What changed
Previously, all export/import transactions between ACU member countries, including Sri Lanka, had to be routed through the ACU mechanism. Now, all eligible current account transactions with Sri Lanka can be settled in any permitted currency outside the ACU mechanism until further notice.
What it means for you
Banks and traders now have flexibility to use non-ACU currencies (like USD, EUR, INR) for Indo-Sri Lanka trade settlements, bypassing the ACU clearing system. This could ease payment bottlenecks given Sri Lanka's economic situation, but banks must ensure compliance with FEMA and other applicable laws.
What you must do
- Update internal systems and procedures to allow settlement of Indo-Sri Lanka trade in any permitted currency outside ACU.
- Inform all concerned constituents, including importers and exporters, about this temporary relaxation.
- Ensure all transactions comply with FEMA sections 10(4) and 11(1) and any other applicable permissions or approvals.
Who it affects
Category-I Authorised Dealer Banks, Importers and exporters trading with Sri Lanka, Trade finance and forex operations teams
Does this circular apply to all ACU member countries or only Sri Lanka?
The circular specifically mentions Indo-Sri Lanka trade. It allows settlement of eligible current account transactions with Sri Lanka outside the ACU mechanism.
Is this change permanent?
No, it is effective until further notice. Banks should monitor for any subsequent RBI instructions.
What currencies can be used for settlement now?
Any permitted currency can be used, meaning currencies that are freely convertible and allowed under FEMA. The circular does not restrict to specific currencies.