Current · Source: Reserve Bank of India · RBI/2022-2023/89 · issued 08 Jul 2022 · ~1 min read
Quick answerRBI has temporarily allowed Indo-Sri Lanka trade settlements in any permitted currency outside the ACU mechanism, effective immediately. This replaces the earlier mandatory routing through ACU for current account transactions.
The rule, in the simplest words
Banks can now settle Indo-Sri Lanka trade in any permitted currency outside the ACU mechanism.
This change is temporary and will be reviewed further.
Banks must ensure compliance with FEMA and other applicable laws.
How it plays out — a real example
The forex & trade-finance officer, Rohan, receives a request from a gold exporter to settle a transaction with a Sri Lankan buyer. Rohan checks the RBI's latest circular and finds that he can now settle the transaction in USD. He updates the internal system, informs the exporter, and settles the transaction in USD, ensuring compliance with FEMA and other applicable laws. A forex & trade-finance officer in Indore can now settle a gold export transaction with Sri Lanka in USD instead of routing it through the ACU mechanism.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2022-2023/89
A.P. (DIR Series) Circular No. 09
July 08, 2022
To
All Category-I Authorised Dealer Banks
Madam/Sir,
Asian Clearing Union (ACU) Mechanism – Indo-Sri Lanka trade
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. The extant provisions have been reviewed and in terms of clause b of sub-Regulation 2 of Regulation 3 and clause c of sub-Regulation 2 of Regulation 5 of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 , it has been decided that all eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism until further notice.
3. 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.
4. 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/2022-2023/89 · issued 08 Jul 2022. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems and procedures to allow settlement of Indo-Sri Lanka trade in any permitted currency outside ACU.
📜 Compliance
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.
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, Importers and exporters trading with Sri Lanka, Trade finance and forex operations teams), your first concrete step on “Indo-Sri Lanka Trade: ACU Mechanism Suspended” is: “Update internal systems and procedures to allow settlement of Indo-Sri Lanka trade in any permitted currency outside ACU.” (RBI issued this 08 Jul 2022).
Circular: RBI/2022-2023/89 -- Indo-Sri Lanka Trade: ACU Mechanism Suspended
Issued: 08 Jul 2022
Action required: Update internal systems and procedures to allow settlement of Indo-Sri Lanka trade in any permitted currency outside ACU.
Action required: Inform all concerned constituents, including importers and exporters, about this temporary relaxation.
Action required: Ensure all transactions comply with FEMA sections 10(4) and 11(1) and any other applicable permissions or approvals.
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=12357&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.
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