The Reserve Bank of India has approved trade transactions between India and Sri Lanka to be settled in Indian rupees outside the Asian Clearing Mechanism.
The approval is alongside a government-guaranteed USD 1 billion term loan from State Bank of India to the government for purchasing essential goods from India.
India, on the 17th of March, announced a term-loan facility as a part of its financial assistance to help the country to deal with its worst financial crisis in modern times.
In a notification, RBI said, “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.”
The Asian Clearing Union was established in 1974 at the initiative of the United Nations Economic and Social Commission for Asia and Pacific for promoting regional cooperation.
The clearing union facilitates payments among member countries for eligible transactions on a multilateral basis, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries.
