Memorandum containing detailed procedural instructions for channeling transactions through Asian Clearing Union (ACU) was first issued in September 1987. The memorandum (ACM) was issued as a separate booklet in March 1994 and a revised version was published in January 1996. With the Foreign Exchange Management Act, 1999 (42 of 1999), coming into force from June 1, 2000, it has been decided to revise the Memorandum ACM, incorporating therein the changes following introduction of FEMA, 1999.

2. The directions issued through this Memorandum have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and any contravention and/or non-observance of these directions is subject to the penalties prescribed under the said Act.

Reserve Bank of India
Exchange control Department
Central Office
Mumbai-400 023.

Chapter I    General Provisions
Chapter II   Operations
Chapter III  Organization And Administration
Chapter IV  Miscellaneous Provisions
Chapter V   Final Provisions

This edition of the Memorandum details the revised procedure to be followed by the authorised dealers for handling transactions to be cleared through Asian Clearing Union (ACU), consequent on the switchover to a dollar denominated trade with effect from 1^st January 1996.

All transactions to be cleared through the ACU will be handled by authorised dealers in the same manner as other normal foreign exchange transactions. All authorised dealers in India have been permitted to handle ACU transactions. Authorised dealers may freely enter into correspondent arrangements with banks in the other countries participating in the Clearing Union.

The Asian Monetary Unit is the common unit of account of ACU and is equivalent in value to one U.S. dollar. The Asian Monetary Unit may also be denominated as U.S. dollar. All instruments of payment shall be denominated in Asian Monetary Unit. Settlement of such instruments may be made by authorised dealers through operation on ACU dollar Accounts.

1. The essence of the procedure for settlement of eligible transactions through the ACU is that as large a part of the transactions as possible should be settled directly through the accounts maintained by authorised dealers with banks in the other participating countries and vice versa; only the spill-overs in either direction being required to be settled by the Central Banks in the countries concerned through the Clearing Union.

2. Authorised dealers are permitted to settle commercial and other eligible transactions in much the same manner as other normal foreign exchange transactions. The procedures for opening letters of credit, negotiation of documents, etc., in respect of trade in convertible currencies are applicable for trade routed through the ACU mechanism.

3. To facilitate settlement of transactions through the ACU in this manner, authorised dealers may freely open with their branches/correspondents ‘ACU dollar accounts’. These must be kept distinct from U.S. dollar accounts, if any, maintained for settlement of transactions taking place outside the Clearing Union. The term ACU dollar is specifically being used in order to identify the use of U.S. dollar in relation to ACU transactions. Otherwise there is no distinction value-wise between ACU dollar and the U.S. Dollar.

4. Authorised dealers should ensure that at all times the balances maintained in the ACU dollar accounts are commensurate with the requirements of their normal exchange business and funds rendered surplus should be repatriated to India regularly.

1. Effective 1^st January 1996, the Reserve Bank of India has been undertaking to receive and pay U.S. dollars from/to authorised dealers for the purpose of funding or for repatriating the excess liquidity in the ACU dollar accounts maintained by the authorised dealers with their correspondents in the other participating countries. Similarly, the Reserve Bank of India has also been receiving and delivering U.S. dollar amounts for absorbing liquidity or for funding the ACU dollar (vostro) accounts maintained by the authorised dealers on behalf of their overseas correspondents.

2. Funding of an ACU dollar account maintained with a correspondent bank in another ACU participant country will continue to be effected by Reserve Bank only after receiving an intimation that equivalent amount of U.S. dollar is being credited to its account with the Federal Reserve Bank of New York, New York, by the authorised dealer on the value date. Similarly, Reserve Bank will continue to arrange for payment of US dollar from its account with the Federal Reserve Bank of New York to the account of the correspondent of the authorised dealer in New York, in case it has received intimation of surrender of surplus funds to the other participant central bank on behalf of the authorised dealer in India.

