SWIFT

Public Sector Oil Companies Yet To Get $300-400 Million Dividend From Russian Projects

The issue in payments of dividend to Indian companies arises due to the unavailability of banking channels after Russia was removed from the SWIFT global payment system by the US.

New Delhi: Government-owned oil companies are yet to receive dividends worth $300 million to $400 million from Russia since the Ukraine crisis began in February 2022, reports MoneyControl, citing a senior petroleum ministry official.

The issue in payments of dividends to Indian companies arises due to the unavailability of banking channels after Russia was removed from the SWIFT global payment system by the US.

Public sector companies including ONGC, Oil India, BPCL and Indian Oil have stakes in Russian oil and gas projects for which they have not received dividends due to Western sanctions imposed on Moscow. The government is negotiating a way to resolve the issue, the official said, according to the website.

According to Bloomberg, about $2 billion in payments from India to Russia is stuck over the last year, and Russia has decided to stop supplying credit for about $10 billion worth of spare parts as well as the two S-400 missile-defence system batteries that are yet to be delivered.

On April 18, the Narendra Modi government signed a significant deal with the Vladimir Putin administration where India agreed to adopt the Russian financial messaging system, Service Bureau of Financial Messaging System of the Bank of Russia (SPFS), for making banking payments to Russia, as per the New Indian Express. SPFS is a financial messaging system that works like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international payment system used by banks to transfer funds worldwide.

After its banking channels were removed from SWIFT, Russia has been asking India to adopt the SPFS to make the payments. Moscow developed the SPFS after Russia was threatened with expulsion from SWIFT when it annexed Crimea in 2014.

India Signs Deal to Adopt Moscow’s SPFS System for Banking Payments to Russia: Report

The landmark agreement was signed between external affairs minister S. Jaishankar and visiting Russian deputy prime minister Denis Manturov on April 18 in New Delhi, where India agreed to adopt the Russian SPFS financial messaging system for making banking payments to Russia.

New Delhi: The Narendra Modi government signed a significant deal with the Vladimir Putin administration last week where India agreed to adopt the Russian financial messaging system, Service Bureau of Financial Messaging System of the Bank of Russia (SPFS), for making banking payments to Russia, reports The New Indian Express.

The landmark agreement was signed between external affairs minister S. Jaishankar and visiting Russian deputy prime minister Denis Manturov on April 18 in New Delhi, said the newspaper. The deal also allows acceptance of Indian Ru-Pay cards and India’s Unified Payments Interface (UPI) in Russia, and the Russian MIR cards and its Fast Payments System (FPS) in India.

India and Russia had earlier agreed to settle payments through Special Rupee Vostro Accounts (SRVA) but that has been stalled because of fear of western sanctions on Indian banks and the high imbalance in bilateral trade. Russia was keen to be paid in Yuans or Dirhams. While India is not keen to adopt the Chinese currency, the UAE has been wary of western sanctions in case India uses Dirhams to pay Russia for crude oil above the western mandated price of $60 per barrel.

The latest agreement clarifies that Russia can use the surplus Indian rupees to conduct other businesses in India or remit them back to Russia, reports the newspaper. The remittance is unlikely because of the Russian reluctance, as has been the case with the Iranian central bank, to have a reserve of rupees. As per Bloomberg, Russia had turned down India’s offer that the former use rupee proceeds from weapon sales to invest in Indian debt and capital markets to avoid stockpiling.

SPFS is a financial messaging system that works like the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international payment system used by banks to transfer funds worldwide. After Russia’s invasion of Ukraine, the US and the EU removed most Russian banks from the SWIFT network.

Since then, Russia has been asking India to adopt the SPFS to make the payments. Moscow developed the SPFS after Russia was threatened with expulsion from SWIFT when it annexed Crimea in 2014.

Watch | ‘Sanctions Are Economic Weapons of Mass Destruction, We Must Consider Their Consequences’

In an interview with Karan Thapar, former RBI governor Raghuram Rajan spoke both about the impact of sanctions on the Russian economy, the global economy and the global financial system.

