TaxTMI 
TaxTMI 
Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)
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....ave been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/ approvals, if any, required under any other law. Yours faithfully, (D. Mishra) Chief General Manager ============= Document 1 Annex (A.P. (DIR Series) Circular No.35 dated February 17, 2010) ACM MEMORANDUM OF PROCEDURE FOR CHANNELING TRANSACTIONS THROUGH ASIAN CLEARING UNION 1. Introduction This edition of the Memorandum details the revised procedure to be followed by the AD Category-l banks for handling transactions to be cleared through Asian Clearing Union (ACU). 2. Handling of ACU Transactions All transactions to be cleared through the ACU will be handled by AD Category-I banks in the same manner as other normal foreign exchange transactions. All AD Category-l banks in India have been permitted to handle ACU transactions. AD Category-l banks may freely enter into correspondent arrangements with banks in the other countries participating in the Clearing Union. 3. Eligible Instruments of Payment The Asian Monetary Units (AMUs) is the common unit of account of ACU and be de....
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....repatriating the excess liquidity in the ACU Dollar and ACU Euro accounts respectively, maintained by the AD Category-l banks with their correspondents in the other participating countries. Similarly, the Reserve Bank has also been receiving and delivering U.S. Dollar and Euro amounts for absorbing liquidity or for funding the ACU Dollar (vostro) and ACU Euro (vostro) accounts respectively, maintained by the AD Category-l banks on behalf of their overseas correspondents. Funding of ACU Dollar and ACU Euro account maintained with a correspondent bank in another ACU participant country will continue to be 3 (iii) effected by the Reserve Bank only after receiving an intimation that equivalent amount of U.S. Dollar and Euro is being credited to its account with the Federal Reserve Bank of New York, New York, and its account with the Deutsche Bundesbank, Frankfurt respectively, by the AD Category-l bank on the value date. Similarly, Reserve Bank will continue to arrange for payment of US Dollar and Euro from its accounts with the Federal Reserve Bank of New York, New York and the Deutsche Bundesbank, Frankfurt respectively, to the....
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....igible to be settled through ACU - (a) payments between Nepal and India and Bhutan and India, exception being made in the case of goods imported from India by an importer resident in Nepal who has been permitted by the Nepal Rastra Bank to make payments in foreign exchange. Such payments may be settled through the ACU mechanism; (b) payments which are not on account of current international transactions as defined by the International Monetary Fund, except to the extent mutually agreed upon between Reserve Bank and the other participants; and (c) such other payments as may be declared by the ACU to be ineligible for being channelled through the clearing facility. 9. Rate of Exchange for U.S. Dollar and Euro Under the revised procedure, the Reserve Bank will receive and pay U.S. Dollar and Euro from/to the AD Category- banks in respect of transactions described in paragraph 5 above and there will be no corresponding payment/receipt of Indian 5 rupees. In other words, no exchange rates will be announced for the purpose of putting through the transactions relating to the ACU, as has been the policy since 1st January 1996. 10.....
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..... 13. Transactions between AD Category-l banks and Reserve Bank for Account of Correspondent Banks (i) (ii) Banks in the other participating countries may fund their accounts with AD Category-l banks in India by transfer of U.S. Dollars and Euros through their Central Banks. On receipt of transfer instructions from the concerned Central Bank, Reserve Bank will arrange to transfer the amount indicated in the transfer instruction from their account with Federal Reserve Bank of New York, New York and Deutsche Bundesbank, Frankfurt to the correspondent of the AD Category-l bank. The AD Category-l bank may then arrange to credit the ACU Dollar and ACU Euro account of its correspondent bank on the value date. Correspondent banks of AD Category-l banks may also request AD Category-l banks to transfer amounts from their ACU Dollar and ACU Euro accounts to Reserve Bank for account of the Central Bank in the participating country. Requests from AD Category-l banks for repatriation of these surplus funds should be made in duplicate in form ACU-2 to DEIO, Mumbai. The acceptance of the offer will be conveyed on the duplicate copy of th....
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....is not necessary. 9 Yours faithfully, Manager ACU-2 [Paragraph 13(ii) of ACM] The Chief General Manager, Reserve Bank of India, Department of External Investments & Operations, Mumbai. Dear Sir, (To be submitted in duplicate) Asian Clearing Union Please arrange to pay U.S. $/ Euro . ( (in words) ..) to (Name of participating through the Asian Clearing Union for Central Bank and office) account of on (commercial bank in participating country and its BIC) (value date) being excess amount repatriated. 2. We undertake to deliver U.S. $/ Euro account with FRBNY/ Deutsche Bundesbank, Frankfurt (in words) to your through our correspondents on the value date. 10 10 Yours faithfully, Manager AGREEMENT ESTABLISHING THE ASIAN CLEARING UNION (As amended by the Board of Directors during various meetings up to June 2008) The central banks and monetary authorities of regional members and associate members of the UNITED NATIONS ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC (ESCAP), DESIRING to establish a facility to settle payments for current international ....