3. In the case of funding of ACU dollar account maintained by foreign commercial banks with the authorised dealers in India, Reserve Bank on receipt of an advice from participant central bank will arrange to credit U.S. dollar amounts to the Nostro Accounts of the authorised dealers in New York. The authorised dealers will credit the U.S. dollar amounts to the ACU dollar accounts of the foreign commercial banks of the participating countries concerned on the value date. Similarly, the authorised dealers will receive instructions from their overseas correspondents to surrender excess liquidity in their ACU dollar accounts to Reserve Bank. In such cases the authorised dealers will have to actually remit the U.S. dollar amounts to the account of Reserve Bank with the Federal Reserve Bank of New York, New York on the value date and Reserve Bank will arrange to advise the other participant central banks to make available the U.S. dollar amounts to the commercial banks in their countries.

Operations conducted in and through the ACU dollar Accounts will be subject to compliance with all the Exchange Control regulations and the specific provisions of this Memorandum.

Transactions that are eligible to be made through ACU are payments –

1. from a resident in the territory of one participant to a resident in the territory of another participant

2. for current international transactions as defined by the Articles of Agreement of the International Monetary fund

3. permitted by the country in which the payer resides

4. not declared ineligible under paragraph 6 of this Memorandum and

5. for export/import transactions between ACU member countries on deferred payment terms.

The following payments are not eligible to be settled through ACU –

1. payments between Nepal & India and Bhutan & 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 Rashtra Bank to make payments in foreign exchange. Such payments may be settled through the ACU mechanism

2. 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.

3. such other payments as may be declared by the Asian clearing Union to be ineligible for being channelled through the clearing facility.

Under the revised procedure, the Bank will receive and pay U.S. dollar from/to the authorised dealers in respect of transactions described in paragraph 5 above and there will be no corresponding payment/receipt of Indian 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 1^st January 1996.

The hours for receiving applications for funding of ACU dollar accounts in overseas participant countries or surrendering of surplus liquidity in the ACU dollar accounts of their overseas correspondents maintained in India will be the regular business hours of the Bank. No application will be received on Saturdays.

11. Minimum and Multiple amounts for transactions with Reserve Bank

The minimum amounts and the multiples in which Reserve Bank will receive and pay U.S. dollar will continue to be U.S. $ 25,000 and U.S. $ 1,000 respectively.

1. Reserve Bank’s Department of External Investments & Operations at Mumbai will undertake ACU transactions.

2. Requests from authorised dealers for funding of their ACU dollar accounts with commercial banks in participating countries should be made in duplicate in form ACU-1 to the concerned Department of the Reserve Bank , Mumbai. The acceptance of the offer will be conveyed on the duplicate copy of the letter of offer. Such offers should be accompanied by confirmation that equivalent amount of dollar is being credited to Reserve Bank’s account with Federal Reserve Bank of New York, New York on the value date. Reserve Bank will advise the central bank in the concerned participating country to deliver the contracted amount on the value date to the correspondent bank indicated by the authorised dealer. To obviate the possibility of delay in putting through the transaction, authorised dealers may inform their correspondents of the particulars of the transactions such as expected amount, value date, etc.

3. Authorised dealers may wish to repatriate the excess liquidity in their ACU dollar accounts maintained with their branches/correspondents in other participating countries. They will arrange through their branches/correspondents for surrendering of such liquidity to the participant central bank. Upon receipt of an advice from the participant central bank, the Department of External Investment & Operations of Reserve Bank will make available U.S. dollar on the value date through the Federal Reserve Bank of New York, New York to the New York correspondent of the authorised dealer.

(i) Banks in the other participating countries may fund their accounts with authorised dealers in India by transfer of U.S. dollars through their Central Banks. On receipt of transfer instructions by telex, cable, etc. 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 to the correspondent of the authorised dealer in New York. The authorised dealer may then arrange to credit the ACU dollar account of its correspondent bank on the value date.

(ii) Correspondent banks of authorised dealers may also request authorised dealers to transfer amounts from their ACU dollar accounts to Reserve Bank for account of the Central Bank in the participating country. Requests from authorised dealers for repatriation of these surplus funds should be made in duplicate in form ACU-2 to the concerned Department of the Reserve Bank, Mumbai. The acceptance of the offer will be conveyed on the duplicate copy of the letter of offer. Such offers should also be accompanied by confirmation that equivalent amount of dollar is being credited to Reserve Bank account with Federal Reserve Bank of New York, New York on the value date. Reserve Bank will advise the participant central bank to provide equivalent amount of dollars to the concerned bank in that country.