Former RBI governor Raghuram Rajan has expressed his concerns about economic sanctions, describing them as “economic weapons of mass destruction”, saying the world needs to carefully consider their consequences and implications, both for individual economies and people but also for the global economy and the global financial system.

Rajan, who is now professor of finance at Chicago University, said: “When fully unleashed, sanctions, too, are weapons of mass destruction [WMD]. They may not topple buildings or collapse bridges, but they destroy firms, financial institutions, livelihoods, and even lives. Like military WMDs, they inflict pain indiscriminately, striking both the culpable and the innocent”.

In a 35-minute interview with Karan Thapar for The Wire, Rajan spoke both about the impact of the sanctions on the Russian economy but, perhaps more importantly, on the global economy and the global financial system. He spoke about the “unintended consequences” that overuse of sanctions can lead to, including that they can “perhaps fuel fascism”. He also believes sanctions could shrink Russia’s economy by 10%.

“For starters, the seemingly bloodless nature of economic weapons, and the lack of norms governing them, could result in their overuse … (this) could reverse the process of globalisation that has allowed the modern world to prosper,” Rajan said. He said this means that economic interaction between countries will shrink and a policy that is, effectively, “beggar my neighbour could also end up beggaring me”.

Another worrying consequence is that “countries might start exploring collective alternatives to the SWIFT financial messaging network, potentially leading to fragmentation of the global payment system”. Rajan points out that already China is trying to build up CIPS as an alternative to SWIFT and this could now be not just expedited but many other countries might choose to prefer CIPS to SWIFT. This would fragment and divide the world’s global payments system. He also says that, whilst at the moment, excluding countries like Russia from SWIFT looks like a sign of strength it could actually lead over time to the diminution of SWIFT or its sizing down.

Speaking about sanctions on Russia’s central bank, which affects the country’s reserves, Rajan said that whilst countries may not be able to diversify their holding into other currencies – because many, like the Pound, Euro, Yen, may also be subject to similar sanctions – they could consider adopting a strategy of deliberately inviting western institutions and banks to their country and then seek to hold them hostage in case their own reserves are sanctioned. This would be a policy of mutual hostage-taking and would fracture the trust on which the global financial system works. Suspicion would replace trust.

“A country might invite foreign banks into its market with the ulterior motive of someday holding their assets and capital hostage,” he said.

Rajan expressed concern about the fact many corporations are under pressure to opt out of Russia. He said that there are two possible unfortunate consequences that can arise from this. First, this “can lead to sanctions being broadened beyond what policymakers intended”. The second is in a sense even worse, “It’s not impossible to imagine a country being subjected to economic warfare because of its government’s position on, say, abortion or climate change.”

In the second half of the interview, Rajan discusses measures that could, in the future, determine how economic sanctions are deployed. First, “because economic weapons are too powerful to leave in the hands of any one country, their use should be subject to a minimal consensus requirement”. Rajan said this minimal consensus requirement needs to be debated and thought about. He doesn’t have a precise answer to what it should be but he wants the process of thinking about it to start now.

Second, he said “there should be a gradation of weapons use”. This means sanctions that affect oligarchs should be amongst the first that are deployed. Those that affect the general population should be amongst the last. In this connection, Rajan warned that sanctions that impoverish the middle class could leave behind a sense of grievance and unite people behind dictators and thus, perhaps, fuel fascism.

Finally, Rajan said, “Advanced economies should … no longer turn a blind eye to the proceeds of tax evasion, corruption, and theft from elsewhere that are parked in their jurisdictions”.

These are some highlights of the issues discussed in Raghuram Rajan’s interview with Karan Thapar. There are many more issues about the consequences and implications of sanctions for the global economy and for the global financial system discussed in the interview. For a complete understanding, please watch the video.

An Ethical View of the Current Geopolitics Behind the War on Ukraine

The current ideas floating around can take some insight from the bilateral clearing arrangements set up in the 1950s during the Cold War years.

