RBI suspends ACU mechanism

Stating that the Euro-denominated Asian Clearing Union (ACU) settlement system is under review, the Reserve Bank of India on Thursday asked lenders to process transactions outside the mechanism.

"As the payment channel for processing 'ACU Euro' transactions is under review, it has become necessary to temporarily suspend operations in 'ACU Euro' with effect from July 1," the central bank said in a notification.

All eligible current account transactions, including trade transactions in the euro, are permitted to be settled outside the ACU mechanism until further notice, it added.

Participants in the ACU mechanism have the option to settle their transactions either in 'ACU dollar' or in 'ACU euro'. The 'ACU dollar' and 'ACU euro' are equivalent in value to one US dollar and one euro, respectively, the notification said.

The authorised dealer banks have been advised to bring this to the notice of their constituents concerned.

In the notification, the RBI said the directions have been issued under section 10(4) and 11(1) of the FEMA Act of 1999 (42 of 1999).