 "RBI, Reserve Bank of India")
With the Russian invasion into Ukraine prompting the West to impose tough sanctions on Russia, the Reserve Bank of India (RBI) is also gauging the extent of damage to the Indian banking sector due to the worsening geopolitical situation.
The Indian Banks’ Association (IBA) called a meeting with top banks of the country on Monday. It asked them to submit detailed information on their exposure to both Russia and Ukraine.
Banks have been asked to furnish the details by Wednesday to the banking regulator. According to bankers, the RBI is likely to announce measures after taking stock of their exposure to both the countries.
“They were inquiring about the possible problems banks could face and the exposure banks have in Russia and Ukraine,” said an official close to the development. “Prima facie, it seems banks may not have large exposures in these countries. Some of the banks may have exposure in the form of guarantees,” the official added.
State Bank of India — the country’s largest bank — has a joint venture with Canara Bank in Russia, namely Commercial Indo Bank. SBI has 60 per cent stake in the bank, while 40 per cent is with Canara Bank. According to bankers, payment made by one of the public sector banks to Russia will hit a wall as the SWIFT system has been cut off from Russian banks. On Saturday, the US and the EU banned several Russian banks’ access to the SWIFT payment system, following the unrelenting Russian attack on Ukraine. This would make it more difficult to make payments to and from Russia.
The move is intended to harm Russian president Vladimir Putin’s ability to finance the war. Western counties have also sanctioned the Russian central bank which will deter Russia from using its reserves to support the rouble.
Five Russian banks are facing the ban that includes state-backed Sberbank and VTB — that make up around half of Russia’s banking assets.
The sanctions against Russia and cutting off SWIFT may impact India’s trade with Russia, which is $9.4 billion so far this fiscal year, as compared to $8.1 billion in 2020-21. Russia’s exports to India are mainly oil, fertiliser and rough diamonds while India’s exports to Russia include pharmaceutical products, tea and coffee.
Bankers said they are also expecting some advisory from the RBI on their dealing with Russian banks present in India.
“There has been no communication on the issue so far. Maybe because it’s too early. RBI may first want to gauge the extent of Indian banks’ transactions with Russian banks before announcing any steps,” said another banker.
