New Delhi: Russia’s largest bank Sberbank will invest in Indian capital markets and also help Russian retail investors gain access to the benchmark Nifty50 index on the national stock exchange, Herman Gref, chief executive officer (CEO) and chairman of the lender, said on Thursday.
In an interaction with reporters, the CEO said that the bank’s investment plans in India include investments in government securities.
The Sberbank chief’s comments came as a Russian delegation led by President Vladimir Putin is in Delhi on a two-day visit starting Thursday. Gref served as Russia’s Minister of Trade and Economy from 2000-2007 and then headed the state bank.
He said the state-run lender recently launched a vehicle for private Russian investors to invest in Nifty50 companies. The Nifty50 is a stock market index that represents a weighted floating average of the 50 largest Indian companies listed on the national stock exchange.
“We launched (the tool) three days ago. We launched a special tool for private investors in Russia (to get) an opportunity to invest in the Nifty50 index. And as we see, it would be a good opportunity for Russian companies, for Russian private individuals to invest in India,” he said, adding that allowing Russian private investment would help generate more interest among these investors in Indian companies.
The awakening of sanctions
Russia’s move comes at a time when billions of dollars worth of rupees are sitting idle in Indian banks. The increase came as Western sanctions over the Ukraine war made it harder for Russia to use dollars or euros for trade, forcing Moscow to settle more transactions with Delhi in Indian currency.
Sberbank, Russia’s largest lender, handles about 65-70% of India’s exports to Russia and 10-15% of Russia’s exports to India. The two countries now have a total bilateral trade of $68.7 billion.
Amid Western sanctions over the past three years, Russian entities have sought newer investment avenues for their funds parked in India, mostly in Vostro rupee accounts. The Vostro accounts were opened due to a lack of investment opportunities in India-Russia trade, continued exchange rate volatility and problems with repatriation of funds following Western sanctions over Russia’s February 2022 invasion of Ukraine.
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In another major development, the bank received a special license to export gold to India, Gref said. India is a major importer of gold. Gold imports rose 199.2% year-on-year to $14.72 billion in October, boosted by pent-up demand and the festival season, according to Commerce Department data.
With a banking license and branches in two cities in the country, Sberbank plans to expand its operations in the country and offer complete retail services in India. It aims to establish a total of 10 branches in the country, Gref said. It will also set up a 40,000-50,000 sq ft corporate office in New Delhi.
“Over the next three years, we will expand our business here and implement a whole range of banking operations in B2B and B2C. It would not be that fast, but step by step,” he said.
Planned retail operation
About its retail banking plans and discussions with the Indian government, the head of Sberbank said: “We will also start with retail operations. But we don’t want to jump. It will go step by step. We discussed a new 10-year strategy. And in 10 years we will become a normal bank with a full package of operations.”
In September, Mint reported that Sberbank was piloting a cashless payment system for Russian tourists. Mint also reported earlier that India and Russia are exploring a link between India’s UPI and Bank of Russia, as well as integration of India’s RuPay with Russia’s MIR cards.
Regarding plans to invest in government securities, Gref said that along with investing its own funds in Indian treasury bills, the lender will also allow other Russian investors who are interested to invest.
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This investment is likely to be in rupees and the surplus of rupees parked in India is a problem facing Sberbank, he said. Without disclosing the exact amount of rupees parked in the bank, he said “several billion dollars worth of rupees” are currently parked in the bank.
He expressed optimism about the rupee-ruble trade and said it did not require intervention. Instead, he emphasized the need to develop adequate market instruments to expand bilateral trade in the two currencies.
“I think it is a bad idea to fix the currency (in the rupee-ruble trade). We need to develop market instruments,” he said.
Mint had earlier said that the rupee settlement mechanism introduced in 2022 to facilitate trade with sanctioned countries has failed to gain traction with India’s largest oil supplier, Russia, and Indian refiners continue to take Russian crude supplies through UAE-based traders and settle transactions in dirhams.
Confidence in the economy
Russia’s top banker has expressed confidence in the Indian economy and said he expects India to grow at a sustained rate of 6-7% annually for the next 10 years.
Comparing India’s current economy with China’s in the last decade, he said, “I feel in this country (India), I feel the same way I did 15 years ago in China. I think the growth in India might not be as fast as in China…but long-term and sustainable.”
“It is the right moment to invest in India and also to support the country in building more sustainable relations with our country.”
Gref’s remarks on the Indian economy follow growth numbers from the latest September quarter, which saw gross domestic product grow by 8.2%, well ahead of estimates.
Emphasizing the need to boost bilateral trade, he said, “If we can increase our imports from India to a few billion USD, maybe that would be good, the best thing we can do for both countries, because Russia needs more sustainable relations and Indian goods, and India needs that.”
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Bilateral trade between Delhi and Moscow reached a record $68.7 billion in FY25, nearly 7 times the pre-pandemic level of $10.1 billion. However, the widening trade deficit remains a concern as India imported $63.84 billion – mostly oil – while exports were just $4.88 billion.
Responding to a question about US sanctions against Russia’s two largest oil suppliers, Rosneft and Lukoil, and the likely impact on bilateral trade, Gref stressed the need to expand the trade basket.
“Will it suddenly, dramatically overnight, go back to $12 billion, or will it find replacement business that can actually sustain that level? I think it’s not such a good idea to depend on one type of commodity here. That’s why we’re trying to, uh, bring more opportunities to the table for trade, trade and investment,” he said.
Russia has been India’s largest oil supplier since FY23, accounting for about 35% of India’s oil basket. However, this share is expected to decrease with the sanctions that came into force on 21 November.
