What will happen to Russia by leaving the SWIFT payment system, know what will be the effect on India?

What will happen to Russia by leaving the SWIFT payment system, know what will be the effect on India?

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new Delhi. Amidst the ongoing war with Ukraine (Russia-Ukraine war), America and European countries have excluded many Russian banks from the SWIFT payment system. Experts say that due to this the economic situation of Russia will be badly damaged.

Forex and Commodity Expert Ajay Kedia says that more than 70 percent of payments made at the global level are done through Society for Worldwide Inter-bank Financial Telecommuni-cation i.e. SWIFT payment system. Although Russia’s share in this is only 1.5 percent, but its transactions with many countries of Europe, America and Asia rest on this system.

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After all, how does the SWIFT payment system work?
About 11 thousand financial institutions from 200 countries around the world are connected to the SWIFT payment system. It acts as an exchange between banks to exchange information and send payment related information. This process continues until the transaction money reaches its final destination. Countries like Iran and North Korea are out of this system.

What is the impact of this ban on Russia?
Russia mainly trades 13 commodities like wheat, crude with European countries. On being out of the SWIFT payment system, he will have to use other traditional options of transactions, which will not only be more expensive but will also take more time. At present, Russia’s payment of $ 121 billion is stuck in this payment system. That is, Russia will neither be able to get this money at the moment nor will there be any further transactions. If this continues, then the Russian economy may get stuck in a big crisis.

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Russia has limited options
Exiting SWIFT will make it difficult for Russia to trade at the global level. However, Russia has maintained its own payment system, which currently includes only 23 countries. According to experts, Russia can also use China’s SIPs (Cross-Border Interbank Payment System). China has made Sips as an alternative to Swift, but it is rarely used right now. Now there is a possibility that along with China, Russia and other countries suffering from US sanctions may try to bring it into circulation.

Russia was already preparing
Many experts say that Russia was already preparing to deal with such a situation. This is the reason why he has started buying gold in the last years by withdrawing money from the US Treasury. Russia currently has large gold reserves, so that it can continue transactions without international currency.

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what will happen if you retaliate
Ajay Kedia, director of Kedia Advisory, says that Russia can retaliate and impose similar sanctions on the European Union. He can stop exporting 13 commodities including crude. In addition, companies in the European Union have invested $ 300 billion in Russian assets. Russia can also confiscate this money.

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Impact on India and Opportunities for it
So far this year, $ 9.4 billion has been traded with Russia and India. Both the countries sometimes transact in Euro and sometimes in Rupees. Therefore, this ban will not have a significant impact on India.

India has advised the world to adopt a Central Bank Digital Currency (CBDC) based Global Payment Interface (GPI). It will come into circulation after the introduction of the digital currency of Rupee. Indian experts say that the transaction of foreign exchange through e-rupee will become much cheaper. Currently, foreign exchange transactions with G-20 countries cost 10 per cent, while with Indian currency it will be just 3-5 per cent. Also, if the new system is implemented, then Indian exporters will also benefit from it, while the status of the domestic currency will increase in the global market.

Tags: India Russia bilateral relations, Russia ukraine war

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