Sberbank is set to launch a closed-ended mutual fund linked to India’s Nifty50, creating a new investment pathway for Russian investors holding billions of rupees stranded in India due to sanctions. The move provides Moscow with a practical solution to utilise its accumulating rupee balances, which cannot be freely converted into dollars because of U.S. financial restrictions.

The fund will allow Russian investors to deploy these idle rupee surpluses into Indian equities, effectively transforming dormant vostro account balances into productive assets. The new structure marks the first large-scale attempt to channel Russia’s trapped rupee pool directly into India’s capital markets.

Sberbank’s debut product—a Nifty50-linked mutual fund—offers Russians diversified exposure to India’s top companies and the country’s fast-growing equity market.

Industry experts say India is encouraging Russia to reinvest its rupee reserves into high-growth sectors. Gautam Kalia of Mirae Asset ShareKhan noted that these funds could support infrastructure, logistics, defence, energy, pharmaceuticals, fertilizers, and high-tech sectors such as IT and automation.

The approach mirrors Japan’s model of financing long-term Indian infrastructure projects, benefiting both economies: Russia gains a channel to deploy rupee surpluses, while India attracts capital for development.

Recent RBI measures have made this easier. Banks may now open special rupee vostro accounts without prior approval, and Russian entities can invest in government securities, bonds, and T-Bills.

Trade between India and Russia has surged, driven primarily by crude oil imports. Bilateral trade hit $68 billion in FY25, compared to $13 billion in 2021, leaving Russia with large rupee holdings.

Analysts say Russia may explore long-gestation infrastructure investments but warn that repatriation mechanisms remain unclear, posing long-term liquidity challenges.

Market experts like Sandeep Parwal caution that increased Nifty inflows may lift valuations, raising entry risks for new investors.

Meanwhile, Sberbank plans to invest $100 million in India, expand operations across 10 cities, and deepen its role as a key financial bridge—already reducing transaction times from weeks to minutes in most cases.