Indian lenders and Russia’s Gazprombank have held exploratory talks on 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. .
Correspondence banking involves contractual relationships between banks to provide mutual payment services. The establishment of such a facility with Indian lenders would help businessmen avoid some of the payment-related problems that emerged after the US and its allies imposed sanctions on Russia over its invasion of Ukraine.
“These are initial discussions, and both countries are looking to explore ways to 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 from India’s state-owned lenders as well as some private banks attended the February meeting.
According to another bank manager, Gazprombank representatives shared details of the sanctions, including impermissible transactions, and their internal compliance protocols.
“We have shared our concerns and the constraints within which we have to operate given international sanctions,” said the executive quoted earlier, adding that Indian banks have asked them to look into further exploring bilateral payments through the special rupee tail account (SRVA) mechanism. .
The RBI has allowed 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 bill and pay in their respective domestic currencies and encourage the development of a bilateral foreign exchange market.