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....II - Participation SECTION 1 - Eligibility to participate (a) Participation in the Asian Clearing Union shall be open to the central bank or monetary authority of each regional member or associate member of ESCAP. (b) Participation in another clearing group or arrangement is not precluded by participation in the Asian Clearing Union. SECTION 2 - Original participants Original participants shall be those central banks or monetary authorities that are eligible to participate in and which sign this Agreement not later than three months from the date this Agreement has been signed by the duly authorized representatives of five such central banks or authorities. Each shall become a participant on the date this Agreement enters into force. SECTION 3 - Other participants A central bank or monetary authority that is eligible to participate and is not an original participant may apply to the Board of Directors to become a participant and be admitted as a participant if the Board so decides by a two-third vote of all the Directors and upon such central bank or monetary authority signing this Agreement and accepting the rules, regulations and....
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....ity are payments: (i) from a resident in the territory of one participant to a resident in the territory of another participant; 13 (ii) for current international transactions as defined by the Articles of Agreement of the International Monetary Fund; (iii) permitted by the country in which the payer resides; and (iv) not declared ineligible under (b) or (c) below. (b) The Board of Directors may declare specified payments to be ineligible to be channelled through the clearing facility and may terminate such ineligibility. (c) A participant, at the time it signs this Agreement, may declare that payments for specified transactions are ineligible to be made by and to residents in its territories through the clearing facility. The participant shall consult with the Board of Directors with a view to the relaxation and eventual removal of this ineligibility as soon as circumstances permit. SECTION 3 - 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. SECTION 4 - Use of the clearing facility (a) A p....
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....n settlement dates. The accrued interest shall be included in the calculation of the net amounts to be paid and received at the end of each settlement period and shall be notified at the end of each settlement period along with the net position of each participant. b) The Board of Directors shall determine, from time to time, the rate of interest, which shall be the same for both net creditor and net debtor positions, on the basis of the return on balances held on similar availability in major financial centres. SECTION 3 - Notifications and Payments (a) The Secretary General shall notify each participant of its net position, including accrued interest and of the amounts it shall pay to, or receive from, other participants at the end of each settlement period. (b) Each debtor participant, within four working days of the receipt from the Secretary General, of the notice of the amounts to be paid, shall make the payments in international reserve assets specified by the Board of Directors for the purpose. Payments may also be made in the currency of the creditor subject to its specific consent. Article VII - Maintenance of Value And N....
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....ntinue participation on the terms and conditions specified by the Board within thirty days of the decision of the Board on this matter, it shall be deemed to have withdrawn. The special terms and conditions may be revoked at any time by the Board. (d) In addition, the Board of Directors shall consider, in consultation with participants, other means by which the amount of the default may be recovered and participants shall take such further measures as the Board deems appropriate in order to recover the amount of the default in the shortest possible time. Article VII A - Currency Swap Arrangement The Board of Directors may provide for a currency swap arrangement among the participants and specify in the rules the eligibility criteria, the terms including the rate of interest and the period for which the facility should be extended, the manner in which the participants should contribute and such other relevant conditions and procedures as are considered necessary. 16 CHAPTER III ORGANIZATION AND ADMINISTRATION SECTION 1 – Joint action Article VIII - Organization Representatives of the participants shall meet from time to....
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....ing Union. (g) The remuneration and expenses of a Director and Alternate Director shall be borne by the participant appointing them. 17 SECTION 3 - Secretary General and Staff (a) The Board of Directors, by a two-thirds majority of all of the Directors, shall select and appoint the Secretary General, who shall not be a Director, for a term of three years. The Board shall establish the remuneration and other terms of the contract of service of the Secretary General. The Secretary General may be re- appointed and shall cease to hold office when the Board so decides by a two- thirds vote of all of the Directors. (b) The Secretary General, under the direction of the Board of Directors shall conduct the ordinary business of the Asian Clearing Union. He shall be the head of the staff and, subject to the general rules of the Board, organize, appoint and dismiss members of the staff. He shall exercise such other powers as are assigned to him by the Board. (c) The Secretary General shall prepare and submit to the Board the documents necessary for its work, particularly the financial statements, the proposed annual budget and the draft an....
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.... place of arbitration shall be decided by the parties to the dispute. The language of arbitration shall be English. Every effort shall be made to settle the controversy within a period of six months after service of a written request to the arbitration. Article XII - Reports and Assessments SECTION 1 - Reports The Board of Directors shall publish an annual report on its activities and the operations of the Asian Clearing Union. The report shall contain an audited statement of accounts and of the clearing operations. The Board may publish such other reports as it deems desirable. SECTION 2 Operating expenses - (a) The Board of Directors shall approve the annual budget and determine the formula under which expenses shall be apportioned among participants, on the basis of the actual use made of the Asian Clearing Union and of the services rendered to them. (b) The Board shall specify the currencies or other means in which the assessments shall be paid by members as well as the schedule of payments for each fiscal year. (c) The Board of Directors may request the Agent to make an advance to the Asian Clearing Union on behalf of....
