India will pay the first installment of oil payments owed to Iran on Wednesday, media reports said.
Refiners will be making payment in rupees equivalent to $700 million to the state-run UCO Bank on Wednesday this week, said three sources with direct knowledge of the matter, Reuters reported on Monday.
The sources said UCO Bank has already bought dollars in the forward markets for payments into the Central Bank of Iran's account with Oman's Bank Muscat.
The sources said timing for the second installment is not yet known.
The refiners, Essar Oil, Mangalore Refinery and Petrochemicals, Indian Oil Corp, Hindustan Petroleum Corp and HPCL Mittal Energy, together owe a total of more than $6.5 billion. The $700 million part-payment will be split in line of the proportion owed by each.
Back on August 18, Indian Finance Secretary Rajiv Mehrishi said his country plans to clear its $6.5 billion debt to Iran for oil imports in tranches.
"What is due to them, must be paid to them. It will not be one single bullet of $6.5 billion. It will be (in) tranches. They also don't want as bullet, they also want it in some kind of tranches. So we are working out with Iran," Mehrishi was quoted by the Press Trust of India (PTI) as saying.
Mehrishi indicated that the payments can be in a combination of US dollar or euro and Indian rupees.
"It will obviously be partly in dollars, partly in rupee. It could be euro also. Partly hard currency, partly rupee. Exact division is yet to be decided," he said when asked about the mode of payment gateway.
He, however, refused to elaborate on options being explored, saying "it is being worked out."