In a strategic move that could significantly alter how Russia utilizes billions of stranded Indian rupees, state-owned Sberbank is launching a closed-ended mutual fund linked to the Nifty50 Index. This initiative provides Russian investors with a direct avenue to invest their rupee surpluses into Indian equities.
This innovative financial structure presents a solution to Russia’s ongoing currency difficulties. When Russia sells crude oil to India, payments are made in rupees deposited in special vostro accounts, which cannot be easily converted into dollars due to U.S. financial sanctions. The newly introduced mutual fund enables these idle rupee balances to be redirected into Indian capital markets, thereby transforming enforced reserves into investment opportunities.
Initially, Sberbank’s mutual fund will be tied to India’s Nifty50 Index, providing Russian investors with a diversified portfolio comprised of the country’s largest and most liquid companies. Gautam Kalia, Head of Investment and Solutions at Mirae Asset ShareKhan, noted that India is encouraging Russia to reinvest substantial rupee reserves accumulated from oil sales into productive sectors. He highlighted potential investments in infrastructure, including railways and logistics, energy, defense manufacturing, pharmaceuticals, fertilizers, and high-tech industries such as IT and automation.
This investment strategy is reminiscent of Japan’s established model of infrastructure financing, resulting in mutual benefits: Russia can utilize its trapped rupee reserves while India gains access to capital for growth and modernization.
In August, the Reserve Bank of India (RBI) permitted authorized dealer category-I banks to open special rupee vostro accounts for foreign correspondent banks without prior RBI approval. Additionally, the central bank has relaxed regulations, allowing Russian firms to invest in government securities, bonds, and Treasury Bills, easing previous restrictions.
The trade relationship between Russia and India has seen significant growth, largely driven by crude oil imports. Trade turnover surged nearly fivefold to $68 billion in FY25 from about $13 billion in 2021. In FY25, India’s exports to Russia amounted to $4.9 billion, while imports reached $64 billion, resulting in a notable trade deficit of $59 billion, predominantly attributed to crude oil, which accounted for $50 billion alone.
Narinder Wadhwa, Managing Director and CEO of Ski Capital Services, expressed that, similar to Japan’s historical financing of major Indian infrastructure projects, Russia may turn its attention to long-term sectors such as energy, logistics, railways, ports, and technology partnerships to effectively deploy its idle rupee balances.
However, Wadhwa cautioned that returns from these projects will not be beneficial in rupees without a sustainable avenue for repatriation or a long-term liquidity mechanism, details of which have yet to be clarified by India.
Sandeep Parwal, Founder of SPA Capital, indicated that increased liquidity in Nifty constituents may elevate valuations, potentially raising entry risks for new investors while providing an exit opportunity for existing shareholders. He suggested that investing in the development of infrastructure in India or monetizing existing operational assets could be more advantageous.
Sberbank additionally plans to invest $100 million in technology, expanding its team and establishing new offices. The bank has applied to the central bank to open branches in ten cities over the next three years. Its core IT platform, originally developed in Russia and re-engineered by a skilled workforce in Bengaluru, is being aligned with Indian regulations.
Emerging as a critical connector in the Russia-India trade corridor, Sberbank has successfully reduced transaction processing times from weeks to under ten minutes in 80% of cases, without the requirement for a third-country currency.
Published on December 8, 2025.
