State Bank of India has decided not to process any new transactions involving Russian entities that are subject to international sanctions imposed on Russia following its invasion of Ukraine.

“SBI has huge international presence and it will have to comply with sanctions in the US and EU that are set out by the governments there,” said a person familiar with the development.

SBI did not respond to an email query from BusinessLine on the issue.

According to Reserve Bank of India data, SBI had 74 offices overseas as on October 31, 2021. This includes a representative office in Washington and also subsidiaries in the US, the UK and Canada, amongst other places — SBI (California) Ltd, SBI (UK) Ltd and SBI (Canada) Ltd respectively.

It also has a joint venture with Canara Bank in Moscow called the Commercial Indo Bank LLC. While SBI has 60 per cent stake in it, Canara Bank has 40 per cent stake.

Other Indian banks do not have presence in Russia in the form of offices, branches or subsidiaries.

Cautious approach

However, most Indian banks remain cautious and are closely monitoring the developments, given the decision by many countries to bar certain Russian banks from SWIFT.

Some lenders are understood to be looking at alternatives but will await further indications from the regulator and the government and said the next few days will be crucial.

Another banker also said larger banks may face challenges although there is not too much of an impact as of now. “One of the problems may be of remittances and payments, a lot of which doesn’t come directly to the bank, but comes via an exchange house. Banks end up losing forex income and remittances,” he said.

Experts said as such banking transactions with India for now have a limited impact and pointed out that even with US sanctions on Iran, an alternative had been found in the form of UCO Bank.

“The ban on select Russian entities from SWIFT will have limited impact on India but there continue to be options for banking such as using the entities that are not barred or using currencies such as INR, and even barter. However, it will be critical to see how Russia manages to deliver defence equipment as per the committed timelines,” said Kuntal Sur, Partner, Financial Risk and Regulation, PwC India.

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