Asian Clearing Union (ACU) is the simplest form of payment arrangements whereby the participants settle payments for intra-regional transactions among the participating central banks on a multilateral basis. The main objectives of a clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries. The ACU is a clearing houses/payments arrangements operating in various regions of the world.
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Q1. What is the Asian Clearing Union (ACU)?
A. The Asian Clearing Union (ACU) was established with its head quarters at Tehran, Iran, on December 9, 1974 at the initiative of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP), for promoting regional co-operation. The main objectives of a clearing union are 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.
Q2. Who are the members of the ACU?
A. The Central Banks and the Monetary Authorities of Iran, India, Bangladesh, Bhutan, Nepal, Pakistan, Sri Lanka, Myanmar and Maldives are currently the members of the ACU.
Q3. Where are the instructions, relating to the ACU, available?
A. The detailed procedural instructions issued by RBI are contained in the A.P. (DIR Series) Circular No.35 dated February 17, 2010.
Q4. How are the ACU transactions to be handled by Authorised Dealers (AD) in India?
A. All transactions to be settled through the ACU will be handled by AD Category-I banks in the same manner as other normal foreign exchange transactions, through correspondent arrangements.
Q5. What is the unit of settlement of ACU transactions?
A. The Asian Monetary Units (AMUs) is the common unit of account of ACU and is denominated as ‘ACU Dollar’ and ‘ACU Euro’, which is equivalent in value to one US Dollar and one Euro, respectively. All instruments of payment under ACU have to be denominated in AMUs. Settlement of such instruments may be made by AD Category-I banks through the ACU Dollar Accounts and ACU Euro Accounts, which should be distinct from the other U.S. Dollar and Euro accounts, respectively maintained for non ACU transactions.
Q6. What is the procedure for settlement of ACU transactions?
A i) Large part of the transactions, as possible, should be settled directly through the accounts maintained by AD Category-I banks with banks in the other participating countries and vice versa; only the spill-overs in either direction are required to be settled by the Central Banks in the countries concerned through the Clearing Union. At all times, the balances maintained in the ACU Dollar and ACU Euro accounts should be commensurate with the requirements of the normal exchange business.
ii) AD Category-I banks are permitted to settle commercial and other eligible transactions in much the same manner as other normal foreign exchange transactions.
Q7. Can Authorized Dealer Category-I banks open ACU Dollar and ACU Euro Accounts in the names of all banks in all member countries including Pakistan without the prior approval of Reserve Bank of India?
A. Yes, this is permissible.
Q8. What is the mechanism for settlement through the ACU?
A. Reserve Bank receives and pays US Dollars / Euros, towards the funding requirements, as reflected in the respective Nostro / Vostro Accounts. Detailed operational guidelines have been issued vide A.P. (DIR Series) Circular No.35 dated February 17, 2010.
Q9. What are the transactions which are eligible to be settled through the ACU?
A. All permitted current account transactions including export / import transactions between ACU member countries on deferred payment terms are eligible to be settled through the ACU.
Q10. What are the payments that are not eligible to be settled through the ACU?
A. The following payments are not eligible to be settled through ACU:-
- payments between Nepal and India and Bhutan and India, exception being made in the case of goods imported from India by an importer resident in Nepal who has been permitted by the Nepal Rastra Bank to make payments in foreign exchange. Such payments may be settled through the ACU mechanism; and
- payments which are not on account of current international transactions as defined by the International Monetary Fund, with the exception of such other transactions mutually accepted for settlement through ACU.
Q11. Are all eligible transactions between member countries required to be settled through the ACU?
A. Yes. However, trade transactions with Myanmar may be settled in any freely convertible currency, in addition to the ACU mechanism.