Two Indian Banks Tie Up With Russian Counterparts To Boost Trade With The Sanctioned Nation

Nearly a month after it was reported that more than 15 Russian banks were in advanced talks with Indian lenders to facilitate bilateral business in their respective local currencies, two of India¡¯s banks have taken a step towards the same.

Uco Bank and Yes Bank have put in place arrangements with two Russian banks as India seeks to step up trade with the sanctioned nation, as per a TOI report.

UCO & Yes Bank Tie Up With Russian Banks To Boost Trade

While Uco Bank, which was the agency responsible for rupee trade with Iran, has tied up with Russia¡¯s Gazprom Bank, Yes Bank and Petersburg Social Commercial Bank (PSCB) also have an agreement in place, sources familiar with the discussions said.

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Uco Bank and Gazprom Bank are said to have done the arrangement after RBI established a mechanism involving the opening of a special vostro account through which payments are to be routed. In absence of a formal arrangement, businesses were routing payments in euros and other currencies, often through the Gulf, which had impacted some of India's exports.

With the shipment of goods from Europe and the US hit by sanctions, Indian exporters sense an opportunity in Russia, especially when it comes to sectors such as pharmaceuticals, food products, textiles and telecom equipment. In April-July 2022 quarter, exports to Russia declined by around 30% to $714 million, as per the TOI report.

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SBI Not Yet A Nodal Bank

About a week ago, SBI had clarified that it has not been identified as a nodal bank for handling Russia-related transactions, as per an ET report.

"Concerning the news published by the media today about SBI being identified as the nodal bank for handling Russia-related transactions, SBI would like to clarify that RBI through its circular on July 11, 2022, has authorised all the banks in India, including the State Bank of India, to open Special Rupee Vostro account to promote invoicing in Indian Rupee. Accordingly, SBI is making necessary arrangements and processing requests received from various banks, including Russian banks, duly following RBI guidelines and our policies and procedures. SBI, as such, has not been identified as a nodal bank," the statement by SBI read.

However, as per TOI¡¯s recent report, SBI has said that it is exploring options for payment arrangements with Russian banks.

Earlier in March 2022, shortly after Russia invaded Ukraine, SBI had stopped processing transactions involving Russian entities against which international sanctions had been announced amidst the Ukraine-Russia war. This was seen as the first major financial step against Russia by India.

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