Indian lenders and Russia’s Gazprombank have held exploratory talks over setting up correspondent banking services to facilitate cross-border payments and support international trade, according to a senior bank executive.Gazprombank representatives met some Indian bankers last month to discuss the proposal, the executive told ET.
Correspondent banking involves contractual relationships between banks to provide reciprocal payment services. The establishment of such a facility with Indian lenders would help traders skirt some of the payment-related problems that have arisen after the US and its allies imposed sanctions on Russia for its invasion of Ukraine.
Correspondent banking involves contractual relationships between banks to provide reciprocal payment services. The establishment of such a facility with Indian lenders would help traders skirt some of the payment-related problems that have arisen after the US and its allies imposed sanctions on Russia for its invasion of Ukraine.
“These are early-stage discussions, and both countries are looking at exploring measures to further strengthen banking ties,” the executive said.
Gazprombank, which has been operating in India for a decade, is looking to expand its presence, capital and operations, the executive said, adding that senior executives of India’s state-owned lenders as well as some private banks attended the February meeting.
According to another bank executive, the representatives of Gazprombank shared details on the sanctions, including non-permissible transactions, and their internal compliance protocols.
“We shared our concerns and the constraints within which we have to operate in view of international sanctions,” the executive cited earlier said, adding that Indian banks asked them to look at further exploring bilateral payments through the special rupee vostro account (SRVA) mechanism.
The RBI has permitted 20 banks operating in the country to open 92 SRVAs of partner banks from 22 countries, including Russia, Bangladesh, Germany, Israel, Malaysia, New Zealand, Oman, Singapore, Sri Lanka and the UK.
The exercise is an effort to promote bilateral trade in local currencies, which in turn will enable exporters and importers to invoice and pay in their respective domestic currencies and encourage the development of a bilateral foreign exchange market.