(iii) The authorised dealers must ensure that deliveries of U.S. dollar amounts are duly made on the value date to the account of Reserve Bank of India with Federal Reserve Bank of New York, New York in respect of transactions of funding their ACU dollar account or repatriation of excess liquidity from the ACU Dollar vostro accounts maintained with them. If the U.S. dollar amount is not delivered on the due date, interest will be charged at the appropriate penal rate for the number of days of default.

Requests from Authorised Dealers to fund their ACU dollar accounts with commercial banks in participating countries as well as to repatriate the excess liquidity in the ACU dollar accounts of their correspondent banks maintained with them would be accepted in ACU 1 and ACU 2 formats respectively by DEIO, RBI, Mumbai on ‘Tom’ basis also, in addition to ‘Spot’ basis. Authorised Dealers desirous of availing the facility of booking transactions on ‘Tom’ basis, should submit their applications to the DEIO, RBI, Mumbai before 3.00 P.M. a day prior to Value Date.

Form

(As amended by the Board of Directors during various meetings up to May 2002)

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 transactions within the ESCAP region on a multilateral basis,

RECOGNIZING that such a facility would contribute to the expansion of trade and the promotion of monetary co-operation among their countries,

RECOGNIZING further that a facility designed to promote the use of the participants’ currencies would reduce the use of extra-regional currencies to settle current international transactions within the regions and thereby effect economy in the use of foreign exchange and reduce the cost of making payments for such current international transactions,

REALIZING that the region-wide clearing facility could co-exist and function in co-operation with sub-regional or less than regional arrangements in Asia and the Pacific,

CONVINCED that the regional clearing facility must be established and operated in a manner that will not prejudice the principles of multilateral trade and payments,

ON WHOSE BEHALF this AGREEMENT has been signed, HAVE AGREED AS FOLLOWS:

The central banks and other monetary authorities on whose behalf the present Agreement is signed, hereinafter referred to as ';participants';, agree to establish a system for clearing payments among their respective countries on a multilateral basis, hereinafter referred to as the ';Asian Clearing Union';, which shall be governed by the provisions of this Agreement and by the rules, regulations and decisions agreed within its framework.

The purposes of this Agreement are :-

(a) To provide a facility to settle, on a multilateral basis, payments for current international transactions among the territories of participants;

(b) To promote the use of participants’ currencies in current transactions between their respective territories and thereby effect economy in the use of the participants’ exchange reserves;

(c) To promote monetary co-operation among the participants and closer relations among the banking systems in their territories and thereby contribute to the expansion of trade and economic activity among the countries of the ESCAP region; and

(d) To provide for currency swap arrangement among the participants so as to make Asian Monetary Units available to them temporarily.

(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.

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.

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-thirds vote of all of the Directors and upon such central bank or monetary authority signing this Agreement and accepting the rules, regulations and decisions of the Board of Directors. The Chairman of the Board shall determine the date on which the payments and transfers with respect to such a participant shall be included in the clearing facility.

(a) The accounts of the Asian Clearing Union shall be kept in a common unit of account hereby designated as the ';Asian Monetary Unit';, which may be referred to in the abbreviated form as ';AMU';.

(b) The value of one Asian Monetary Unit shall, with effect from 1.1.1996, and until such time as it is changed by the Board of Directors in terms of the sub-clause (c) of the Article, be equivalent in value to one U.S. Dollar. The Asian Monetary Unit may also be denominated as ‘ACU dollar’.

(c) The Board of Directors may change the value of the Asian Monetary Unit at any time by a unanimous vote of all the Directors.

(d) In the event of a change in the value of the Asian Monetary Unit by the Board of Directors, the outstanding net debtor and creditor positions as of the date of this change including accrued interest shall be settled on the basis of the value of the Asian Monetary Unit preceding such change.

1. The Board of Directors, after consultation with participants, shall prescribe by appropriate rules consistent with this Agreement the procedures to effect the financial settlement of eligible payments and transfers through the clearing facility. In particular, these rules and regulations shall specify the procedures to be followed by persons, commercial banks, and central banks or monetary authorities. The Board shall prescribe the information to be supplied to the Secretary General for the operation of the clearing facility.

