Iranian businessmen, intensely engaged with their Indian counterparts to strike deals, said on Tuesday finding a suitable payment mechanism in the wake of US sanctions still remains a big problem for the bilateral trade.
Members of the Tehran Chamber of Commerce, Industry and Mines were engaged in business-to-business meetings under the aegis Ficci in Delhi. They had a similar meeting with the members of the Federation of Indian Export Organisations (FIEO) exporters on Monday.
"There is huge trade potential between the countries. The Indian banking officials are meeting the delegation to resolve the payment issue but banking is a big problem," Tehran Chamber's Director of Asia and Oceania International Department Massoud Maleki said.
Echoing similar views, Managing Director of an Iranian pharmaceutical company - DarouPakhsh Holding - Gholamhossein Farzandi said that there is a need to involve more Indian banks for the payment settlement.
"Government has agreed to make payments in rupee but it is only limited to the UCO bank. We want to expand this agreement to 2-3 more banks," Farzandi said.
"Letter of Credit is not allowed because of the US sanctions. The US sanctions prevent major cooperation with major Iranian banks. It is a difficult matter for many businesses," he said.
Following the US sanctions on Iran over its disputed nuclear programme, the payment problem with Iran began after the Reserve Bank of India in December 2010 withdrew the Asian Clearing Union (ACU) mechanism under which payments were made to Iran.
As part of the recently worked out bilateral payment mechanism, UCO Bank is the nodal agency from the Indian side while Parsian Bank is its counterpart in Iran to facilitate the transactions.
Meanwhile, addressing an Assocham meeting, Joint Secretary in the commerce ministry Arvind Mehta said that some problems related with banking system have been resolved.
"There was a problem from the Indian side regarding the banks feeling vulnerable because they do not have export insurance cover which is given by ECGC and we are happy that ECGC has found a resolution to the issue," he said.
The main objective of the Export Credit Guarantee Corporation of India Ltd (ECGC) is to strengthen the export promotion drive by covering the risk of exporting on credit.
Mehta said that issue of high commission being charged by the Parsian Bank has also been resolved.
The 56-member delegation which arrived in Delhi on Sunday will have meetings in Mumbai on Wednesday.