Russia’s aggressive advances in Ukraine have generated different types and scales of responses in the world economy. Western Europe, supported by the US as a NATO ally, has imposed various financial sanctions on Russia.

The sanctions include discontinuation of SWIFT facilities, embargoes on trade with Russia and freezing of Russian assets or banking activities. In addition, a resolution has been passed in the Security Council of the United Nations by the same group of countries urging an end to Russia’s aggression in Ukraine. While the resolution has yet to yield results, the sanctions can have a perceptible impact on the Russian economy in the medium run.

Russia, however, has continued to remain defiant with official assertions that the country would follow the path of self-reliance it treaded as part of the Soviet Union during the Cold War years.

India’s responses to the ongoing crisis in Ukraine has been quite different. Carefully taking a position which India considers a neutral one, the country has refrained from supporting various resolutions at the United Nations, even though it has called for an end to violence. The move, as held officially, follows the path of non-alignment which the country emulated in earlier years, largely in the context of the Cold War.

China and the UAE also chose the same move, but obviously not on the same logic.

UN Ambassadors vote during a United Nations Security Council meeting, on a resolution regarding Russia’s actions toward Ukraine, at the United Nations Headquarters in New York City, February 25, 2022. Photo: Reuters/Carlo Allegri

A page from the 1950s

The other measure which India is considering taking up includes the working out of an alternate route for trading with Russia in the face of the sanctions faced by the country. The plan intends to avoid the use of the US dollar as the currency for settlement of trade and all payments. Ideas that are currently floating include the use of bilateral clearing arrangements which happened to be a major vehicle for India’s trade with the Soviet Union and some Commonwealth of Independent States back in the early 1950s. The arrangement was similar to the clearing arrangements the European countries tried during the Interwar years as a major tool to contain trade within the region.

The arrangement between India and the Soviet Union entailed the setting-up of a closed account to handle all merchandise as well as credit-related transactions between the two, with the rupee as the medium of all such dealings. It was, of course, an elaborate arrangement that did work to expand the volume of trade between the countries, often by making use of the export surplus, if any, in favour of one partner to be used to provide additional demand for imports from the other.

In addition to this, all loans, largely provided by the Soviet Union, created the space for India’s industrialisation. Collaboration of the socialist state in the Soviet Union matched the prevailing interests of India. It even worked in framing a draft of India’s second five-year plan by India’s economist Mahalanobis, who followed the model framed by the Soviet economist G. Feldman. One can mention here the impressive steel plant which was set up as a public sector unit in Bhilai.

The use of the clearing arrangement made it easy for India to arrange for debt servicing as well as repayments, by exporting to the Soviet Union. This created an added sphere for trade expansion. On the whole, the arrangement worked well, and in the face of the reluctance of the West to accept any virtue in such deviations from the market principles of efficiency.

Changes taking place in the Indian economy, slowly in the direction of the market, started creating problems in the smooth running of the arrangements. The devaluation of the Indian rupee in 1966 was a major factor creating further troubles to the smooth functioning of those agreements. The end came naturally with the complete break-up of the Soviet Union in 1991.

Also Read: Will India Roll Out Ingenious Measures to Bypass Sanctions Imposed on Russia?

Future course

Dwelling on India’s current position on the Russian war, one hears about some ongoing talks for reviving the bilateral agreements India used to have with the Soviet Union till its breakdown. The idea is to revive the Rouble-Rupee link of local currencies as in the past rather than the US dollar as the unit of transaction as well as settlements. It is argued that the use of such a clearing account will help Indian exporters to get paid against their export revenue, currently amounting to $600 million, which Russia finds difficult to settle in absence of SWIFT facilities at banks. It is also argued that the move will both push the current level of $10.8 billion Indo-Russian trade and help to settle India’s trade deficit of $5 billion. At the back-stage of course there are arguments that such arrangements would help India in continuing with her imports of oil as well as the defence equipment from Russia. Counting on further advantages, ideas are currently floated that a flexible rouble rate for the Rupee would bring in further advantages for India as the Russian currency goes through further depreciation.

