The January lifting of sanctions imposed on Iran has been well received by most letter of credit (L/C) providers.

But India's state-owned Uco Bank has seen a sharp fall in the amount of L/C business it writes as a result of increased competition for a service it essentially had a monopoly on when sanctions were imposed.

Sanctions advantage

When sanctions were in force, Indian oil importers paid into rupee-accounts of Iranian oil exporters maintained by Uco.

That money was used by Iran for making payments to Indian exporters against L/Cs opened by private Iranian banks.

Position eroded

Under this arrangement, Uco was essentially the banker for India's oil trade for the last three years.

But since the lifting of economic sanctions earlier this year, other banks such as State Bank of India are also looking to write L/C business with Iran.

Uco Bank has reported a 50 per cent fall in the volume of rupee-deposits it receives from local oil companies buying Iranian crude following the lifting of sanctions.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.