RBI allows banks to make ACU interest payments in euro
08 May 2009
The Reserve Bank of India (RBI) has allowed banks to pay interest in either euro or US dollar to accounts held in euro denomination to settle payments to Asian Clearing Union member countries like Pakistan, Iran, Bangladesh, Myanmar, Nepal and Sri Lanka.
''It has been decided to allow banks operating in India to pay interest, at their discretion, on ACU Euro Vostro accounts in addition to ACU Dollar Vostro accounts maintained by them,'' the RBI said in a release, adding, ''The decision to pay interest and the rate at which it will be paid and other conditions will, however, be left to the discretion of each bank.''
''The board of directors of the Asian Clearing Union (ACU), at the 37th meeting in June 2008, had adopted the euro as a settlement currency under the ACU mechanism with effect from 1 January 2009. Further, it was also decided at that central banks of the ACU member countries would allow commercial banks under their respective jurisdictions to pay interest, at their discretion, on the balances in ACU Dollar accounts as also the ACU Euro accounts of correspondent banks of other ACU member countries maintained by them,'' the release added.
Under the ACU mechanism, the seven nations settle international payments using the Asian monetary unit as the unit of account. Dollar dominates as the settlement currency under this mechanism.
Euro has been adopted as a settlement currency under the ACU mechanism with effect from January 1 this year.