While the talks are not yet finalised and the situation on the war-front continues as devastating, one can offer some re-thinking on the matter.

First, it is a misnomer that such agreements will bring back the modality as well as the mutual interest prevailing in the earlier arrangements. Russia today is not what it was in the days of the Soviets – both in political as well as in economic terms. There is no question of using Russia’s trade surpluses to meet India’s payments deficits by funding public sector infrastructures or otherwise. Nor is India, under extensive liberalisation, ready for such adjustments to help out the disappearing public sector units. That a clearing account may not work between the countries in the BRICS group has been abundantly clear from experience. However, saving Indo-Russian trade by using the bilateral trade route may help India in continuing its procurements of the strategic items of defence equipment and energy sources from Russia.

There is another point that extends beyond economic issues. Is India obliged to continue economic relations with Russia in the face of one of the most barbaric attacks launched on another country in recent times? Can India not open up alternate sources for those items, of course, without getting entrapped in the US-West European geopolitical circuit? The move, at least, will fetch India a dividend of seeking an end to this devastating war on ethical grounds. Incidentally, the resolution by the West in the Security Council contradicts itself when it fails to provide any concrete step towards that. Can ethics be left behind completely in the current juncture of aggressive geopolitics?

Sunanda Sen has been a professor at Jawaharlal Nehru University, New Delhi.

EU Considering Curbing Russia’s Rights in IMF Over Invasion: Sources

One option under consideration is to remove Russia entirely from the institution that acts as a lender of last resort, officials said, though some noted that would prove difficult if not impossible.

Brussels: European Union officials are examining curbing Russia’s influence and access to finance at the International Monetary Fund (IMF) following its invasion of Ukraine, six officials told Reuters.

This scenario now under discussion would add to the pressure on Russia’s economy and financial system and also mark an important symbolic step, deepening Moscow’s international isolation.

One option under consideration is to remove Russia entirely from the institution that acts as a lender of last resort, officials said, though some noted that would prove difficult if not impossible.

“There is a discussion, but kicking Russia out entirely is probably unrealistic because of required quora,” one senior euro zone official said, referring to the wide support needed among countries that include China.

Other options being examined include the suspension of Russia’s voting rights as well as blocking its access to a special IMF currency, the Special Drawing Rights (SDR), the officials said.

A spokesperson for the IMF did not immediately comment.

Russia has been economically isolated after Russian forces invaded Ukraine in the biggest assault on a European state since World War II. Moscow calls the assault a “special operation”.

IMF curbs could be part of another round of sanctions, as the war in Ukraine enters its second week.

Russia has already been hit by a freeze on its central bank assets, a ban from EU, Canadian and US airspace, the removal of a number of its from the SWIFT international payments system, and sanctions on a clutch of Russian tycoons.

The United States and the EU are now worried that Moscow, cut off from much of its $630 billion reserves, could have access to $17 billion in IMF reserves it received last year when the IMF boosted them to fight the COVID-19 pandemic.

The SDR is an IMF currency based on a basket of dollars, euros, sterling, yen and yuan. To spend the $17 billion in SDRs, Russia would have to find countries willing to exchange them for the underlying currencies, a prospect seen as unlikely.

Also read: As Ukraine Burns, India Must Contend With the Worrisome Prospect of a Russia-China Symbiosis

Pressure building

The officials confirmed that while curbing Russian membership rights in the IMF and blocking its access to the SDRs were discussed, the discussion was even broader, concerning Moscow’s membership.

“There is on ongoing discussion to kick Russia out of all international financial institutions,” a second senior euro zone official said, adding though the discussion on the IMF was chiefly about how to prevent Moscow from using its SDRs.

However, ejecting Russia from the IMF entirely may not be legally possible, another official said.

“The consensus legal reading is that it cannot be done. Even for members guilty of genocide it was not done, because it would require proof of a legal breach of the IMF agreement, so it very unlikely,” the third official said.

