Indian banks avoid Russian entities blacklisted by the West

THE GOVERNMENT and the Reserve Bank of India (RBI) are yet to issue formal guidance on banking transactions involving Russian lenders in the wake of Western sanctions triggered by the Ukraine war, but business and industry are increasingly complaining about blockages in transfers of funds and credits during routine transactions between Indian and Russian banks.

With the US and European nations blocking major Russian financial institutions from SWIFT, those entities on the sanctions list cannot receive confirmations of funds transactions executed through the globally accepted messaging network.

But even transactions routed through Russian entities outside of SWIFT’s sanctions list, including that country’s biggest lender Sberbank and Gazprombank, to accounts at some Indian banks face the effect of the restrictions. the indian express has learned

This has made it difficult to execute financial transactions involving Russian banks from an operational standpoint, according to industry sources.

“Regulatory authorities have not issued any clear guidance on exactly how to treat payments from Indian exporters owed by Russian entities. As of now, the banks themselves are taking precautions when dealing with entities on the US, EU and UN sanctions list. Discussions on alternative payment mechanisms are also ongoing,” said a senior banker.

RBI officials and members of the Banking Association of India have held discussions about the impact of the sanctions, with domestic banks following the lead taken by the country’s largest lender, the State Bank of India.

“No transactions involving entities, banks, ports or vessels on a US, European Union or United Nations sanctions list will be processed, regardless of the currency of the transaction,” SBI said in a letter to your customers in the last week of February. SBI did not respond to inquiries from The Indian Express.

Banking sources said Western sanctions on Russian banks “remain a gray area.”

“Banks are unclear on the status of some of the transactions…whether they attract sanctions or not. There is also a possibility that Indian banks are using different criteria,” a source said.

When asked about funds received through SWIFT that were not credited, IDFC First Bank said: “IDFC First Bank is crediting all incoming remittances from Russia to accounts in India, received through the SWIFT system, subject to the compliances applicable to the banking industry”.

From an operational point of view, there seems to be an evolving consensus to play it safe, and Indian banks will not handle transactions involving companies, institutions or ports mentioned on the US or EU sanctions list.

Operationally, however, there are gaps. A key question is this: how will Indian clients or banks prove that the remitted funds are not from a sanctioned entity, given that clients can transfer funds multiple times through other entities within Russia that are not on the list? before sending them to India via SWIFT? .

Several money transfer companies, including Western Union, Wise and Remitly, have stopped services to Russia. Visa and MasterCard have also suspended services in that country.

An alternative payment mechanism is seen as providing a durable solution, the sources said. There are also ongoing talks between India and Russia to allow Indian banks to connect to the Bank of Russia’s financial messaging system, called SPFS, which could facilitate interbank transactions.

The government is considering establishing a Rupee-Roble trade agreement with Russia, based on the exchange rate with a third currency, to ensure that trade flows continue smoothly. India previously had a rupee-ruble trade agreement with the former Soviet Union, mainly for the purchase of military equipment, between 1970 and 1992.

India’s main exports to Russia include pharmaceuticals, mobile phones and seafood, while imports include oil and gas, fertilizers and agricultural raw materials. Bilateral merchandise trade between India and Russia stood at $10.75 billion in the first 10 months of this fiscal year, with India exporting $2.8 billion worth of goods and importing $7.9 billion worth of goods.

The EU has excluded seven Russian banks from the SWIFT messaging system that allows international financial transactions. The United States has banned all energy imports from Russia and sought to restrict Russia’s access to high-tech components made from US parts or intellectual property.

Previous post Business News | Stock Market News | financial news
Next post The worst personal finance advice on TikTok (and why it’s wrong)
%d bloggers like this: