The semi-official Fars news agency quoted an unidentified senior Oil Ministry official as saying it will not authorize shipments of crude oil to India as of August 1 if overdue payments are not made.
The semi-official Mehr news agency quoted Central Bank of Iran Governor Mohammad Bahmani as saying that India owes Iran about USD 5 billion.
A plan for India to funnel oil payments to Iran through Germany's central bank in April was scrapped at a time when Tehran faces international sanctions over its controversial nuclear programme.
"If the problem over crude oil payments is not resolved, it's very likely that Iran won't authorize crude oil shipments to India in August," Fars quoted the official as saying.
India reportedly imports 12 million barrels of crude oil, or more than 12 percent of the nation's total, every month from Iran. This makes Iran its the second-largest supplier after Saudi Arabia.
The semi-official Mehr news agency quoted Bahmani, the governor, as saying that the problem over overdue payments has nothing to do with the banking system but "political issues."