The State Bank of India (SBI) is likely to collaborate with Russian banks that are not subject to sanctions and to remain on the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network in order to create a special rupee vostro account (SRVA) for invoicing in Indian currency. In a statement, the country’s largest lender stated that it has not been designated as the nodal bank for Russia-related transactions.
Subject to certain restrictions, the Reserve Bank of India (RBI) enabled Indian banks, including SBI, to operate an SRVA in July to encourage invoicing in Indian rupees.
Accordingly, the bank in a statement said it is “making necessary arrangements and processing requests received from various banks, including Russian banks”, following guidelines laid out by the RBI.
In July, the banking regulator permitted Indian banks to open SRVAs with lenders from other countries in order to settle international trades in Indian currency. A domestic bank opens a vostro account with a foreign correspondent bank to function as the domestic bank’s agent.
Following the Russia-Ukraine conflict, numerous Russian banks have been sanctioned by Western countries. They’ve also been expelled off the SWIFT network. This meant losing access to the network’s usual smooth and quick transactions, as well as disruptions in payments for Russia’s key oil and agricultural exports. Banks facing sanctions must now engage with other banking firms directly, generating delays and additional expenses.
To avoid US sanctions, state sector lender UCO Bank was picked in 2018 to transit payments from India for Iranian oil purchases. The money from Iran’s oil imports was to be placed into escrow accounts maintained by five of its banks with the state-run UCO Bank under the payment method.
According to SBI executives, the RBI has made it very clear that the establishment of such special accounts is contingent on sanctioned firms and any Financial Action Task Force bad list.
Because SBI has a strong presence in developed countries that have placed sanctions on Russia, it would not interact with numerous Russian banks and organisations facing sanctions.
Some banks from countries with considerable commerce with India have expressed interest in establishing a special vostro account. The conversations are still in their early stages, they stressed.