India's state-run Hindustan Petroleum Corp is facing difficulties in paying for Russian oil imports following a December 5 price cap imposed by Western nations as banks shy away from processing payments, a company official said on Tuesday.

While Western sanctions against Moscow are not recognised by India - and purchases of Russian oil may not violate them - banks and financial institutions are cautious about clearing payments so as not to unwittingly fall foul of the measures.

HPCL is looking for alternative banking channels after some Indian banks with huge exposure to the United States and the western economies stopped facilitating payments, the source, who did not wish to be identified, told reporters on a press trip with India's energy minister.

"Some banks are US affiliated,” he said, and foreign banks won't “support” or “entertain” transactions concerning Russian oil. HPCL declined to comment.

Refiners in India, which rarely used to buy Russian oil because of costly logistics, have emerged as key oil clients for Russia, snapping up discounted crude shunned by Western nations since the invasion of Ukraine a year ago.

Indian refiners are buying Russian oil at below the $60 per barrel price cap imposed by Western economies, which is necessary in order for them to access Western insurance cover and shipping.

The source said India is buying Russian oil on a delivered basis, which includes transportation costs, and traders supplying the oil are not willing to declare the free-on-board price for the Russian oil. Despite challenges, HPCL is continuing to buy Russian oil and has imported 40,000 barrels per day in the current financial year to March 31, the source added.

Due to the higher availability of Russian oil at discounted rates, HPCL has raised its intake of spot crude to about 30 per cent of its overall imports in this fiscal year from 25 per cent in 2021/22.

The source said HPCL's spot purchases in the next fiscal year from April would rise further on better availability of Russian oil. The company is also looking at buying Russian oil under a term deal, although volumes could be “small”, he added.

India's Russian oil imports in January rose to record levels after European nations stopped buying Russian oil from December 5, leading to a higher intake by India.

The source said in the past HPCL had used roubles, dirhams and dollars to pay for Russian oil. Reuters reported earlier this month that Indian refiners are paying for Russian oil in dirhams.