Indian banks likely to join hands with Russian lenders not hit by sanctions

Several Indian banks, including Canara Bank, UCO Bank and the Bank of Maharashtra, are likely to join hands with Russian banks that are not hit by Western sanctions to facilitate bilateral payments, an Economic Times report suggested.

In discussions held last week, it was decided that these Indian banks would open accounts with their Russian counterparts and vice versa. This is to ensure smooth trade flows without violating the sanctions imposed on Russia by the West over the Ukraine war. Meanwhile, the Reserve Bank of India is likely to issue an operational circular to pave the way for this.

"While Indian authorities have shown unprecedented seriousness to expand bilateral trades, the Russian delegation ensured every possible measure to promote trade relations,” a person in the know told ET.

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Last week’s meeting was attended by officials from the Indian government, the Reserve Bank of India, the Bank of Russia and bankers from both countries, according to the report. State Bank of India and IndusInd Bank were among the attendees. Several Russian banks under sanctions, including Sberbank and VTB Bank, were also at the meeting.

Provided bilateral trade begins, banking transactions could take place in any currency, including Indian rupee, US dollar, euro and rouble. A proposal to pay Russians in Indian rupees was discussed and members of the Russian delegation requested the RBI to allow Russians to invest the same rupees 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 a yield on the idle money," an executive told the publication.

DH could not independently verify the ET report.