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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


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