Asked when the talks could come to a conclusion, the first official said the issue was urgent, but some other members of the IMF, which groups 190 countries, may object.

One of the officials said Russia’s rights were being examined because of concerns it could use the IMF to avoid sanctions put on the Russian central bank.

“The United States is also looking into this. But … China, India and others may be problem,” the first official said.

US Republican lawmakers have also urged US treasury secretary Janet Yellen to block Russia from exchanging the $17 billion in IMF reserves it received last year.

They said $650 billion allocation of Special Drawing Rights to IMF members had undermined previous sanctions on Russia.

(Reuters)

Russia-Ukraine: If Biden’s Sanctions Produce Inflation, Nehru Could Have the Last Laugh

Both the Centre and RBI will have to keep a hawk’s eye on food and energy price inflation in the next few quarters.

Note: This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here.

After much debate about its desirability, the US bit the bullet and removed some leading Russian banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging system. SWIFT connects over 11,000 banks in over 200 countries on a common transactional information platform.

This is possibly the harshest economic sanction against Russia to date.

Being removed from this system will cause much pain and disruption in Russia’s international trade conducted through its prominent banks. It is like SBI, Canara, HDFC and ICICI Bank – holding nearly 50% of Indian bank assets, including regular credit to large and small exporters – being suddenly thrown out of the global banking information system.

Iran is believed to have lost over 30-40% of its trade, including in oil and gas exports, when it was removed from SWIFT in 2012 after being sanctioned by the US.

News reports say President Joe Biden had to convince some key European Union nations before imposing the latest measure. Germany, which depends on Russian gas for over 30% of its needs, had legitimate concerns about the scale of disruption to energy exports from Russia. In a way, this was Putin’s trump card, which could potentially split the US and EU on the nature of sanctions. The US is nearly self-sufficient in energy.

Also watch: ‘Nightmare Scenario for India If US Decides Russian Threat Means Easing Up On China’: Shyam Saran

However, the US managed to find a middle ground with the EU, which is to punish Russia enough without totally incapacitating its energy trade. Throwing key Russian banks out of the SWIFT system will create ripples in markets, leading to further hardening of oil prices from the present elevated level. Crude has surged to $105 in response to Russian banks being removed from SWIFT, and the rouble is down 30% against the dollar.

Earlier, as global oil prices moved up, it produced the perverse outcome of Russia earning higher revenues for its oil/gas exports! So some calibrated cost had to be imposed on Russia. Throwing large Russian banks out of SWIFT will partially achieve that aim, hitting Russia’s oil revenues considerably. Oil, gas and related products account for nearly 50% of Russia’s exports and 35% of its GDP. The Western alliance would want to strategically target this but is also calculating the blowback to the global economy.

Putin may have anticipated this and created parallel trading and banking arrangements via China and other non-hostile countries, which are very few at present. Even North Korea has such subterranean arrangements to export its mineral resources. This is closely controlled by the political elite.

Putin had also been de-dollarising the Russian economy, with some help from China. This gathered pace after the 2020 pandemic when close to 45% of trade between China and Russia was non-dollar denominated. China has also been consciously conducting non-dollar trade with some countries. Partially de-dollarising mutual trade by conducting large transactions in local currencies was also actively discussed at the BRICS forum a few years ago.

Russian President Vladimir Putin arrives for a meeting with representatives of the business community at the Kremlin in Moscow, Russia February 24, 2022. Photo: Sputnik/Aleksey Nikolskyi/Kremlin via Reuters

Russia last year denominated the largest share of its foreign currency reserves in gold. It was the first country to have more official forex reserves in gold rather than in US dollars. Most large economies keep the largest chunk (over 50%) of their reserves in US dollars. It is seen as the safest hedge. However, it is yet to be seen how prepared Russia is to counter the overall impact of multiple sanctions. Russia’s stock market has fallen 35%, which may be an indicator of what lies ahead. We will know the full extent of damage to Russia’s economy in a few months, if no diplomatic solution is found. If Russia is badly hurt, higher energy costs will inflict pain on global markets. Food grain prices might also move up as Russia and Ukraine account for over 25% of global wheat production. The region is seen as Eurasia’s breadbasket.

