AKIPRESS.COM - Russia's state-owned development bank VEB and India’s national bank Reserve Bank of India (RBI) have likely finalized an alternative transaction platform to facilitate bilateral trade after Western sanctions firewalled Moscow's access to the globally used Swift banking platform, Economic Times reported.
The new payments system will likely be installed at the headquarters of both the RBI and the VEB, the latter also known globally as the State Development Corporation. VEB is the Moscow-nominated bank that maintains this account with the RBI.
"India offered a number of such transaction platforms out of which the Russian authorities have accepted a particular network protocol. The new system is likely to be put in place within a week.
The system, seen as an alternative to the Belgium-based SWIFT (The Society for Worldwide Interbank Financial Telecommunication), is likely to ensure seamless transfer of import or export documents for Indian rupee-Russian ruble trades that are settled through the Rupee Debt Account.
If a Russian importing company gets a consignment from an Indian exporter, VEB (assuming it is the bank for the importer) receives rubles or dollars equivalent to the value from its local importer. It then informs the RBI to debit the same quantum of rupees from the Rupee Debt Account and credit it to the exporter's Indian bank once the consignment is received in Russia.
All such related documents were earlier generated via SWIFT, which is now out of bounds for Russian lenders due to the economic sanctions. "Documents and payments can be exchanged via this software, which is billed as an alternative to SWIFT globally," said an executive with knowledge of the matter.
Tea, steel, rice and pharmaceuticals are some of the commodities exported to Russia. Defence equipment and fertilisers are key product area for Indian imports from Russia.
Earlier, Indian oil companies have purchased Russian oil at discounted prices to meet domestic demand amid high global crude prices.
"There is no restriction of any kind related to the settlements in national currencies of Russia and India," the Russian embassy in New Delhi said in a letter explaining the sanctions on Sberbank to India’s ministries of external affairs, finance, and commerce and industry as well as the Reserve Bank of India.
A rupee-ruble trade mechanism could be established soon, said president of the Federation of Indian Export Organisations (FIEO). Indian government is working on a proposal to allow four to five state-owned Indian banks to be engaged in such trade.
Some large Russian banks with presence in India include VTB, Sberbank and Gazprombank.
Russian central bank officials are expected to meet their counterparts from the RBI in the first week of April to create a regulatory framework that will help sustain bilateral trade and banking operations despite the global sanctions against Moscow. They are also likely to work on the creation of a dedicated payment mechanism to facilitate India's energy purchases from Russia.
Russia’s foreign minister Sergei Lavrov is scheduled to visit India on March 31 and April 1. This will be the first high-level visit by a Russian official to India after Moscow launched its military operations against Ukraine on February 24.
Lavrov is expected to brief India on Russia's operations and peace talks with Ukraine. India calls for an early cessation of hostilities and push for dialogue and diplomacy to end the impasse.
India has abstained from several United Nations votes on the conflict while highlighting the need for upholding the UN charter and matters of territorial integrity and sovereignty.