Indian banks shun rupiah trade with Russia – Reuters – RT Business News

Major Indian banks are avoiding direct rupee transactions with Russia for fear of being targeted by Western sanctions, Reuters reported on Monday, citing people familiar with the matter.

This comes less than a month after the State Bank of India agreed to introduce a simplified rupee settlement mechanism aimed at boosting mutual trade.

An Indian diplomat told the outlet that Russian banks had asked India’s eight largest lenders to arrange settlement in the local currency, but received no response.

These banks include India’s largest lender, State Bank of India, as well as Punjab National Bank, Bank of India, Bank of Baroda and Central Bank of India. Sources within the credit institutions told the news agency that their management did not plan to use this mechanism, at least not yet.

According to a senior official at a major state-owned bank, financial entities fear punishment from the US and EU for trading rupees with Russia. “They [Western nations] may impose a sanction on us, it will be a major loss of business and reputation,” said the banker.

Indian banks that are exposed to the international financial system stick to dollars or euros in dealings with unsanctioned Russian lenders. They fear that their activities will be disrupted if they are subject to sanctions.

Currently, only two small lenders, Yes Bank and UCO Bank, which have agreements with Russia’s PSCB and Gazprombank, use the rupee payment mechanism.

In September, the Economic Times reported that Indian banks had received around 20 requests from Russian credit institutions to open accounts. The Rupee Trade Initiative was put in place to bypass the US Dollar, thereby ensuring uninterrupted cross-border trade between the two countries.

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