Asian Clearing Union (ACU) Knowledge Bank
ASIAN CLEARING UNION (ACU)
Asian Clearing Union (ACU) is the simplest form of payment arrangements whereby the members settle their payments of intra-regional transactions among the participating Central Bank on a multilateral basis.
02. OBJECTIVES & PURPOSE:
- to promote trade and commerce among the member countries
- to increase regional co-operation towards reducing trade gap
- to settle payments of different transactions more easily
- to avoid dependence on the traditional settlement of payments
- to economize the time and cost involved in settlement of payments abroad
- to promote the use of participants currencies in current transactions and to economize the use of participants exchange reserve.
- to promote total co-operation and coordination in economic activities among the Central banks of the member countries
- to provide for currency swap arrangement among the participants so as to make Asian Monetary Unit available to them temporarily.
03. COMPOSITION OF ACU:
At present the ACU enjoys the membership of the following 8 (eight) participants:
i) Bangladesh Bank
ii) Reserve Bank of India
iii) Nepal Rastra Bank
iv) State Bank of Pakistan
v) Central Bank of Sri Lanka
vi) The Central Bank of the Islamic Republic of Iran
vii) Central Bank of Myanmer
viii) Royal Monetory Authority of Bhutan
04. ELIGIBLE PAYMENTS & TRANSFERS:
The payments those are eligible to be made through the clearing facility are:
i. Payments from a resident in the territory of one participant to a resident in the territory of another participant
ii. Payments for current international transaction
iii. Payments permitted by the country in which the payer resides.
05. ELIGIBLE INSTRUMENTS:
All instruments of payment denominated in AMUs or US Dollars may be used to effect payment through the clearing facility, Settlement of such instruments will be made by the Commercial banks through operation of the accounts.
The instruments that can be used for payments through the Union are Telegraphic Transfers, Mail Transfers, Bank Drafts and Bill of Exchange payable at sight . For settlement of payments through the unions clearing mechanism, the instruments are to be denominated in ACU Dollar which is equivalent to one US Dollar.
06. DUTY TO COMPLETE PAYMENT:
Each participant undertakes that all eligible payments made through the clearing facility to residents in its territory will be accepted and completed.
- ADs shall maintain Nostro Accounts in ACU Dollar with their correspondent bank in ACU member countries. ADs may also open ACU dollar accounts in their books in the names of their correspondents.
- An AD needing to Fund its ACU Dollar nostro A/Cs with correspondent bank in an ACU member country shall do so through its Central bank against surrender of the required amount in US Dollar or equivalent local currency for remittance through the ACU mechanism.
- The participant receiving the amount will advise the participant in the country concerned to make available the amount in US Dollar to the concerned bank in that country.
- After making the payment the Central Bank of the receipant ACU member country shall advise the Secretary General of the ACU to credit its account by debit to the first participants account.
07. REPATRIATION OF FUNDS:
The procedure for repatriating funds from an ACU Dollar nostro account with a correspondent bank in an ACU member country is given below:
- When a commercial bank desires to repatriate funds from its ACU Dollar account with its correspondent bank in another participating country, it will request that bank to effect the remittance through the ACU mechanism. The correspondent bank will surrender equivalent amount of US Dollars to its own central bank for remittance .
- The participant receiving the amount will advise the participant in the country concerned to make available the equivalent amount to the concerned bank in that country.
- The Central bank may, at its option, make the payment in US Dollar or in Local currency.
- After making the payment, the second participant will advise the Secretary General of the ACU to credit its account by debit to the first participants account.
- On receipt of the advices, the clearing union shall effect the necessary transfers under advice to both the participants.
08. SETTLEMENT OF BALANCES AMONG PARTICIPANTS:
1. The clearing union shall maintain an account in AMUs for each participant to which the payments advised by the participants will be debited or credited.
2. The settlement of net balances with accrued interests in respect of member countries are made at the end of each two monthly period. In other words accrued interest is included in the calculation of the net amounts to be paid or received.
3. Interest is paid by net debtors and transferred to net creditors on daily balances outstanding between settlement dates.
4. The rate of interest is determined by the Board of Directors subject to change from time to time, on the basis of the rates in major financial centers.
5. Each participants is notified of its net position at the end of each settlement period and debtors make the payments within 4 (four) working days of the receipt of notice from the Secretary General in US Dollar currency
6. If the settlement is desired to be effected in a currency other than US Dollar, the exchange rate be decided by mutual agreement.
09. DELAYED PAYMENT:
- If a participant fails to make payment notified by the Secretary General within specific date the participant will be deemed to have defaulted & defaulting participant be suspended.
- After the default has been fully discharged, the board of Directors may restore the defaulting participants to full participation in the ACU subject to any special terms & conditions that the Board may deem appropriate.
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