Indian banks may join hands with Russian banks

These Indian banks will likely open accounts at their Russian counterparts and vice versa, as decided in the meetings held in New Delhi to ensure trade flows without violating the economic sanctions on Russia over the Ukraine war.

The Reserve Bank of India (RBI) is expected to come out with an operational circular, paving the way for this. Such accounts, held by one bank in another in a foreign country are known as Loro, Vostro, and Nostro.

From the Russian side, nearly a dozen banks that are not under sanctions held discussions with the Indian regulators, banks, and government officials.

If these banks from both sides start engaging bilaterally, banking transactions can take place in any currency: USD, EUR, INR, or RUB. A proposal of paying Russians in rupees was also discussed. Some members of the Russian delegation said such transactions were possible but requested the RBI to permit them to invest the same rupees in Indian assets.

There are about 450 small banks in Russia that form less than one-fifth of the local banking assets/liabilities there.