Awaiting Government, RBI Guidelines On SWIFT Transactions With Russian Entities, Says PNB

The country's second-largest bank Punjab National Bank (PNB) said it was awaiting advisory from the Finance Ministry and the Reserve Bank with regard to SWIFT-related transactions with Russian entities.

In view of 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 that is used for global banking transactions.

"...we have not received any advisory from the RBI/Finance Ministry regarding SWIFT-related transactions with respect to Russia. Any action in this regard shall be taken after receipt of guidelines from RBI/Finance Ministry," PNB said in a response to queries on Russia-related transactions.

Meanwhile, sources said that India's largest lender State Bank of India has stopped processing transactions of Russian entities that have been sanctioned by the West over Moscow’s invasion of Ukraine.

SBI is learnt to have issued a circular as it fears that any transaction with entities or sectors under sanction will invite sanctions on it as well. Russia is one of the biggest suppliers of defense products and equipment to India mostly under government-to-government contracts.

Bilateral trade between India and Russia stood at $9.4 billion so far this fiscal year, against $8.1 billion in 2020-21.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is the world's main banking messaging service which links around 11,000 banks and institutions in more than 200 countries, including India.

Based in Belgium, the SWIFT system is considered central to the smooth functioning of global finances and Russia's exclusion 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 appliances; electrical machinery, and equipment and fertilizers.

Major export items from India to Russia include pharmaceutical products, electrical machinery, and equipment, organic chemicals, and vehicles.

In the past too, India had devised a mechanism to pay for imports from Iran, when sanctions were imposed on the Persian Gulf nation.

The Russia-Ukraine war entered its 11th day on Sunday, with fighting intensifying in the Ukrainian capital Kyiv and other big cities.

Recently, the Group of Seven (G-7) major economies imposed punitive sanctions against the Russian central bank.

They also decided to remove Russian banks from the SWIFT inter-banking system -- which is intended to isolate Russia from global trade. India has so far maintained a neutral stance on Russia’s invasion of Ukraine asking both countries to resolve the issue diplomatically.

India demanded 'safe and uninterrupted' passage for all its nationals, including students still stranded in Ukraine and cities in the conflict zones, as it abstained in the UN General Assembly on a resolution deploring Russian aggression against Ukraine and reiterated that differences can only be resolved through dialogue and diplomacy.

Removing banks from SWIFT is deemed to be a severe curb because almost all banks use the system. Russia is heavily reliant on the SWIFT system for its key oil and gas exports.

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

These prohibitions will come into force on the 10th day after the publication in the official journal of the EU, the Council of the EU said in a release on Wednesday.