From India’s perspective, both energy and food are very sensitive segments of the political economy. The first big hit will come after the Uttar Pradesh elections when the Modi government will be forced to adjust domestic petrol and diesel prices against international levels.

The last domestic price adjustment occurred on November 4, when crude was $75 per barrel. Since then, no domestic price increase has happened, primarily because of UP elections. After the UP polls, the Centre will either have to increase domestic petrol/diesel prices by 33% to align them with global crude prices or cut excise duty proportionately. Cutting excise will throw the government’s revenue assumptions out the window. If US sanctions on Russia last even two quarters, inflationary forces might spiral out of control. The rupee’s exchange rate could also decline sharply if global investors seek the safety of US treasury bonds.

Besides, global financial market disruptions could make it difficult to raise money. A former RBI governor told me that whenever there is panic and uncertainty in global financial markets, investors rush to the safety of US government bonds. This is not good news for stock markets in the developing world. Appetite for foreign direct investment or foreign participation in India’s divestment or asset monetisation programme may be tepid this year. Both the Centre and RBI will keep a hawk’s eye on food and energy price inflation in the next few quarters. Fiscal 2022-23 could well be about mere crisis management for most major economies.

In his reply to the President’s address, Prime Minister Narendra Modi mocked Nehru for citing the Korean War of 1952 as the reason for inflationary pressures in India. It will be no surprise if Modi ends up blaming the war over Ukraine for India’s economic woes in due course.

Nehru may yet have the last laugh.

EU Unlikely to Cut Russia off Swift for Now, Sources Say

The foreign ministers of the Baltic states, once ruled from Moscow but now members of NATO and the EU, called on Thursday to stop Russia’s access to SWIFT.

Brussels: The European Union is unlikely at this stage to take steps to cut Russia off from the SWIFT global interbank payments system as it works on a new package of sanctions against Moscow for its action against Ukraine, several EU sources said.

The foreign ministers of the Baltic states, once ruled from Moscow but now members of NATO and the EU, called on Thursday to stop Russia’s access to SWIFT.

Other EU member states are reluctant to make such a move because, while it would hit Russian banks hard, it would make it tough for European creditors to get their money back and Russia has in any case been building up an alternative payment system.

“Urgency and consensus is utmost priority at the moment,” said an EU diplomat, adding that at this stage it meant no move on SWIFT, because doing so would have such wide-ranging consequences, also in Europe.

Another EU diplomat said: “I am not aware of an agreement (on SWIFT sanctions) at this point.”

Data from the Bank of International Settlements (BIS) shows that European lenders hold the lion’s share of the nearly $30 billion in foreign banks’ exposure to Russia.

Belgium-based SWIFT, a messaging network widely used by banks to send and receive money transfer orders or information, is overseen by central banks in the United States, Japan and Europe.

(Reuters)

With Reports of Gloomy Sales Numbers, Auto Industry Woes Continue in July

Maruti Suzuki’s domestic sales drop in July was its largest in over a decade, while Bajaj Auto and M&M also reported poor numbers.

New Delhi: Most of India’s automobile and vehicle companies reported sharp drops in sales in July 2019, continuing a slump that has gone on for a large part of this year.

Maruti Suzuki, India’s biggest car maker, registered its biggest sales drop yet in 2019, with the company’s domestic sales and exports dropping 33.5% to 1,09 lakh units in July 2019 compared with 1.06 units in the same month last year.

This is the sixth straight month of declining sales for the firm. The automaker also reported a 36.3% year-on-year drop in just domestic sales at 98,210 units in July 2019 compared to 1.54 lakh units in July 2018 – the sharpest decline in over a decade.

