India, Russia halt talks to settle trade in rupees

India and Russia have suspended efforts to settle their trade in rupees, after months of negotiations failed to convince Moscow to keep rupees in its coffers, several people with direct knowledge of the matter said.

This would be a major setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent rupee payment mechanism to help lower currency conversion costs. With a high trade gap in favour of Russia, Moscow believes it will end up with an annual rupee surplus of over $40 billion if such a mechanism is worked out and feels rupee accumulation is 'not desirable', an Indian government official, who did not want to be named, said. The finance ministry, the Reserve Bank of India and Russian authorities did not immediately respond to requests for comment.

The rupee is not fully convertible. India's share of global exports of goods also is just about 2% and these factors reduce the necessity for other countries to hold rupees.