Cooperation could be seen as attempt to circumvent US sanctions, Indian bankers say
Indian banks and financial institutions do not support the idea of integrating the country’s internal Financial Reporting System (SFMS) with Russia’s Financial Messaging System (FSFS), the Economic Times reported on Friday citing sources. of the banking sector.
Indian financial institutions are said to be concerned that the move could be seen as an attempt to circumvent US sanctions imposed on Russian banks as part of broader sanctions in response to Moscow’s military operation in Ukraine.
The issue was raised on Wednesday when Indian and Russian bankers held a meeting to discuss “rupee trading”, a senior banker told media.
The proposed plan offers the possibility for any Russian bank, once under sanctions, to find a way to connect to Indian banks where it has vostro accounts (where one bank handles another’s money) through a secure channel. Aligning the Russian messaging system with the Indian SFMS should help.
However, dealing with a Russian bank under US sanctions would not be considered a safe procedure for Indian lenders.
“Whether the deposits of a Russian bank (en vostro) would be blocked in the event of a sanction is a hypothetical question at this stage. But tying SFMS to the Russian system could be seen as a way to circumvent US sanctions to deal with a sanctioned Russian bank,” said an industry source quoted by the ET.
Some small and medium Russian banks which have not yet been targeted by the sanctions and which are ready to open accounts in India also fear the consequences of possible future sanctions.
“Some public and private Indian banks have approached the RBI [central bank] to manage vostro accounts of Russian banks. It is not known if anyone has received permission so far,” said another banker, quoted by the media.
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