Also read: Auto Slowdown: 286 Dealers Closed Down in 18 Months, 32,000 Jobs Impacted

According to a stock exchange notification put out by the company on Thursday afternoon, sales of mini cars comprising Alto and WagonR were at 11,577 units as compared to 37,710 units in July last year, down 69.3%.

Sales in the compact segment, including models such as Swift, Celerio, Ignis, Baleno and Dzire, were down 22.7% at 57,512 units as against 74,373 units in July last year.

Mid-sized sedan Ciaz sold 2,397 units as compared to 48 units in the same month a year ago.

Utility vehicles, including Vitara Brezza, S-Cross and Ertiga were down 38.1 per cent at 15,178 units as compared to 24,505 in the year-ago month, MSI said.

Exports in July were down by 9.4% at 9,258 units as against 10,219 units in the corresponding month last year, the company said.

M&M, Bajaj Auto too down

Mahindra & Mahindra Ltd.’s auto sales declined 15% to 40,142 units on a yearly basis last month, while its tractor sales fell 12% to 19,992 units, according to its stock exchange filing.

Bajaj Auto, on the other hand, reported its first fall in total sales in nearly two years. The company’s sales, which includes both two-wheelers and three-wheelers, fell 5% to 3.81 lakh units in July 2017, from 4 lakh units in July 2018.

Domestic sales stood at 2,05,470 units as against 2,37,511 units a year ago, down 13 percent, the Pune-based firm said in a statement.

Commercial vehicle sales any better?

The slowdown, which has affected passenger vehicle sales, also appears to have extended to commercial vehicle sales which includes trucks.

For instance, Ashok Leyland’s sales fell 28% on a yearly basis to 10,927 units in July 2018. Sales of domestic medium and heavy commercial trucks fell 47% to 4,668 units.

Also read: Passenger Vehicle Sales Down by 18% in June, Car Sales Decline by 25%

Eicher’s commercial vehicle arm also reported poor numbers, with total sales declining 32.1% on a year-on-year basis to 4,048 units.

According to data collated by Bloomberg, vehicle registrations, a key metric of sales at the dealership level, fell by 1.8% in July 2019 on a month-on-month basis and 8.2% on a yearly basis.

(With inputs from agencies)

Sharp Increase in Fraud Cost Indian Banks Rs 42,167 Crore in 2017-18, Says RBI

This is 72% more than the loss due to bank fraud in 2016-17.

New Delhi: Despite “stringent monitoring and vigilance,” data released by the Reserve Bank of India (RBI) reveals that fraudsters have looted India banking institutions of Rs 42,167 crore in 2017-18.

This is a sharp increase of 72% from Rs 23,933 crore from the previous year, according to the Indian Express.

The data revealed on Friday by the central bank shows that there were 5,917 instances of bank fraud in 2017-18 compared to 5,076 cases in the previous year, and that such instances of fraud have been rising year on year – increasing by over four times in the last four years. Bank fraud cases amounted to Rs 10,170 crore in 2013-14.

This year, frauds related to off-balance sheet operations, foreign exchange transactions, deposit accounts and cyber-activity were the most prominent. According to the Indian Express, banks reported an increased number of cyber frauds in 2017-18 – losing Rs 109.6 crore in 2,059 cases against Rs 42.3 crore in 1,372 cases last year.

Also read: Raghuram Rajan Gave PMO a List of ‘High Profile NPA Fraud Cases’ but No Action Was Taken

A majority – about 80% of all recorded frauds in 2017-18 – were large-value frauds, wherein each case involved an amount of Rs 50 crore or more. About 93% of cases worth more than Rs 1 lakh took place in PSU banks, while private sector banks only accounted for 6%.

This considerable increase in bank fraud has significantly contributed to the mushrooming bad loans, which loomed around the Rs 10,39,700 crore mark as of March 2018.

The RBI, however, reported that this sharp increase in terms of amount is largely due to large-value banking fraud cases in the jewellery sector – referring to the case involving the fugitive businessmen, Nirav Modi and Mehul Choksi. The over Rs 13,000 crore Punjab National Bank (PNB) case has made a significant dent in the banking fraud data this year.

