India is said to be considering facilitating exporters affected by the Ukraine crisis

Guarantees for letters of credit from lenders and soft loans for exporters are options for the government.

India is considering guaranteeing letters of credit and soft loans for exporters hit by a liquidity squeeze following Russia’s invasion of Ukraine and Western sanctions imposed on Moscow, two people familiar with the matter told Reuters.

Indian banks are reeling after invoices for imports from Russia started surging and payments for exports stalled.

A government official, who declined to be named because discussions were not public, said Indian exporters owe Russia about $500 million and the government could guarantee letters of credit or loans from banks to ease the crisis.

“Letters of credit are the most likely option,” the official said.

A veteran banker familiar with the developments said: “Letters of credit or some form of bank guarantee may be given so that trade settlement is not hampered. We are checking this.”

The Ministry of Finance and the Reserve Bank of India did not immediately respond to requests for comment.


The government is also considering allowing state-owned banks to lend to exporters at reduced interest rates or to provide them directly with funds up to the outstanding payments from Russia and Ukraine.

The official said the decisions could be made in a couple of weeks.

The banking source said the central bank could then go ahead and “find solutions on how to handle bilateral deals.”

India exported US$3.33 billion worth of goods to Russia in 2021, mainly pharmaceuticals, tea and coffee, while imports totaled US$6.9 billion, including defense goods, minerals, fertilizers, metals and gems.

“We will first try to ease the pain of Indian exporters. Import accounting issues may take time to be resolved,” the government official said.

India, which has strong trade and defense ties with Russia, has avoided publicly criticizing its longtime arms supplier, instead urging both sides to cease hostilities, sparking frustration among its other allies, including the United States.

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