How Indian, Russian banks plan to bypass sanctions to facilitate trade

In a bid to ensure smooth flow of trade without violating the West's economic sanctions on Russia, the Indian banks will open accounts with their Russian counterparts, and vice versa

Canara Bank, Bank of Maharashtra, UCO Bank and other Indian banks are planning to tie up with Russian banks, which have not been sanctioned by the West, to facilitate bilateral payments, a media report said. 

To ensure smooth trade flow without violating the West's economic sanctions on Russia amid the Ukraine war, the Indian banks will open accounts with their Russian counterparts and vice versa, The Economic Times reported. 

The Reserve Bank of India will likely issue an operational circular to pave the way. 

An executive, who attended last week's meeting in New Delhi, where officials from the Centre, RBI and the Bank of Russia were present, told ET, "While Indian authorities have shown unprecedented seriousness to expand bilateral trades, the Russian delegation ensured every possible measure to promote trade relations."

State Bank of India and IndusInd Bank were also in the meeting, ET reported. Meanwhile, from Russia, nearly a dozen banks not under sanctions held talks with Indian regulators, government and bank officials. 

Petersburg Social Commercial Bank, Zenit Bank, Tatsotsbank, CentroCredit Bank, Bank Soyuz, MTC Bank and Gazprombank were among the Russian banks that participated in the meeting, ET reported. 

From the Russian delegation, some members proposed to make transactions in rupee, requesting the Indian central bank to allow them to invest in Indian assets.

"If they cannot convert the rupee into rouble immediately, those Russian banks can invest in Indian financial assets via a dedicated route to earn yield on the idle money," another executive present at the meeting told ET.

Amid the ongoing Russia-Ukraine war, the West has imposed sanctions on Russia's nine major banks that contribute to the nation's four-fifths of the banking industry. The other one-fifth is constituted of nearly 450 small banks. The West has also put a firewall on Moscow's access to the SWIFT banking platform, a move that has affected the payment networks, upsetting the lenders. 

After the war, Russia became India's second-largest oil supplier after Iraq, as private refiners made big bets on deep discounts being offered by Moscow. 

In May, India's oil purchases from Russia rose to 18 per cent, at nearly 8,19,000 barrels a day, as the Centre for Research on Energy and Clean Air reported.