What changed
Previously, all eligible current account and trade transactions between India and Iran had to be routed through the Asian Clearing Union (ACU) mechanism. This circular exempts Indo-Iran transactions from that requirement, allowing settlement in any permitted currency outside the ACU until further notice.
What it means for you
Banks handling Indo-Iran trade can now process payments and receipts in freely convertible currencies like USD, EUR, or INR, bypassing the ACU. This removes a key operational hurdle for importers and exporters facing difficulties with ACU-based settlements. Banks must update their internal processes and advise customers accordingly.
What you must do
- Update internal systems to process Indo-Iran transactions outside the ACU mechanism.
- Inform all relevant constituents (importers/exporters) about the change in settlement procedure.
- Ensure compliance with FEMA provisions and any other applicable laws when handling these transactions.
Who it affects
AD Category-I banks, Importers and exporters trading with Iran, Compliance and trade finance departments
Does this circular apply to all transactions with Iran?
Yes, it covers all eligible current account transactions and trade transactions with Iran, including those on deferred payment terms.
What currencies can now be used for Indo-Iran settlements?
Any permitted currency outside the ACU mechanism can be used, such as USD, EUR, or INR, until further notice.
Are there any other regulatory approvals needed?
The circular states it is without prejudice to permissions or approvals required under any other law, so banks must ensure compliance with all applicable regulations.