SBI Alerts Branches on Iran Dealings

EghtesadOnline: India’s largest lender State Bank of India has alerted all its offices on the pitfalls of dealing with companies carrying out trade with Russia and Iran, which are battling US sanctions.

News ID: ۷۴۵۴۲۱

03 June 2018

Large corporate branches handling oil import payments to Iran have been told to inform Indian refiners that the bank will not be able to handle such transactions from November 4, if the existing sanctioned regime continues.

All branches have been directed to refrain from taking new exposure in any form, such as letter of credit and bank guarantee, for any transaction related to Iran with immediate effect, according to a SBI internal communiqué dated May 25, Economic Times reported.

According to a news agency report, Iran remained the third-biggest oil exporter to India during April 2017-February 2018, while Iraq replaced Saudi Arabia as top supplier. The April 2018 report said that drawn by incentives offered by Tehran, Indian state refiners plan to double oil imports from Iran in 2018-19, Financial Tribune reported.

The bank’s branches have to invariably obtain prior clearance from the compliance division before handling transactions related to Russia (and a few other countries) in a special format and conduct higher level of due diligence before taking any credit exposure.

The US this month withdrew from the Iran nuclear deal and reimposed sanctions that were suspended under the 2015 accord.

However, addressing a news conference this week, Indian External Affairs Minister Sushma Swaraj said the country would follow only sanctions by the United Nations and not unilateral sanctions of a country.

Though low-valued trade transactions, which are typically below the radar and difficult to track, may be overlooked by US authorities, Indian banks, particularly lenders with operations in the US, can come under the glare for settling trade payments with sanctioned entities in dollar.

The SBI circular is silent on whether the US currency can be used to settle transactions with Russia and Iran.

SBI, in the internal circular, told its offices that all SWIFT transmissions (like letters of credit, bank guarantees, etc.) should contain full disclosure of all the parties to the transactions, including the purpose of such a transaction.

SWIFT is the global financial messaging service banks use to move millions of dollars and documents across borders every day.

Reuters reported this week that two Indian banks, namely IndusInd and UCO, have asked exporters to complete their financial transactions with Iran by August in response to the threat of new US sanctions.