Several bankers have raised concerns with the Reserve Bank of India over business dealings with Russian entities. Banks have expressed concerns about their current exposure to Russian entities. Among the bankers present were representatives from the public sector, private and foreign banks who met with RBI executive directors on Friday, Mint reported. The meeting comes after the central bank asked all banks to share details of their level of exposure to Russia.
“RBI wanted to know the details of the exposure of the banks and the total exposure of the banking sector to Russian entities. There are problems on SWIFT and payment. This is uncharted territory. It’s different from sanctions against Iran because it’s on a larger scale. Our customers are worried about inflation and rising costs,” one of the bankers at the meeting told Mint.
Following Russia’s invasion of Ukraine, the United States, NATO, Australia, Japan and the EU imposed several financial sanctions on Russia. These include the expulsion of several Russian banks from the SWIFT communication network, as well as sanctions concerning other sectors of the Russian economy.
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With Russia now excluded from international markets, it is much more difficult to trade with Russia because the country no longer has access to currencies like the dollar, which are mainly used for international trade.
India channeled all of its payments for Iranian crude, which has been subject to sanctions, through a single bank with limited foreign exposure, UCO Bank. These payments were made in euros and rupees instead of dollars.
While India has circumvented US sanctions in the past, the scale of the new Russian sanctions is adding to its problems. Discussions on activating a rupee-ruble trade pact to process payments have been initiated, but no decision has been made on this yet. Although Russia is not a huge trading partner for India, it is a key strategic arms supplier for India, with trade between the two countries worth $8.1 billion. in fiscal year 21.
First post: STI