* Trade with Iran becoming tighter - Foreign Minister
* Cenbank against using non-rupee currency for payment
By Nidhi Verma
NEW DELHI, March 22 (Reuters) - Energy-hungry India has sought clarification from the European Union on insuring oil supplies from Iran as trade with Tehran gets tougher due to Western sanctions, India's foreign minister said on Friday.
European reinsurance firms under heavy pressure to help block Iran's oil exports are reluctant to deal with Indian insurers that want to cover refineries processing Iranian crude.
The minister, Salman Khurshid, said he had asked the European Union to clarify the situation as he tries to resolve the reinsurance problem and other issues.
"This is something we have to attend to immediately and hopefully in the near future we will find some solution," Khurshid told reporters in New Delhi.
Trade with Iran "is becoming tighter and tougher", he said.
Europe and the United States introduced tough sanctions last year targeting Iran's oil exports to force the Islamic nation to the negotiating table over its disputed nuclear programme.
The head of Indian refiner MRPL said this month that India may halt oil imports from Iran because local insurers had refused to cover refineries processing the oil.
EU sanctions have blocked European reinsurers from any involvement in Iranian oil.
Oil is Iran's biggest income generator and sanctions more than halved its crude exports in 2012.
India, the world's fourth-biggest oil importer, wants crude to feed its expanding economy.
New Delhi and Tehran have been scouting for a stable payment mechanism since December 2010 when India unilaterally ended a decades-old clearing mechanism under U.S. pressure.
Since February, New Delhi has been paying for its oil imports for Tehran in rupees after a route for part-payment in euros via Turkey's Halkbank was blocked.
Khurshid said India's central bank opposed a solution that would involve settling payment in other currencies such as roubles or yen.
He said "enormous" funds were lying in Iran's account with India's UCO Bank and that the resulting trade imbalance with Iran was "a matter of concern".
India's exports to Iran from April to September 2012 amounted to $1.4 billion - a quarter of the value of its imports from Iran during the period, according to Indian government data. (Reporting by Nidhi Verma; Editing by Tom Pfeiffer)