2. Each participant, in so far as its monetary and exchange system permits, shall take all steps necessary to put into effect in its territories the procedures prescribed by the Board of Directors and to supply the information required by the Board for the operation of the clearing facility.

1. The payments that are eligible to be made through clearing facility are payments

2. The Board of Directors may declare specified payments to be ineligible to be channelled through the clearing facility and may terminate such ineligibility.

3. 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.

Each participant undertakes that all eligible payments made through the clearing facility to residents in its territory will be accepted and completed.

(a) A participant may require residents to make payments through the clearing facility, but such a requirement shall not be enforced in a manner that will restrict or delay the making of payments for current international transactions or create a discriminatory currency arrangement.

(b) Except to the extent that a participant requires its residents to make payments through clearing facility in accordance with (a) above, the use of the clearing facility shall be optional.

(c) In order to promote the use of the clearing facility, participants may adopt measures designed to provide incentives to make payments for individual transactions through the clearing facility, provided such measures shall be consistent with the participant’s undertakings under the Articles of Agreement of the International Monetary Fund. Thus, for this purpose, participants may allow the conversion of their currencies into Asian Monetary Units or into those of other participants in respect of payments or receipts at rates which are more favourable than those for dealings outside the clearing facility.

The Board of Directors shall specify in its rules and regulations the types of instrument of payment that may be used and how each is to be used to make payment through the facility. Only instruments of payment denominated in Asian Monetary Units or the U.S. dollar may be used to make payment through the clearing facility. A participant, after consultation with the Board may prohibit the use of particular instruments of payment by its residents for making payments through the clearing facility, but shall notify the Secretary General of such prohibition who shall notify all other participants.

(a) Settlement shall be made of net positions and accrued interest at the end of each two monthly settlement period. Settlements shall be made in accordance with section 3 of this article.

(b) The Board of Directors may change the length of the settlement period by a decision taken by a unanimous vote of all the Directors.

1. Interest shall be paid by net debtors and transferred to net creditors on daily balances outstanding between 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.

2. 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.

(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.

The value of any instrument of payment or transfer of a currency for the purpose of the amount to be settled through the clearing facility shall be the amount in Asian Monetary Units or ACU dollars, as well as in the case of a transfer of currency, be equivalent in Asian Monetary Units or ACU dollars determined as of the date the transfer is considered to be made under the rules prescribed by the Board of Directors. The values of payments and transfers made and received in respect of participants and the resulting positions of participants shall be recorded by the Secretary General in Asian Monetary Units.

If a participant fails to make any payment notified to it by the Secretary General under article VI within the time required, interest shall be payable by the participant on the amount due at such rate as may be determined by the Board of Directors.

(a) In the event the payment referred to in Section 2 above remains unpaid after fifteen days from the date on which it was due in terms of Article VI Section 3(b), the participant shall be deemed to have defaulted and the Secretary General shall immediately notify the Directors and all participants. Thereafter no payments with respect to residents in the territory of the defaulting participant can be made through the clearing facility until the default has been fully discharged and the participant restored to full participation in accordance with (c) below.

(b) Unless the defaulting participant, within seven days of the date of default agrees with the participants to which it is obliged to make any payments due under article VI on arrangements to make the payments, with interest, its participation in the Asian Clearing Union shall be suspended.

(c) After the default has been fully discharged, the Board of Directors may restore the defaulting participant to full participation in the Asian Clearing Union subject to any special terms and conditions that the Board may deem appropriate, or may require the defaulting participant to withdraw from participation. If the defaulting participant does not agree to continue 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.

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.

Representatives of the participants shall meet from time to time for the purpose of giving effect to those provisions of this Agreement which involve joint action and, generally, with a view to facilitating the operation and furthering the objectives of this Agreement. Whenever reference is made in this Agreement to the participants acting jointly, they are designated as the Board of Directors.

