exporters to complete their financial transactions with Iran by August in response to the threat of new US sanctions, according to the country’s main exporters’ organisation and bank letters seen by Reuters.
US President Donald Trump earlier this month pulled out of the 2015 nuclear accord with Iran and ordered the reimposition of US sanctions. India and Iran have long-standing political and commercial ties, but New Delhi has been careful to not fall foul of US sanctions on Iran.
The Federation of Indian Exporters Organisation (FIEO) said IndusInd and UCO, the two banks facilitating exports to Iran, had set August 6 as the deadline for winding up deals.
“IndusInd and UCO bank are telling exporters that you complete all Iran business by August 6,” Ajay Sahai, director general of FIEO, told Reuters.
Indian exporters mostly receive payments in rupees for exports to Iran, under a mechanism devised in 2012 when banking channels were restricted due to the US sanctions. India, Iran’s top oil customer after China, had implemented a barter-like scheme that allowed it to make some oil payments to Tehran in rupees through UCO Bank.
IndusInd Bank in a May 24 letter, seen by Reuters, asked Indian exporters to provide a declaration from customers that the entire export LC (letter of credit) transaction would be completed before August 6, 2018. An Indian exporter executing Iranian orders worth 90 million rupees said he was worried because he would get some payments in the second half of August.
“How does an exporter feel safe? I don’t know whether I will get my money or not,” said the exporter, who did not wish to be identified. He said payment for an Iranian export order normally takes between one to one-and-a-half months.
Indian companies receive payments for exports to Iran using the oil payments held in rupee balances at UCO. The mechanism helped India to narrow its trade deficit with Iran from about USD 11.3 billion in 2011-12 to about USD 3.5 billion in 2015-16, when the Iran sanctions were lifted.
In the fiscal year to March 2017, India’s trade deficit with Iran widened to USD 8.24 billion, according to the government data. UCO Bank told the exporter mentioned above that payment would be made only if the Iran account had enough money.
“Payments will also be subjected to any trade restrictions or currency restrictions being put in place by USA post 08-05-2018 and as per the Government of India guidelines on the date of claim,” UCO said in its letter to the exporter dated May 29, which was seen by Reuters.
UCO Bank chairman R.K. Takkar told Reuters his bank was continuing with the rupee mechanism. He refused to elaborate on the letter issued by his bank, and said Iran had 18 billion rupees in its account with UCO.