BackIndia exploring payment alternatives for Russian biz
The methods being explored include routing payments through smaller Russian banks
PremiumBENGALURU : The Centre and the Reserve Bank of India (RBI) are exploring alternative mechanisms to process financial transactions involving Russian businesses, including routing payments through smaller Russian banks which have not been put under sanction, local currency trade and third-country payments, said two government officials, requesting anonymity.
The departments of economic affairs, financial services and commerce, and the ministry of external affairs are brainstorming over releasing payments to exporters and businesses that have been affected by the sanctions imposed by the US, UK and EU following Russia’s invasion of Ukraine.
“Departments are exploring options to resolve the issue. One option is whether payments can be routed through small Russian banks that have not been sanctioned," said one of the two officials. Trade estimates put the due amount at $400-500 million.
The West, led by the US, has excluded some Russian banks from the SWIFT financial transaction system. “So far, SWIFT has been excluded for large banks. We could look at the other banks. But again, there are sanctions on products, so those cannot be traded. However, RBI is looking into the payments issue and will revert with the best possible way out," said the second official.
In FY21, Indian exports to Russia stood at $2.6 billion, while imports were at $5.5 billion.
India shipped pharma products worth $469 million and electrical machinery worth $301 million to Russia. Other major items include tea, coffee, apparel and textiles. During April 2021--January 2022, India’s exports stood at $2.99 billion, up 25% from a year ago, and accounting for 0.84% of India’s overall exports.
“Feasibility of rupee-rouble trade is also being explored. But it will have its difficulties as sanctions have come into effect for all products other than agriculture, pharma and energy. Also,the rouble is not a freely convertible currency," the second official added.
Queries emailed to spokespersons of the ministries of finance, commerce and industry, and external affairs remained unanswered at press time.
The commerce department set up a help-desk last week for traders as the Russia-Ukraine conflict intensified. Most queries so far pertain to financial transactions-related difficulties faced by exporters.
Meanwhile, representatives of the Indian Bankers’ Association met with banks to understand the exporters’ concerns and will share these with the RBI to devise a mechanism for processing pending payments.
Exporters have raised concerns with the government and banks to get clarity on whether their pending payments were secure and whether they should continue to export.
Last week, the Export Credit Guarantee Corp of India changed the cover category shipments to Moscow from ‘open cover’ to ‘restricted cover’, which has revolving limits (normally valid for a year), and are approved on a case-by-case basis.
The state-owned export credit provider clarified that the cover for shipments to Russia has not been withdrawn, but modified with effect from 25 February.
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