Operational risk management, according to the central bank, has been seriously challenged this year due to increased bank fraud, with over “90% of them located in the credit portfolio of banks,” reported the Indian Express.

The central bank reported that modus operandi of large-value frauds involves “opening current accounts outside the banking consortium without no-objection certificates from lenders, division of funds by borrowers through various means, including through associated/shell companies, lapses in credit underwriting standards, deficient and fraudulent services or certification by third-parties and the banking sectors failure to identify early warning signs,” according to the Indian Express.

Also read: IT Dept Raised Red Flags Over Nirav Modi Months Before PNB Scam Broke: Report

In February 2018, The Indian Banks Association (IBA) was instructed by the RBI to install enhanced IT-enabled, user-friendly, web-based Third Party Evaluation (TPE) reporting and establish an infrastructure with comprehensive data security and control measures.

Given the increase in cases related to the Society of Worldwide Interbank Financial Telecommunication (SWIFT) system, banks were also directed by the RBI to strengthen their operational control measures in a timely manner.

Banks are also required to report the names of third-party entities like advocates, chartered accountants, valuers and architects involved in bank frauds to the IBA, which is then required to circulate a caution list among banks.

Nuclear Deal Talks Set to Drag as Iran Seeks More From World Powers

Ministers from Britain, China, France, Germany and Russia will meet their Iranian counterpart in Vienna for the first time since US President Donald Trump left the pact in May, but diplomats see limited scope for salvaging the deal.

Vienna: Talks to save the 2015 nuclear deal on Friday are unlikely to satisfy Iran, said European powers after Tehran warned that it could leave the accord if it was not fully compensated for the re-imposition of US sanctions.

Trump pulled the US out of the multinational deal under which sanctions on Iran were lifted in return for curbs on its nuclear programme, verified by the International Atomic Energy Agency. Washington has since told countries that they must stop buying oil from the OPEC producer from November 4 onwards or face financial consequences.

Speaking on French radio ahead of arriving in the Austrian capital, France’s foreign minister Jean-Yves Le Drian said that world powers would struggle to put together an economic package immediately.

“They (Iran) must stop threatening to break their commitments to the nuclear deal,” said Drian. “We are trying to do it (economic package) before sanctions are imposed at the start of August and then the next set of sanctions in November. For August, it seems a bit short, but we are trying to do it by November,” he said.

On arrival in Vienna, Germany’s foreign minister Heiko Mass said that he didn’t expect a collapse of talks, but suggested that more negotiations would be needed in the future. He stressed that world powers would struggle to compensate Tehran for companies leaving Iran.

The pillars of the EU’s strategy are European investment bank lending, a special measure to shield EU companies from US secondary sanctions, and a commission proposal that EU governments make direct money transfers to Iran‘s central bank to avoid US penalties.

Bank payments

“We’ve made some progress, including on safeguarding some crude (oil) sales, but it’s unlikely to meet Iranian expectations. It’s also not just about what the Europeans can do, but about how the Chinese, Russians, Indians, others can contribute,” said a senior European diplomat.

Iranian officials have said that the key for them is to ensure that oil exports do not halt, and that Tehran still has access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international bank payments messaging system or an alternative.

“We are ready for all possible scenarios… the collapse of the deal will increase the tension in the region. To save the deal, other signatories should compensate for US sanctions,” a senior Iranian official told Reuters on Friday.

During a visit to Europe this week, President Hassan Rouhani warned that Iran could reduce its co-operation with the UN nuclear watchdog, having already threatened Trump of the “consequences” of fresh sanctions against Iranian oil sales.

Iran‘s revolutionary guards have also warned that they may block oil shipments through the Strait of Hormuz in response to US calls to ban all Iranian oil exports.

“We expect our partners to give us verifiable solutions rather than just promises,” Iran‘s foreign minister Mohammad Javad Zarif told reporters on Friday.

(Reuters)