Russia-Ukraine tensions: Banks see minimal impact on biz, trade financing

Indian banks expect a minimal impact on their business as well as trade financing due to the geopolitical issues involving Russia.

However, defence imports from Russia, India's largest supplier, could be hit if countries led by the US impose restrictions, bankers said.

The Commercial Indo Bank, a joint venture between public-sector State Bank of India (SBI) and Canara Bank, is the only Indian bank with a presence in Russia with a small balance sheet of $100 million. Trade between India and Russia is also miniscule at just above $8 billion. All these factors are helping bankers relax even as the crisis in Ukraine has turned worse.

"As of now, there is no significant impact. The only area it could hit India is defence imports, which is dominated by Russia but that is a government-to-government interaction and banks have a limited role to play. Most of the small trade happening between India and Russia is processed either by multinational foreign banks or Russian lenders with offices in India so in that sense Indian lenders are relatively insulated from this volatility," said a senior banker with a large public sector bank.

India imports some oil and capital equipment from Russia. The oil imports are very small at less than $5 billion out of India's annual bill of $150 billion. Analysts do not expect Russia to be excluded from the global financial system immediately because unlike India, a large part of Europe depends on oil and gas supplies from Russia. However, in case of tough sanctions bankers say India can revert to the rupee-ruble trade where both countries can pay each other in their own currencies which can be set off by the trade.

"India's imports from Russia amounted to about $5.5 billion in fiscal 2021 while exports were at just $2.6 billion so in terms of trade there will be no impact," said Madan Sabnavis, chief economist, Bank of Baroda.