(a) Each participant shall appoint one Director and one Alternate Director to represent it on the Board of Directors. Each Director and Alternate Director shall be appointed for a term of two years, may be re-appointed, and may be replaced at any time during the term of his appointment. Each Director shall have one vote. An Alternate Director may attend the meetings but may vote only when his principal is not present or when his principal is acting as the Chairman. The Board shall elect a Chairman from among its members to serve for a period of one year, and a Vice-Chairman to serve in the absence or inability of the Chairman during the same period.

(b) The Board of Directors shall meet at least once in a calendar year. In addition, meetings of the Board shall be called by the Chairman when requested by two Directors or when the Chairman considers a meeting necessary.

(c) A quorum for any meeting of the Board of Directors shall be the Chairman or Vice-Chairman and two-thirds of the Directors.

(d) All decisions of the Board of Directors shall be taken by a majority of the votes of all the Directors unless a special majority is required by this Agreement. The votes of ';all of the Directors'; means the votes of all the Directors and not merely of those present and voting. When both a Director and his Alternate are not present at a meeting of the Board, the Director, in accordance with rules established by the Board, may authorise another Director to present his views and to cast his vote. The Chairman shall have no vote, except in the case of an equal division when he shall cast the deciding vote.

(e) The Board of Directors may establish a procedure whereby the Chairman may obtain the votes of the Directors on a specific question without calling a meeting of the Board.

(f) The Board of Directors may adopt such rules and regulations as are necessary for the organization and operation of the Asian Clearing Union.

(g) The remuneration and expenses of a Director and Alternate Director shall be borne by the participant appointing them.

(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 Boards 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 annual report.

(d) The Secretary General shall act as the representative of the Board of Directors within the limits prescribed by the Board.

(e) The Secretary General and the staff members, in the discharge of their official functions, shall owe their duty entirely to the Board of Directors and to no other authority. Each participant in the Asian Clearing Union shall respect the international charter of this duty and shall refrain from all attempts to influence any of the staff in the discharge of his functions.

The Board of Directors may make arrangements with a Central Bank or monetary authority of a participant or with the Asian Reserve Bank when it is established to provide the necessary services and facilities for the operation of the clearing facility. The agreement establishing these arrangements with an Agent must be approved by a vote of two-thirds of all of the Directors.

The Board of Directors may make arrangements to co-operate with other general, regional or sub-regional international organizations, or other clearing arrangements among countries within or outside the ESCAP region. Any such arrangements shall not apply to a participant which does not consent.

(a) Any question of interpretation of this Agreement or of any rules, regulations or decisions of the Board of Directors arising between the Secretary General and a participant or between participants shall be decided by the Board whose decision shall be final.

(b) Should any disagreement arise between the Board of Directors and a participant which has withdrawn from the Asian Clearing Union or has been required to withdraw, and if efforts to settle the controversy by negotiation fail, such disagreement shall be submitted to arbitration by a tribunal of three arbitrators, the first appointed by the Board, the second by the participant and the third designated by first two arbitrators. If they fail to reach agreement, the third arbitrator shall be appointed by the Executive Secretary of ESCAP. The third arbitrator shall be empowered to decide all matters of procedure whenever the other two arbitrators disagree with respect to such a question.

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.

(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 the participants when such action becomes necessary to meet expenses, but the Board shall promptly make an assessment to meet the amount borrowed.

(d) All the decisions taken by the Board of Directors in accordance with this section shall require the affirmative vote of two-thirds of all the Directors.

Any participant may withdraw from this Agreement at any time by transmitting a notice in writing to the Secretary General. Withdrawal shall become effective three business days from the date such written notice is received by Secretary General unless a later date is indicated by the participant in the notice. The Secretary General shall notify all other participants as promptly as possible.

If a participant fails to fulfil any of its obligations under this Agreement, and if, after consultations between the Board of Directors and the participant concerned, the participant fails to correct the situation, the Board may require such participant to withdraw from participation. The participant shall be deemed to have withdrawn on the date of the decision of the Board or such later date as the Board may specify.

(a) A participant shall remain liable for and shall meet all its obligations to other participants arising from its participation under the Agreement until the final settlement of accounts with it has taken place.

