Russia-Ukraine war: RBI board discusses geopolitical impact on economy

Sources say Indian banks have small exposure to the two warring countries; but oil price surge above $100/bbl mark could impact India's current account deficit and inflation

The central board of the Reserve Bank of India (RBI) met on Friday and discussed several issues including the fallout of the Russian invasion of Ukraine on the Indian economy.

“The Board in its meeting reviewed the various areas of operation of the Bank and the current economic situation, global and domestic challenges including the overall impact of current global geopolitical crises,” the central bank said in a statement.

Sources indicate that Indian banks do not have large exposure to the two countries that are at war. However, oil prices surged after the tensions escalated and are trading above the $100/bbl mark which could impact India’s current account deficit and inflation. Pump prices of petrol and diesel were hiked three times in the last four days. The rupee slumped to an all time low earlier this month prompting the central bank to sell dollars to stem the currency’s fall.

India is also planning to devise an alternative payment mechanism to pay Russia for oil imports after western countries blocked Russia from using the Swift payment network.

The central board also discussed the Reserve Bank’s activities during the current accounting year 2021-22. “The Board also approved the budget for the accounting year 2022-23,” the statement said.

The meeting which was chaired by RBI governor Shaktikanta Das was also attended by all the four deputy governors, and also other directors of the including Satish K. Marathe, S. Gurumurthy, Revathy Iyer and Sachin Chaturvedi.

Government’s nominee directors, Ajay Seth, Secretary, Department of Economic Affairs and Sanjay Malhotra, Secretary, Department of Financial Services also attended the meeting, RBI said.