Asian Clearing Union (ACU) was established in 1975, after at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). The central banks and monetary authorities of India, Islamic Republic of Iran, Nepal, Pakistan and Sri Lanka Bangladesh, Myanmar, Bhutan and Maldives are the current participants in the ACU with its Head Quarters in Teheran Iran. ACU is a system of clearing payments among the members of the Union on a multilateral basis.
The major objective of formation of ACU is;
i) To facilitate settlement, on a multilateral basis, of payments for current international transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries
ii) To promote the use of participants’ currencies in current transactions in lieu of using a foreign currency for mutual transactions with currency swap arrangement among the participants.
iii) To promote monetary cooperation among the participants and closer relations among the banking systems so as to expand trade and economic activity among the countries of the ESCAP region, and
All instruments of payments are required to be denominated in Asian Monetary Unit. The Asian Monetary Unit is the common unit of account of ACU and is equivalent in value to one U.S.Dollar. The Asian Monetary Unit may also be denominated as ACU dollar. The Authorised Dealers settle the transaction on ACU dollars. In India, RBI undertakes to receive and pay U.S. dollars to and from authorised dealers for the purpose of funding or for repatriating the excess liquidly in the ACU dollar accounts maintained by the authorised dealer with their correspondents in the other participating countries.
RBI on Tuesday (March 17, 2020) notified that “The Board of Directors of ACU has decided to permit Japanese Yen for settling payments among the ACU member countries. Accordingly, clause (a) and (b) of Article IV of the General Provisions of Agreement establishing the Asian Clearing Union have been revised and the Asian Monetary Unit is now denominated as “ACU Dollar”, “ACU Euro” and “ACU Yen” which shall be equivalent in value to one US Dollar, one Euro, and one Japanese Yen respectively”. For details click below post.