India exploring payment options for Russian business

The Departments of Economic Affairs, Financial Services and Commerce and the Ministry of Foreign Affairs are considering releasing payments to exporters and businesses that have been affected by sanctions imposed by the US, UK and European Union following Russia’s invasion of Ukraine.

“Departments are exploring options to resolve the issue. One option is whether the payments can be made through smaller Russian banks that have not been approved,” said one of the two officials. Business estimates put the payable amount at $400-500 million.

The West, led by the US, has excluded some Russian banks from the SWIFT financial transaction system. “As of now, SWIFT has been excluded for large banks. We can look at other banks. But again, there are restrictions on the products, so they cannot be traded. However, RBI is looking into the payment issue and will revert in the best possible manner,” said another official.

In FY21, Indian exports to Russia stood at $2.6 billion, while imports stood at $5.5 billion.

India sent pharma products worth $469 million and electrical machinery worth $301 million to Russia. Other major commodities include tea, coffee, apparel and textiles. During April 2021-January 2022, India’s exports stood at $2.99 ​​billion, a 25% increase from a year ago, and accounted for 0.84% ​​of India’s total exports.

“The feasibility of rupee-ruble trade is also being explored. But it will have difficulties as restrictions have come into force for all products except agriculture, pharma and energy. Moreover, the ruble is not a freely convertible currency,” said the second official.

Questions emailed to the spokespersons of the Ministries of Finance, Commerce and Industry and External Affairs remained unanswered at press time.

The Commerce Department last week set up a help-desk for traders as the Russia-Ukraine conflict intensified. So far most of the queries pertain to the difficulties faced by the exporters related to financial transactions.

Meanwhile, representatives of Indian Bankers’ Association met banks to understand the concerns of exporters and will share these with RBI to work out a mechanism to process pending payments.

Exporters have raised concerns with the government and banks to clarify whether their pending payments are safe and whether they should continue exporting.

Last week, Export Credit Guarantee Corp of India changed the cover category of shipments to Moscow from ‘open cover’ to ‘restricted cover’, with revolving limits (normally valid for one year), and case-by-case. Cases are accepted.

The state-owned export credit provider clarified that the cover for shipments to Russia has not been withdrawn but has been revised with effect from February 25.