Seeking to enhance trade and economic cooperation with New Delhi and make the financial transaction system stable for importers and exporters of both India and Iran, Tehran has proposed the opening of local bank branches in each other’s soil.
Indian exporters have been facing uncertainty over payment issues with their Iranian counterparts. The rupee payment system was recentlyput in operation after a nod from the Finance Ministry to waive “withholding tax” for transactions with Iran. Nearly Rs. 2,000 crore was stuck in the pipeline due to delay in notifying the new rules.
“We feel 45 per cent rupee payment mechanism is fine for the time being. But with India looking to grab huge economic opportunities in Iran, it is imperative we open local bank branches in each other’s countries to ensure a stable and reliant financial system,” a senior member of the Federation of Indian Exporters Organisation (FIEO) said.
With Indian exports hit by slowdown in the traditional markets of Europe and U.S., Iran could potentially provide a great opportunity for Indian companies, both in the private and public sectors, to boost exports by opening up a huge market for items such as rice, tea, yarn, fabric and energy, including fertilizers.
“The Iranian government has approached its Indian counterpart with a proposal to allow Persian Bank to open its branch in Mumbai and similarly, an Indian bank could open its branch in Tehran. It will be a win-win situation for both the countries. The matter is pending with the Finance Ministry,” officials in the Commerce and Industry Ministry said.
Iran was waiting for the Finance Ministry’s word to its proposal. Iran is the second biggest exporter of crude oil to India and is keen on expanding trade in other fields, including water management and agriculture. “They are basically looking for transfer of technology, especially help in modernising their textile industry which is up for a major haul,” the official said.
Iran has also invited Indian companies, especially those engaged in the railway sector, to invest in putting in place a north-south railway corridor that could possibly open a new route for trading and reduce the time taken to export goods to Europe from the present 30 to 40 days to just 12 to 19 days.
“There is an offer for Indian companies to take up construction of this critical corridor, which will start in Chaubahar port city in the south and will continue up to the city of Mashhad,” the senior FIEO member said. The corridor would connect Iran to Caspian Sea littoral countries and Afghanistan.