Russia wants payment messaging system to align, but Indian banks are wary
To protect themselves from freezing funds due to additional sanctions imposed by Western countries, Russian banks and other financial institutions are looking for ways to bring their country’s payment messaging system in line with India’s messaging system. Indian banks are reluctant to the idea, however, according to a report by Economic period.
If the courier platforms are connected, it could help improve the payment settlement mechanism between the two countries. Russian bankers believe it will help them if additional sanctions are imposed on Russia in the coming days, the report added.
“Russian banks, which are still unaffected by US sanctions, do not have a branch in India. Once such a bank is under sanctions, its office in Russia will want to find a way to communicate via a secure channel with Indian banks where she has vostro accounts.For this they believe that the Russian mail system should be connected to SFMS.Emails are not considered a safe mode to share payment details and no bank uses fax anymore,” one banker said in the report.
Indian banks, meanwhile, believe that if the move is implemented, it could be seen as a way to circumvent sanctions imposed on Russia by the United States. The United States and the European Union (EU) have imposed numerous sanctions on Russia since it attacked Ukraine in February.
“Whether deposits from a Russian bank (en vostro) would be blocked in the event of a sanction is a hypothetical question at this stage. deal with a sanctioned Russian bank,” said an Indian industry expert.
Currently, Russia is a member of the Society for Worldwide Interbank Financial Telecommunication (SWIFT). It is a global courier service provider for confirmation of cross-border payments. Since the outbreak of the war in Ukraine, talks have taken place in the EU and the United States to exclude Russia from the mechanism. However, no steps have yet been taken in this direction.
In July, the Reserve Bank of India authorized the settlement of payments between Russia and India in rupees. With this, countries can avoid USD when making payments and use INR instead. For the two countries’ messaging platforms to be aligned, the RBI needs to display a green flag, which it has yet to do.