India, Russia considering monthly rupee-ruble exchange rate to boost trade
What's the story
India and Russia are considering a semi-floating rupee-ruble exchange rate, possibly pegged on a monthly basis. The move is aimed at boosting bilateral trade by cutting currency conversion costs and reviving trade momentum. Most of the trade between the two countries is done in local currencies or third currencies like dirham due to Western sanctions on dollar transactions.
Cost reduction
Direct rupee-ruble exchange rate could reduce forex costs
A direct rupee-ruble exchange rate could significantly reduce foreign exchange costs. An industry source told Moneycontrol that these costs can be 4-5% higher when indirect currency conversions are used instead of direct settlement in local legal tenders. Any such framework would need coordination between the Reserve Bank of India (RBI) and the Russian central bank, as part of ongoing efforts to deepen local-currency trade.
Sanction impact
Western sanctions complicate traditional payment channels
The discussions for a rupee-ruble exchange rate come amid tighter Western sanctions on Russia. These restrictions have complicated traditional dollar- and euro-based payment channels, highlighting the need for local-currency settlement mechanisms. In 2025, the US imposed curbs on Russian refiners Rosneft and Lukoil, which could temporarily impact India's crude imports.
Trade imbalance
India and Russia's trade balance
India and Russia are also working to fix a direct exchange rate for their local currencies. This is part of the larger plan to boost bilateral trade to over $100 billion by 2030. However, the current trade balance is heavily skewed in favor of Russia, with Indian exports at less than $5 billion annually against imports worth around $64 billion.