INR Settlement for India-Sri Lanka Trade Under SBI Credit Facility
Current · Source: Reserve Bank of India · RBI/2022-2023/53 · issued 19 May 2022 · ~2 min read
Quick answerRBI allows trade with Sri Lanka under SBI's USD 1 billion GOI-guaranteed term loan to be settled in INR outside the ACU mechanism, easing export proceeds receipt difficulties.
The rule, in the simplest words
Banks can settle trade transactions with Sri Lanka in INR outside the ACU mechanism for eligible exports under the SBI credit facility.
Exporters must obtain full details of the credit facility agreement from SBI or its website.
Only transactions under the SBI agreement and eligible under India's Foreign Trade Policy can be processed outside the ACU mechanism.
How it plays out — a real example
Rahul, a forex & trade-finance officer in Indore, helps an exporter settle a trade transaction with Sri Lanka in INR, bypassing the ACU hurdles and speeding up payments for eligible essential goods exports.
What changed
RBI has permitted trade transactions with Sri Lanka under the SBI credit facility agreement dated March 17, 2022, to be settled in Indian Rupees outside the ACU mechanism. Previously, such transactions between ACU member countries were required to be routed through the ACU mechanism as per FEMA regulations.
What it means for you
This circular provides a targeted exemption for exports to Sri Lanka financed under the GOI-guaranteed SBI term loan, allowing INR settlement directly. Banks and exporters can bypass ACU hurdles, potentially speeding up payments and reducing currency conversion costs for eligible essential goods exports.
What you must do
Inform your exporter clients about the INR settlement option for eligible exports to Sri Lanka under the SBI credit facility.
Advise clients to obtain full details of the credit facility agreement from SBI's International Banking Group or website.
Ensure that only transactions falling under the SBI agreement and eligible under India's Foreign Trade Policy are processed outside the ACU mechanism.
Maintain records of such transactions for FEMA compliance purposes.
Who it affects
Category-I Authorised Dealer Banks, Exporters to Sri Lanka under the SBI credit facility, State Bank of India (as the lending bank)
❓ Common questions
Can all exports to Sri Lanka now be settled in INR?
No, only those trade transactions that fall under the specific SBI credit facility agreement dated March 17, 2022, for financing purchase of essential goods by Sri Lanka from India, and are eligible under the Foreign Trade Policy, are allowed INR settlement outside the ACU mechanism.
What is the ACU mechanism and why is this exemption needed?
The Asian Clearing Union (ACU) mechanism is the standard route for settling payments between member countries. This exemption was granted due to difficulties exporters faced in receiving export proceeds from Sri Lanka, allowing a direct INR settlement channel for this specific credit facility.
Where can we get details of the eligible goods and terms?
AD banks and exporters should contact State Bank of India's International Banking Group at its Corporate Centre in Mumbai or visit SBI's website for the complete credit facility agreement details.
📜 Read the original circular — full text as issued by RBI
RBI/2022-2023/53
A.P. (DIR Series) Circular No.03
May 19, 2022
To
All Category-I Authorised Dealer Banks
Madam/Sir,
Government of India guaranteed term loan extended by SBI to the Government of Sri Lanka- Settlement in INR
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulations 3 and 5 of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 in terms of which export / import transactions between ACU member countries are to be routed through the ACU mechanism.
2. In view of the difficulties being experienced by exporters in receipt of export proceeds from Sri Lanka and State Bank of India’s credit facility agreement dated March 17, 2022 with the Government of Sri Lanka for sanction of Government of India guaranteed USD 1000 million term loan to the latter for financing purchase of essential goods by Sri Lanka from India, it has been decided that such trade transactions with Sri Lanka, falling under the said arrangement, may be settled in INR outside the ACU mechanism.
3. Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by SBI under this agreement.
4. The above instructions shall come into force with immediate effect. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned and advise them to obtain complete details of the credit facility agreement from State Bank of India’s office at International Banking Group, Corporate Centre, State Bank Bhavan, Madame Cama Road, Nariman Point, Mumbai- 400021 or from their website https://sbi.co.in/web/international-banking/credit-finance/commercial-loans .
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Vivek Srivastava)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2022-2023/53 · issued 19 May 2022. The plain-English explanation above is BankPulse’s own independent summary.
Inform your exporter clients about the INR settlement option for eligible exports to Sri Lanka under the SBI credit facility.
Maintain records of such transactions for FEMA compliance purposes.
📜 Compliance
Advise clients to obtain full details of the credit facility agreement from SBI's International Banking Group or website.
Ensure that only transactions falling under the SBI agreement and eligible under India's Foreign Trade Policy are processed outside the ACU mechanism.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an Operations officer at a bank this circular applies to (Category-I Authorised Dealer Banks, Exporters to Sri Lanka under the SBI credit facility, State Bank of India (as the lending bank)), your first concrete step on “INR Settlement for India-Sri Lanka Trade Under SBI Credit Facility” is: “Inform your exporter clients about the INR settlement option for eligible exports to Sri Lanka under the SBI credit facility.” (RBI issued this 19 May 2022).
Circular: RBI/2022-2023/53 -- INR Settlement for India-Sri Lanka Trade Under SBI Credit Facility
Issued: 19 May 2022
Action required: Inform your exporter clients about the INR settlement option for eligible exports to Sri Lanka under the SBI credit facility.
Action required: Advise clients to obtain full details of the credit facility agreement from SBI's International Banking Group or website.
Action required: Ensure that only transactions falling under the SBI agreement and eligible under India's Foreign Trade Policy are processed outside the ACU mechanism.
Action required: Maintain records of such transactions for FEMA compliance purposes.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12320&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.