Since February 2013, when the US blocked payment channels to Iran for its nuclear programme, India has been paying 45 per cent of its Iran oil bill in rupees through a UCO Bank branch in Kolkata. For the remainder, it had been waiting for a way to make the payment.

As much as $4 billion had been accumulated in past dues.

Sources said the payment mechanism used in June/July will again be used to clear $400 million dues.

Rupee payments equivalent to $400 million will be deposited by Indian refiners in the UCO Bank account, which will now be transferred to the Reserve Bank of India for onward credit to the central bank of the United Arab Emirates, which will make payments in dirhams to Iran.

Since July 2011, India had been paying in euros for 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent was remitted in rupees through UCO Bank.

The euro payments ceased from February 6, 2013, but the portion of rupee payments continued through Uco Bank.

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