Skip to main content

What is Asian Clearing Union (ACU)?

In view of the economic crisis faced by Sri Lanka, Reserve Bank of India (RBI) has allowed exemption in ACU mechanism.

What is Asian Clearing Union (ACU)?

Asian Clearing Union (ACU) was established with its head-quarters at Tehran, Iran, on December 9, 1974 at the initiative of United Nations Economic and Social Commission for Asia and Pacific (ESCAP), for promoting regional co-operation. 

The main objective of ACU is to facilitate payments among member countries for eligible transactions on a multilateral basis, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries.

Who are the members of ACU?

The Central Banks and the Monetary Authorities of Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are currently the members of ACU.

What is the unit of account in ACU?

Asian Monetary Units (AMUs) is the common unit of account of ACU and is denominated as ‘ACU Dollar’, ‘ACU Euro’ and ‘ACU Yen’, which is equivalent in value to one US Dollar, one Euro and one Japanese Yen respectively. 

As the payment channel for processing ‘ACU Euro’ is under review, the operations in ‘ACU Euro’ have been temporarily suspended w.e.f. July 01, 2016 and accordingly, all eligible current account transactions including trade transactions in “Euro” are permitted to be settled outside the ACU mechanism until further notice.

What exemptions are allowed under ACU mechanism?

The export / import transactions between ACU member countries are to be routed through the ACU mechanism. However, following exemptions have been allowed by RBI in ACU mechanism.

  • All eligible current account transactions including trade transactions with Sri Lanka are allowed to be settled in any permitted currency outside the ACU mechanism until further notice.
  • In view of the difficulties being experienced by exporters in receipt of export proceeds from Sri Lanka and SBI’s credit facility agreement dated March 17, 2022 with Government of Sri Lanka for sanction of GoI guaranteed USD 1000 million term loan to the latter for financing purchase of essential goods by Sri Lanka from India, such trade transactions with Sri Lanka, falling under the said arrangement, are allowed to be settled in Indian Rupee (INR) outside the ACU mechanism.


References

Reserve Bank of India. (2021, March 03). 'FAQ-Asian Clearing Union'. Retrieved from https://rbi.org.in/Scripts/FAQView.aspx?Id=50

Reserve Bank of India. (2022, July 08). 'Asian Clearing Union (ACU) Mechanism – Indo-Sri Lanka trade'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12357&Mode=0

Reserve Bank of India. (2022, May 19). 'Government of India guaranteed term loan extended by SBI to the Government of Sri Lanka- Settlement in INR'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12320&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)

Reserve Bank of India (RBI) had released the framework for recognition of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs). What is the need of Self-Regulatory Organisation (SRO) for Payment System Operators (PSOs)? Industry self-governance helps in industry-wide smooth operations and ecosystem development. RBI’s Payment and Settlement Systems Vision 2019-21 had, therefore, envisaged the setting up of an SRO for PSOs. Accordingly, the framework for recognition of SRO for PSOs was released in October 2020. What shall be the role of SRO for PSOs? An SRO is a non-governmental organisation that sets and enforces rules and standards relating to the conduct of member entities in the industry, with the aim of protecting the customer and promoting ethical and professional standards.  The SRO is expected to resolve disputes among its members internally through mutually accepted processes to ensure that members operate in a disciplined environment and even accept penal ...
Post a Comment
Read more

Nomination for demat accounts and mutual fund folios

Securities and Exchange Board of India (SEBI) had revised the guidelines on nomination for demat accounts and mutual fund folios.   Which entities are covered by the guidelines? The following regulated entities (REs) are covered by the guidelines – Asset Management Companies (AMCs) of Mutual Funds (MFs) and their Registrars to an issue and share Transfer Agents (RTAs)  Association of Mutual Funds in India (AMFI)  Recognized Depositories  Registered Depository Participants (DPs) What are the guidelines on nomination facility? Nomination shall be mandatory for single holding and optional for jointly held accounts / folios. However, an investor having single holding / account / folio can opt-out of nomination, either online or through physical / offline mode. In case a joint account / folio becomes single holding, post the demise of holders, either nomination or ‘opt-out’, is mandatory. Investors shall have the option to specify guardians when nominees are minors....
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-I – Preamble and Section 1 to 13

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the first article in the series. Preamble of the Act RBI to – Regulate the issue of bank notes. Keep reserves for monetary stability in India. Operate currency and credit system of the country to its advantage. The primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth. Chapter I – Preliminary Section 1 – Short title, extent and commencement 1(1) – This Act may be called the Reserve Bank of India Act, 1934. 1(2) – The Act extends to whole of India. Chapter II - Incorporation, Capital, Management and Business Section 3 – Establishment and incorporation of Reserve Bank 3(1) – RBI to take over management of the currency from the Central Government. 3(2) – RBI to have perpetual succession, common seal, and shall by...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-V – Section 45B to 45JA

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the fifth article in the series.  Chapter IIIA - Collection and Furnishing of Credit Information Section 45B – Power of Bank to collect credit information RBI may collect credit information from banking companies and furnish it to any banking company in accordance with section 45D. Section 45C – Power to call for returns containing credit information RBI may direct any banking company to submit statements relating to credit information. Section 45D – Procedure for furnishing credit information to banking companies A banking company may apply to RBI to provide credit information. RBI shall furnish the requested credit information without disclosing the names of the banking companies which have submitted the information. RBI may levy fees of up to Rs.25 for furnishing credit...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-III – Section 20 to 40

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the third article in the series.  Chapter III - Central Banking Functions Section 20 – Obligation of the Bank to transact Government business RBI shall undertake – To accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations. Management of the public debt of the Union. Section 21 – Bank to have the right to transact Government business in India The Central Government shall entrust RBI with – All its money, remittance, exchange and banking transactions in India, and shall deposit free of interest all its cash balances with RBI. The Central Government may carry on money transactions at places where RBI has no branches or agencies and m...
Post a Comment
Read more