Pending Government, RBI Guidelines on SWIFT Transactions with Russian Companies: PNB

On March 2, the EU banned certain Russian banks from accessing the SWIFT financial messaging system amid “Russia’s unprovoked and unjustified military aggression against Ukraine.”

On March 2, the EU banned certain Russian banks from accessing the SWIFT financial messaging system amid “Russia’s unprovoked and unjustified military aggression against Ukraine.”

The country’s second-largest bank, the Punjab National Bank (PNB), said it was awaiting advice from the Treasury and Reserve Bank on SWIFT-related transactions with Russian companies.

With the ongoing war between Russia and Ukraine, several countries including the US, Canada and certain European nations have blocked some Russian banks from using SWIFT, a system used for global banking transactions.

“…we have received no advice from RBI/Treasury regarding SWIFT related transactions in relation to Russia. All related actions must be taken upon receipt of guidance from RBI/Treasury,” PNB said in response to inquiries about Russia-related transactions.

Meanwhile, sources said that India’s largest lender, the State Bank of India, has halted transactions by Russian companies sanctioned by the West over Moscow’s invasion of Ukraine.

SBI is said to have issued a circular as it fears any transaction with sanctioned companies or sectors will also result in sanctions. Russia is one of the largest suppliers of defense products and equipment to India, mostly under government contracts.

Bilateral trade between India and Russia so far this fiscal year is $9.4 billion compared to $8.1 billion in 2020-21.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the world’s premier banking intelligence service, connecting around 11,000 banks and institutions in more than 200 countries, including India.

The Belgium-based SWIFT system is considered central to the smooth functioning of global finance, and excluding Russia from it would hit the country hard.

India’s main imports from Russia include fuels, mineral oils, pearls, precious or semi-precious stones, nuclear reactors, boilers, machinery and mechanical equipment; electrical machinery and equipment, and fertilizers.

The main exports from India to Russia include pharmaceutical products, electrical machinery and equipment, organic chemicals and vehicles.

Also in the past, India had developed a mechanism to pay for imports from Iran when sanctions were imposed on the Persian Gulf nation.

The Russo-Ukrainian war entered its 11th day on Sunday, with fighting intensifying in Ukraine’s capital Kyiv and other major cities.

Recently, the major economies of the Group of Seven (G-7) imposed punitive sanctions on the Central Bank of Russia.

They also decided to remove Russian banks from the SWIFT interbank system, which aims to isolate Russia from global trade. India has so far maintained a neutral stance on Russia’s invasion of Ukraine, urging both countries to resolve the issue diplomatically.

India called for “safe and uninterrupted” transit for all its nationals, including students, who are still stranded in Ukraine and in towns in the conflict zones, as it abstained at the UN General Assembly on a resolution condemning Russian aggression deplored Ukraine and reiterated that differences can only be resolved through dialogue and diplomacy.

The exclusion of banks from SWIFT is considered a severe limitation as almost all banks use the system. Russia relies heavily on the SWIFT system for its major oil and gas exports.

On March 2, the EU banned Russia’s second-largest bank VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB from accessing the SWIFT financial messaging system in light of “Russia’s unprovoked and unjustified military aggression against Ukraine.”

These bans will come into effect on the 10th day after their publication in the EU’s Official Journal, the Council of the EU announced on Wednesday.

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