Petersburg Social Commercial Bank, Zenit Bank and Tatsotsbank are among the Russian lenders likely to open these customised trade accounts.
, and are likely to be the local partners of the lenders from Moscow.
Indian Banks’ Association (IBA) is reportedly engaged in facilitating the talks. The Indian Economic Trade Organization (IETO) is coordinating with local companies that are keen on trade with Russia. Banks and the respective regulators are considering setting up a customized common reference exchange rate that will be announced daily by both the Reserve Bank of India (RBI) and the Central Bank of Russia.
By contrast, in the ordinary course of global trade, the prevailing rate of a currency in relation to the US dollar is typically the peg used to derive the exchange rate with a third monetary unit.
Centro Credit Bank, Bank Soyuz and MTC Bank are also said to be part of the group of Russian lenders that are not under global economic sanctions and are negotiating with their local counterparts, such as the
, , and .
Officials at the RBI could not be immediately reached for their comments. Individual banks could not be contacted immediately for comments. IBA and Indian lenders did not respond to ET’s queries.
“A host of Russian lenders are in talks with select Indian banks as they are going through several permutations and combinations,” said Asif Iqbal, president, Indian Economic Trade Organization. “While the rupee-denominated trade with Russia will pave the way for cheaper oil imports, small to mid-sized public sector banks will look at this as an opportunity to expand their operations to territories where they were never present.”
With a strong dollar-denominated balance sheet, the
may not be able to participate in these bilateral trades bypassing Western sanctions, sources said. Unlike small local lenders that have minimum exposure to dollar assets, SBI would not like to risk its sizable presence in the US and Europe’s richer neighborhoods by entering into trade deals that bypass the world’s reserve currency.
The RBI, on July 11, allowed invoicing and payments for international trade in rupees, potentially facilitating greater bilateral business with Russia that is facing a wide range of Western sanctions and is virtually cut off from standard cross-border payment platforms.
The move paved the way for settlement of payments in rupees for trades between Indian and Russia by giving greater flexibility in the operation of vostro accounts that Russian banks open with Indian banks for the purpose. A vostro account is one a foreign bank opens with an
in domestic currency i.e. rupees.
India imported goods worth $4.23 billion in June from sanctions-hit Russia, up nearly seven times compared with last year. Crude oil worth $3.02 billion was reportedly imported in June, which translates into a share of 71% of the total imports from Russia.