India has worked out a mechanism to make payments to Iran for crude oil imports, a senior government official said Thursday.

The State Bank of India (500112.BY) will make the payments in euros through Hamburg-based European-Iranian Trade Bank AG, said the official, who declined to be named.

Deutsche Bundesbank , Germany 's central bank, has said the payments through EIH aren't a problem as long as India 's government can certify that they are for crude oil purchases, the official said.

"There was a reluctance on the part of the State Bank of India to transact with EIH. They have been given comfort by the government at the highest level," the official said, adding that India currently has outstanding payments of $2 billion towards Iran .

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