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....tor on the Board shall be required to approve an amendment to modify the provisions of: (i) Article III on participation; (ii) Article IV(c) on the modification of the denomination and/or the value of the Asian Monetary Units; 20 20 (iii) Article V, Section 2(b) on specified ineligible payments; (iv) Article VI, Section 1(b) on the change of the settlement period; (V) Article VII, Section 1 on the value of payments and transfers; (vi) Article XII, Section 2(a) on the formula under which expenses shall be apportioned among participants; (vii) Article XIII, Section I on the right of a member to withdraw voluntarily from this Agreement at any time; and (viii) Article XIV on the amendment of this Agreement. The absence or abstention of a Director shall be considered to be a negative vote. (c) Any proposal to amend this Agreement shall be communicated to the Chairman of the Board of Directors who shall place the proposal before the Board for discussion. When an amendment has been adopted by the Board, the Chairman shall so certify in an official notice addressed to all participants and to the Executive Secretary ....
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....irector, and the Executive Secretary of ESCAP shall call the inaugural meeting of the Board of Directors. (b) At its inaugural meeting, the Board shall: (i) elect the Chairman and Vice-Chairman; and (ii) make arrangements to proceed with the preparatory work necessary to commence operations of the clearing facility. (c) The Chairman of the Board shall notify the participants of the date of the commencement of operation of the clearing facility. 22 Article XIX - Notification The Executive Secretary of ESCAP shall notify signatories and all regional members and associate members of ESCAP of: (i) all signatures to this Agreement, and (ii) the date on which this Agreement enters into force Done in a single copy in the English language. 23 ASIAN CLEARING UNION (PROCEDURE) RULES (As amended by the Board of Directors during various meetings up to June 2008) 1. These rules have been adopted by the Board of Directors of the Asian Clearing Union in terms of Article VIII Section 2(f) of the Agreement establishing the Asian Clearing Union and shall be called the Asian Clearing Union (Procedure) Rules. 2. These rules shall come into....
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....countries to maintain ACU Dollar and ACU Euro accounts with their correspondent banks in the other participating countries. All payments other than ineligible payments will be settled by the banks concerned through these accounts. The operations on these accounts shall be governed by the prevailing Exchange Control Regulations and such other directions, rules, regulations or guidelines as the participants may issue or specify from time to time. (b) When a commercial bank desires to fund its ACU Dollar or ACU Euro account with its correspondent bank in another participating country, it may purchase the required amount of ACU Dollar or ACU Euro either from a local commercial bank having a surplus in that participating country or from its central bank. In the latter case, it will surrender equivalent amount of US Dollars or euros or, at the option of the Central Bank, the equivalent in the local currency to its own Central Bank 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 Dollars or euros to the concerned bank in that....
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....acility from each other. (b) Entitlement At the end of each calendar year, the Secretary General shall advise each participant by swift or telex or cable of its entitlement in ACU Dollar using the exchange rate referred to in Rule 7. Every eligible participant shall be entitled to the facility from every other participant up to 20% of the average gross payments (ACU Dollar and ACU Euro accounts collectively) made by it through the ACU mechanism to other participants during the three previous calendar years. A participant shall not, however, draw more than its net deficit (ACU Dollar and ACU Euro accounts collectively) at the end of a settlement period. The drawal by each participant from each other participant shall be in the same proportion as its net deficit (ACU Dollar and ACU Euro accounts collectively) bears to its maximum entitlement. The drawal may be effected in a currency (US Dollar or Euro) decided by mutual agreement. (c) Rate of Interest The rate of interest chargeable on each drawal would be equal to US Dollar or Euro LIMEAN derived from the respective two months LIBOR declared by the British Bankers' Association, appl....
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.... settlement period At the end of each settlement period, the Secretary General shall notify each participant by swift or telex or cable of its net position and accrued interest, and of the amounts it shall pay or receive from other participants for ACU Dollar and ACU Euro accounts separately. 12. Settlement of balances – (a) Each debtor participant, within four working days of the receipt from the Secretary General of the notice of the amounts to be paid, shall 27 make the payment in US Dollar or Euro or in any other mutually acceptable currency, under swift or telex or cable intimation to the Secretary General. (b) If settlement is desired to be effected in a currency other than US Dollar or Euro, the participants shall, by mutual agreement, decide on the exchange rate to be made applicable for such settlement. 13. Obligation to accept net position advised by the Secretary General - The net position at the end of the settlement period, as notified by the Secretary General shall be accepted by every participant as correct and settlement shall be made accordingly. The participants shall, however, have the right to bring an....