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State Bank of India Ramping Up Russia Links On `Dire’ Need

Sanctions that forced SWIFT to halt transactions with Russia are seriously hindering payments for oil and fertilizer imports, said a senior SBI executive.

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State Bank of India
A man checks his mobile phone in front of a State Bank of India branch in Kolkata. Photo: Reuters.

 

State Bank of India (SBI) is striving to ramp up payment transfers via Russian banks as it seeks ways for its customers to continue doing business with the country, said SBI executives familiar with the plan.

One possibility is that payments would be routed through Commercial Indo Bank LLC in Moscow, a joint venture between SBI and India’s Canara Bank, said a person familiar with the matter at SBI. Another option is that payments will be made via a number of other Russian banks, said the person, who declined to name the banks.

“We had some arrangements with Russian Banks earlier, and we are trying re-activate those arrangements to ease up transactions for our clients,” said another senior SBI official. “The intention is to expand the network without violating the international sanctions. ”

 

ALSO ON AF: Russia Becomes India’s Second Biggest Supplier of Oil

 

In Limbo

Sanctions imposed on Russia after it invaded Ukraine in February forced the international payments system SWIFT to halt transactions with the country.  SBI has since  “essentially stopped” processing transactions involving Russian clients, one of the people said.

The sanctions are seriously hindering payments for oil, and fertilizer imports for its clients, the person said, adding that there is a ”dire” need for a solution.

“This is despite the fact that commodities like oil, food grain, and fertilizers are outside the sanctioned list,” one of the people said.

State-owned SBI, India’s biggest bank, is waiting for the Reserve Bank of India to give the go-ahead to re-activate arrangements with Russian banks, said one of the people.

India has close defence and trade links with Russia and has refrained from publicly denouncing its long-time ally.

 

SWIFT Alternative

SBI, along with the Reserve Bank of India and the government, is also working on ramping up an international payment gateway.  SBI hopes it can emerge as an alternative to the SWIFT system.

“SBI already has an internal payment gateway (SFMS) that the bank uses for internal transactions,” one of the people said.  “There is an ongoing discussion to extend that gateway for all transactions as an alternative to SWIFT after it was banned in Russia.”

All Indian banks use an RBI-approved secure messaging standard for intra-bank and inter-bank applications called the Structured Financial Messaging System (SFMS). This is an Indian standard similar to SWIFT.

The RBI, said in its recent “Payments Vision2025 ” blueprint that it aims to establish India as a global payments powerhouse using the SFMS as one of the tools.

“The internal gateway could be expanded separately or linked to the NPCI International Payments Limited (NIPL),” the SBI official said.

NIPL is a payment gateway developed and owned by the National Payments Corporation of India (NPCI), which is already building an acceptance network for deployment of RuPay (a local card scheme) and UPI (a mobile payment solution) outside of India.

NPCI claims that it has already established a global payment network that is linked to Discover Financial Services (DFS) in the US, Japan Credit Bureau (JCB), Union Pay International of China, Royal Monetary Authority of Bhutan, and Network for Electronic Transfers (NETS), Singapore.

 

  • By Indrajit Basu

 

READ MORE:

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China Can’t Take Place of SWIFT System, Analysts Say

 

Indrajit Basu

Indrajit Basu is an India-based correspondent for Asia Financial and wears two hats: journalist and researcher (equity). Before joining AF he reported on business, finance, technology, wealth management, and current affairs for China Daily, SCMP, UPI, India Today Group, Indian Express Group, and many more. He is also an award-winning researcher. If he didn't have to pay bills, he would be a wanderer.

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