Russia-Ukraine War: SBI to Stop Trade with Sanctioned Russian Entities

According to the sources, India’s biggest lender will not handle any transactions with Russian firms that are subject to international sanctions imposed on Russia following its invasion of Ukraine.

The State Bank of India’s (SBI) exposure to Russia, which is subject to sanctions as a result of its invasion of Ukraine, is less than $10 million. To avoid short-term complications for businesses and commerce, banks will be given 10 days to complete the processing of payments that are already in the system.

While determining the overall system exposure is still a work in progress, the bank (SBI) has limited transaction exposure (less than $10 million), according to a senior bank executive. Following the imposition of sanctions on transactions with Russian firms, the Reserve Bank of India (RBI) intervened to find a solution for blocked payments. It is gathering information on the nature of exposure from all banks.

As per a letter by State Bank of India (SBI), “No transactions involving entities, banks, ports or vessels appearing” on a U.S., European Union or United Nations sanctions list shall be processed irrespective of the currency of the transaction.

In the letter to clients, SBI also advised them to take “additional measures” when dealing with sanctioned countries. Many big Indian corporations have close ties to the state-controlled lender, which has a huge network of international subsidiaries.

“We have a significant international presence and we need to comply with U.S. and EU regulations as we are present in those jurisdictions and we cannot be seen as not adhering to these rules,” said a senior SBI executive.

According to two senior energy sector insiders, SBI has also requested information from Indian oil companies on their exposure to Russia, including shares in Russian assets, funds received from Russia in the last year, and lenders involved in routing these transactions.

The government and the RBI are putting plans in place to ensure that payments for commerce and business continue. Part of their efforts includes investigating the utilisation of the rupee-rouble arrangement.

Banks will have 10 days to wind down their SWIFT activities. Payments in the pipeline are generally exempt from sanctions, but no new ones can be entered into the system. According to a top public sector bank (PSB) official, such leniency was granted when tough sanctions were imposed on Iran as well.

Indian banks will also wait for orders from the government on whether to stop dealing with Russian banks after the United States, the European Union, and its allies moved to isolate some of them from the global financial markets platform, the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

The invasion, dubbed as a “special operation” by Moscow and the largest assault on a European state since World War II, was met with worldwide condemnation and a slew of sanctions.

India, which has extensive commercial and defence connections with Russia, has not publicly criticized its long-standing friend, but has urged for a halt to violence and the use of diplomacy and negotiation to resolve the conflict.

According to Reuters, the European Union has barred seven Russian banks from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system, which underlies worldwide transactions, as part of its sanctions on Russia for its invasion of Ukraine.