This note is on how bilateral trade payments between India and Iran were settled after sanctions on Iran. 1. **2010** - On December 23, 2010, post sanctions against Iran, RBI decided to keep the payments for Iranian crude imports [outside](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=6172) the Asian Clearing Union (ACU) mechanism. 1. The Asian Clearing Union (ACU) is a multilateral arrangement among some Asian countries (including India, Iran, Bangladesh, etc.) for settling payments with ACU member nations periodically through a central account (to reduce the use of foreign reserves). 2. Here instead of using dollars/euros for each bilateral trade separately, members settle all these payments together at the end of a fixed period. 3. Only the final net difference is settled, using USD or EUR (or earlier, the now-discontinued ACU dollar/ACU euro). This is called _netting out payments multilaterally._ 4. ACU started operations in 1975. 5. Due to US sanctions, India and Iran could no longer settle trade payments through the ACU, which normally acts as a regional clearing system that settles payments among member countries in USD or EUR. 2. **2011 -** From July 2011, India paid in euros to clear 55% of its payables for import of Iranian oil through Turkey's Halkbank. 1. The rest 45% were paid in Rupees. For this, few Iranian banks opened INR Vostro accounts with UCO Bank. 2. They are rupee accounts (instead of USD accounts) held by a foreign banks with an Indian bank to receive and pay for trade transactions. 3. Also 50% of the funds received as payment towards oil imports could be used towards payment for their exports. 4. But Iran has current account surplus with us. So it wanted to use those balances to pay for its imports from other countries. 5. Interest was not paid for balances as India did not allow balances in RVA to be invested in govt. securities. 6. This allowed continued trade of oil (~90%) and some non-oil items outside the ACU system. 3. **2012** - UCO Bank was designated to settle payments with Iran. SBI was risk given its popularity. 4. **2013 -** After further U.S. sanctions blocked the euro payment route, Iran had agreed in February 2013 to receive all oil payments from India in rupees through UCO Bank but later decided to not accept more than 45%. 5. **2018 -** U.S. reimposed sanctions, after it withdrew from the nuclear talks, starting on November 5, 2018, but allowed India to import a limited volumes, that is 0.3 million barrels a day of Iranian oil for 180 days. 1. A revised agreement was signed between India and Iran in November 2, 2018 that allowed India to pay for all oil imports in rupees instead of USD. 2. This ended the earlier 55%-EUR / 45%-INR mechanism and moved to 100% INR settlement, but Iran would repatriate balances, left after payments for exports, in other currencies. 3. Under this arrangement, UCO Bank and IDBI Bank were authorised to open INR Vostro accounts of Iranian banks in India. 4. Until 2018, UCO Bank was the main bank. 5. Indian refiners deposited 100% of their oil import payments in INR into these Vostro accounts. The FBIL reference rate for USDINR was used for settlement. 6. **Iran now held INR balances so Iran bore forex risk**. 7. The funds in these INR Vostro accounts were then used by Iran to pay for essential imports from India such as food, medicines, and medical devices functioning like a rupee-clearing system for bilateral trade. 6. **2019** - Since May-2019 India stopped the oil imports from Iran, and the rupee balances in their accounts with UCO bank declined. 7. **2025** - In first 7 months of 2025, India imported around $205 million worth of crude and petroleum products from Iran. Read more at: [https://energy.economictimes.indiatimes.com/news/oil-and-gas/indias-crude-oil-imports-from-iran-jumped-36-per-cent-in-october/66780435](https://energy.economictimes.indiatimes.com/news/oil-and-gas/indias-crude-oil-imports-from-iran-jumped-36-per-cent-in-october/66780435) ## Non-Resident Rupee accounts for trade 1. SRVA accounts are special Rupee Vostro accounts held by foreign banks/overseas correspondents with AD Category-I banks for settlement of trade transactions. 1. [FAQs]((https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=3373)) - Special Rupee Vostro Account (SRVA) since [July 11, 2022](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12358&Mode=0). 2. Rupee Vostro accounts are INR account held by foreign banks. 3. [SNRR](correspondent) accounts are Rupee accounts held by non-resident entity for any permitted business activity like ECB in INR, trade credits in INR, trade (Export/ Import) invoicing in INR, etc. 1. The SNRR account shall carry the nomenclature of the specific business for which it is in operation 2. [FAQs](https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=3259) - Special Non-Resident Rupee Accounts (SNRA) 4. Any net balances in these accounts are just like capital inflows. 5. *A related note - [[Deposits and Accounts]]* ## Regulations 1. [FEM (Deposit) Regulations, 2016](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10325&Mode=0) with effect from April 1, 2016 superseded and replaced the FEM (Deposit) Regulations, 2000 as amended from time to time. 1. Maintenance of deposits/ accounts between a person resident in India and a person resident outside India is regulated in terms of sub-section (3) of section 6 of the Foreign Exchange Management Act, 1999 (FEMA) (Act 42 of 1999) read with Foreign Exchange Management (Deposit) Regulations, 2016 2. FEM (Foreign Currency Accounts by a person Resident in India) [Regulations]((https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12916&Mode=0), 2015 1. On [January 1, 2016](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10261&Mode=0), FEM (Foreign Currency Accounts by a person Resident in India) Regulations, 2000 was repealed and replaced by FEM (Foreign Currency Accounts by a person Resident in India) [Regulations](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12916&Mode=0), 2015 [^3] with effect from January 21, 2016. 2. [FAQ](https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=357) - Foreign Currency Accounts by Resident Individuals 3. [Master Direction](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198) - Deposits and Accounts 1. [Part II](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198#P1:~:text=2-,Part%20II%20%2D%20Opening%2C%20holding%20and%20maintaining%20accounts%20in%20India%20by%20a%20person%20resident%20outside%20India,-3) - Opening, holding and maintaining accounts (rupee and foreign currency accounts) in India by a person resident outside India 2. [Part III]((https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198#P3)- Provisions pertaining to Vostro Accounts 4. [FAQs]((https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=3373)) - Special Rupee Vostro Account (SRVA) since [July 11, 2022](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12358&Mode=0). 5. [FAQs](https://www.rbi.org.in/commonman/English/Scripts/FAQs.aspx?Id=3259) - Special Non-Resident Rupee Accounts (SNRA) ## References 1. Indian Oil Corporation Ltd. (2025, August 6). _Government exempts rupee payments for Iran oil from taxes_ [News release]. [Link](https://www.iocl.com/MediaDetails/52251) 2. RBI. (2010, December 27). *Asian Clearing Union (ACU) Mechanism – Indo - Iran trade*. [Link](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=6172) 3. EXIM. (2012, July). *Potential for enhancing India's trade with Iran: A brief analysis*. EXIM Bank’s Working Paper Series -18. [Link](https://www.eximbankindia.in/sites/default/files/2025-07/51file.pdf) | [[EXIM_Research_Working Paper Series-18_1207_Potential for enhancing India's trade with Iran- A brief analysis.pdf|pdf]] 4. EXIM. (2021, March). *Countertrade Strategy: International Comparison and Indian Perspective.* EXIM Bank’s Working Paper Series - 100 | [Link](https://www.eximbankindia.in/sites/default/files/2025-07/147file.pdf) | [[EXIM_Working Paper Series-100_2103_Countertrade Strategy- International Comparison and Indian Perspective.pdf|pdf]]