Reuters: India rejects the use of Chinese yuan in trade, prefers the UAE dirham
India has asked banks and traders to avoid using the Chinese yuan to pay for Russian imports due to long-standing policy disputes, three government officials involved in policymaking and two banking sources said.
India, which has become the biggest buyer of Russian oil as well as low-priced coal, prefers to use the UAE dirham to settle trade deals, the three government officials said.
One government official directly involved said New Delhi was "not comfortable" with the settlement of foreign trade in yuan, but said the settlement was "in dirhams".
The second official said India could not allow trade to settle in yuan until relations between the two countries improved.
The five officials did not say whether there were economic reasons behind India's reluctance to accept the yuan settlement.
Two banking officials familiar with the matter said the Reserve Bank of India (RBI) does not favor settling foreign trade in yuan and confirmed that the government is discouraging them from using that currency.
They also said Russia prefers the yuan settlement because it helps it buy goods from China.
Indian refiners have in recent weeks begun settling some Russian oil purchases in rubles, Reuters has previously reported.
But the bulk of trade remains in other currencies, as the ruble is partially convertible and the two countries have yet to finalize the framework.
The five officials declined to be named because the discussions were confidential. India's foreign and finance ministries and the Reserve Bank of India did not respond to requests for comment.
The first official said the government expects most payments to Russia to be in dirhams in the coming months.