Two Russian banks, Tinkoff Bank and CentroCredit Bank, have registered as foreign portfolio investors, taking the total number of FPI registrations from the country to 10.
Tinkoff Bank is a neobank, the second largest provider of credit cards in Russia and the world’s largest digital bank, as measured by number of customers. CentroCredit Bank is a universal bank and has been an active participant on the Russian financial markets since 1995.
The former has taken a category I as well as a category II licence, while the latter has registered as a category II FPI. State-owned Sberbank of Russia had registered as category I FPI in October. This means a total of three Russian banks have taken FPI licences to invest in India.
Experts believe that the entry of Russian entities as FPIs may be watched for any sanction-related matters with respect to the ultimate beneficial owners. However, given that the banks are well recognised and public, they may pass the test.
“FPI licence to Russian banks will allow them access to Indian securities — not just to equities, but also to forex and commodity derivatives. It could also allow other Russian investors to invest in the Indian market, which is today one of the most sought after globally,” said Rajesh Gandhi, Partner, Deloitte India.
Such institutions, generally being Russian tax residents, will also be able to avail treaty benefits, he added.
Other Russian entities to get an FPI licence last year include Alfa Capital Management, First Asset Management, Asset Managing Corporation Dohod, Igor Noskov and Vsevolod Rozanov.
More wealth creation
“India is bound to grow faster over the next 6-12 months with continued stability and growth in wealth creation. Besides, SEBI’s continued focus on improving transparency has been well-received by FPIs. The entry of FPIs from Russia, who are willing to comply with Indian regulatory requirements, may be in line with the above opportunity,” said Viraj Kulkarni, founder, Pivot Management Consulting.
Russia has traditionally invested through the FDI route. The country ranked 28, with inflows of $1.276 billion from April 2000 to September 2023.
Twenty Russian banks, including Gazprom, Rosbank, Tinkoff Bank, CentroCredit Bank and Credit Bank of Moscow, have opened rupee vostro accounts with authorised dealer banks in India to enable rupee trade between the two countries.
In July 2022, the RBI allowed international trade in rupees, creating the possibility of doing business with Russia in rupees and, in the process, bypassing the sanctions imposed by the west on Moscow. The sanctions were imposed following Russia’s attack on Ukraine in February 2022.