Renewed U.S. sanctions on Iran’s oil exports are giving a boost to the profits of one of India’s smaller state-owned banks, which has been struggling under the weight of a mountain of bad loans.
Kolkata-based Uco BankNSE 0.27 % expects its privileged status processing refiners’ payments for Iranian oil shipments to add more than Rs 800 crore ($110 million) to annual earnings, according to Chief Executive Officer Atul Kumar Goel. Indian refiners are required to deposit any money destined for Iran without interest with Uco Bank during periods when U.S. sanctions are in force.
“Being involved in the country’s oil imports from Iran gives us access to zero-interest funds, which refiners place with us,” Goel said in a recent interview at his Kolkata office. “It will improve our net interest income as well as operating profit.”
Uco Bank was first designated by India’s government as the payment bank for Iranian oil in 2012, as the U.S. tightened an earlier round of sanctions in an effort to get Iran to accept controls on its nuclear program.The bank was chosen because of its limited international presence, which made it less vulnerable to any repercussions from its involvement in the oil trade, processed in euros and rupees to avoid exposure to the U.S. banking system.