As Russia seeks to expand trade in rupee-rouble, RBI & SEBI remain wary

While some of these issues were likely discussed during the recent visit of Prime Minister Narendra Modi to Russia, emails seeking comment from RBI and SEBI on the current status did not elicit a response. Sberbank had set up a branch in India in 2010 with an objective to support Indo-Russian trade and create a strategic presence.

According to sources, sensing opportunities to sell gold in the Indian market, Sberbank AG sought a licence from the RBI to export 100 tonnes of Russian gold bars to India and directly sell in national currencies to jewellers. Its application for an import licence in December 2023 was rejected by the RBI in March this year citing “supervisory concerns”.

Further, the Russian side also pointed out that the 15 per cent import duty on Russian gold is 1 per cent higher than that on UAE gold which attracts 14 per cent given India’s bilateral agreement with the West Asian country. Russia has sought a similar agreement with India.

While the Ministry of External Affairs and the Embassy of India in Russia supported a relook of ECGC’s country risk classification list, it continues to be fixed at C2 — or high risk — level. Seeking a review, Sberbank AG said that ECGC’s model of risk assessment did not consider the existence of trade in national currencies. The risk of rupee or rouble trade is non-existent, it claimed. Despite this, no changes were made to the risk level in the list as of March ending this year.

Financial regulators SEBI and RBI are unclear if Russia is still a member of the Financial Action Task Force following its suspension after Russia attacked Ukraine in 2022. Sberbank said Russia is still a member of FATF, and hence requested the government to issue a clarification to the regulators.

Further, Russian stakeholders including banks have reported difficulty in accessing government of India sides, and those of the RBI and SEBI, due to internet firewalls. To continue normal business, one of the issues on the agenda was a request to allow unhindered access to various government-related sites.

Sberbank said addressing these issues would help expand the rupee-rouble trade, including trade in commodities, payment of dividends to Indian companies (many oil PSUs dividends are stuck) for their projects in Russia. It said since these trades are conducted outside the Western financial system, they were immune to external disruptions.