The assets of the only bank in the Russian Federation with Indian capital show significant growth

The assets of the only bank in Russia wholly owned by Indian owners are showing significant growth. Over the course of a year and a half, they increased by more than 11 times, and the funds raised increased by 18.6 times. According to experts, the bank was faced with an influx of funds from non-residents, who could redirect them from other Russian banks. Moreover, the bank prefers not to expand lending, but to keep funds on deposit with the Central Bank of the Russian Federation.

As evidenced by the report of Commercial Indo Bank LLC for the first half of the year, its assets increased by more than 39%, to 60.6 billion rubles, and for 2022 – eight times (to 43.5 billion rubles). Thus, in a year and a half, assets grew more than 11 times. For comparison: since the beginning of 2022, the assets of ICBC Bank have grown four times, the assets of Bank of China – 4.9 times (see Kommersant on August 14).

ACRA wrote in March about the expansion of Indo Bank’s business and diversification of its activities “against the backdrop of increasing trade turnover between Russia and India.” The agency declined to comment, noting “state secrets and insider information.” According to RIA Novosti, citing the Indian Ministry of Trade and Industry, in the first half of the year, trade turnover between India and the Russian Federation increased 2.9 times, to $33.5 billion. Indo Bank did not respond to Kommersant’s request.

As ACRA analysts noted, Indo Bank focuses on cash settlement services and deposit operations of companies related to export-import transactions between the two countries. On the bank’s website, among its services, it lists currency exchange and money transfers, including in rupees to India. However, it is impossible to estimate the volume of cross-border payments from reporting. “For settlements with Indian counterparties, local branches of large Russian banks or correspondent accounts opened by Russian credit institutions in Indian banks can be used,” explains banking expert Alexey Nechaev. Russian settlement participants are limited in their ability to manage emerging positions in rupees; in particular, Indian currency cannot be sold or purchased on the Moscow Exchange.

At the same time, the bank attracted a significant amount of client resources. Over the course of a year and a half, raised funds grew 18.6 times, to 56.7 billion rubles, the bulk of which came from corporate clients. Financial expert Olga Ulyanova believes that the funds mainly represent the balances of legal entities in current accounts. “Either companies receive revenue or actively transfer funds from other Russian banks in hopes of increasing trade turnover,” the expert notes.

Alexey Nechaev admits that we are talking about type C accounts, which reflect frozen obligations to “unfriendly” non-residents. India is a friendly jurisdiction, and banks are required to place funds raised into type C accounts in the DIA, the expert explains, but such an amount is not found in the assets of Indo Bank. One precedent for storing blocked funds in a bank is reliably known – these are the dividends due to the Indian ONGC Vankorneft in the amount of 11.3 billion rubles. At the same time, “the balance of funds in non-residents’ bank accounts is five times larger and other similar cases cannot be ruled out,” Mr. Nechaev believes.

The bank transferred client funds to deposits with the Central Bank of the Russian Federation (almost 54 billion rubles as of July 1), according to the 101st reporting form. According to one market participant, this “means that the bank does not want or cannot invest them in lending.” According to Alexey Nechaev, the accrual of interest income on deposits “has become the main source of income for the bank.” The net profit of Indo Bank for the first half of the year amounted to 930 million rubles, exceeding the result of 2022 by one and a half times.

Olga Sherunkova