Sberbank, the biggest bank in Russia, has been trying to make trade between India and Russia easier by using their own currencies instead of the US dollar. However, Indian financial regulators are not very keen on approving Sberbank’s plans, according to a recent report by the Indian Express.
One of the main reasons for the hesitation is the Indian government’s credit risk insurance company, ECGC Ltd. This organization has labeled Russia as a “high-risk” country. This rating affects how Indian regulators make decisions about Sberbank’s proposals. Because of this, the Indian Securities and Exchange Board has restricted Sberbank’s foreign investor license. This means Sberbank can only trade in oil and natural gas derivatives, limiting its business opportunities.
Sberbank also wanted to export Russian gold bars to India and sell them to jewelers, allowing transactions in Indian rupees or Russian rubles. However, in March, the Reserve Bank of India turned down this request due to concerns about supervision and regulation.
In response, Sberbank has asked the Indian government to clarify any regulatory issues that are causing delays. They argue that the ECGC’s risk assessment doesn’t consider trade in national currencies like the rupee and ruble, suggesting that these transactions are low-risk because they are outside the Western financial system.
Moscow and New Delhi have been in talks to strengthen their trade relations. Sberbank believes that resolving these regulatory issues would help expand trade in rupees and rubles, allowing for easier sales of commodities and payments to Indian state-run oil and gas companies working in Russia.
Last month, Sberbank’s deputy CEO, Anatoly Popov, highlighted that trade between India and Russia is doing well and that payments are flowing smoothly. Sberbank has branches in New Delhi and Mumbai and runs an IT center in Bengaluru. They handle about 70% of all Russian exports to India.
This discussion comes on the heels of Indian Prime Minister Narendra Modi’s visit to Russia in July, where both countries agreed to work on increasing and diversifying their trade, aiming for a target of $100 billion. In 2023, trade between India and Russia reached an impressive $65 billion, a significant jump from the previous year, largely due to India buying more Russian oil.
Looking ahead, these topics are expected to be discussed at an upcoming meeting of finance ministers and central bank governors from BRICS countries in Moscow. There’s also an important meeting scheduled for November 11 in Mumbai, where Indian Foreign Minister Subrahmanyam Jaishankar and Russian First Deputy Prime Minister Denis Manturov will lead their respective delegations.
The road ahead for Sberbank is uncertain, but the potential for a stronger trade relationship between India and Russia hangs in the balance.