(b) Only instruments of payments for the settlement of transactions involving residents in the territory of the withdrawing participant issued on or before the date of its withdrawal shall be settled thereafter through the clearing facility. Settlements shall normally be made at the regular settlement dates until all outstanding instruments of payments have been cleared. The Board of Directors shall determine any further procedures needed to effect the final settlement of accounts with the withdrawing participant.

(a) This Agreement may be amended by a decision of the Board of Directors taken by a vote of two-thirds of all the Directors.

(b) Notwithstanding the provisions of the preceding paragraph, the affirmative vote of each Director on the Board shall be required to approve an amendment to modify the provisions of :

1. Article III on participation;

2. Article IV (c) on the modification of the parity of the Asian Monetary Unit;

3. Article V, Section 2(b) on specified ineligible payments;

4. Article VI, Section 1(b) on the change of the settlement period;

5. Article VII, Section 1 on the value of payments and transfers;

6. Article XII, Section 2(a) on the formula under which expenses shall be apportioned among participants;

7. Article XIII, Section I on the right of a member to withdraw voluntarily from this Agreement at any time; and

8. 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 of ESCAP. Amendments shall enter into force one month after the date of dispatch of the official communication unless the Board specified a different date.

(a) The Board of Directors may suspend operations by a decision of the Board taken by a vote of two-thirds of all of the Directors. All participants shall be notified immediately and no instrument of payment issued after the date of notice shall be settled through the clearing facility.

(b) After a decision under sub-section (a), if the Board of Directors does not decide to resume operations within six months, all operations and other activities shall be suspended, except those necessary for the orderly liquidation and the final settlement of accounts among participants as determined by the Board.

(a) The Executive Secretary of ESCAP shall be the depository of this Agreement and shall send certified copies of this Agreement and any amendments to it, to all regional members and associate members of ESCAP. Any amendments to this Agreement, as certified by the Chairman of the Board of Directors under the provisions of Article XIV(c), shall be appended to its text.

(b) This Agreement shall be open for acceptance by signature by duly authorized representatives of Central Banks or monetary authorities of regional members or associate members of ESCAP at the United Nations Economic and Social Commission for Asia and the Pacific. Each Central Bank or Monetary authority on whose behalf this Agreement is signed shall deposit with Executive Secretary, before signature, an instrument setting forth that it has full legal authority to accept this Agreement and to carry out all its obligations under it.

This Agreement shall enter into force when it has been signed and the instruments provided in Article XVI(b) have been deposited by duly authorized representatives of at least five Central Banks or monetary authorities of regional members or associate members of ESCAP but not before the date determined by Article III, Section 2.

(a) As soon as this Agreement enters into force, each participant shall appoint a Director and Alternate Director, and the Executive Secretary of ESCAP shall call the inaugural meeting of the Board of Directors.

(b) At its inaugural meeting, the Board shall :

1. elect the Chairman and Vice-Chairman; and

2. 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.

The Executive Secretary of ESCAP shall notify signatories and all regional members and associate members of ESCAP of :

1. all signatures to this Agreement, and

2. the date on which this Agreement enters into force

Done in a single copy in the English language.

ASIAN CLEARING UNION (PROCEDURE) RULES
(As amended by the Board of Directors during various meetings up to May 2002)

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 force on such date as may be notified by the Board of Directors of the Asian Clearing Union.

3. Definitions – In these rules, unless there is anything repugnant in the subject or context:

1. Agent’ means the participant central bank or monetary authority with whom the Board has arranged to provide the necessary services and facilities for the operation of the clearing facility;

2. ‘Agreement’ means the Agreement establishing the Asian Clearing Union;

3. ‘Asian Monetary Unit’ (AMU) means the common unit of account of the Clearing Union referred to in Article IV of the Agreement;

4. ‘Board’ means the Board of Directors of the Asian Clearing Union referred to in Article VIII Section I of the Agreement.

5. ‘Clearing Union’ means the Asian Clearing Union;

6. ‘Secretary General’ includes the officer who is designated by the Agent to perform the functions of the Secretary General for the time being;

7. ‘Participant’ means any central bank or monetary authority which is a signatory to the Agreement and

8. ‘Currency swap’ arrangement means an arrangement among the participants under which a participant becomes eligible to draw Asian Monetary Units from other participants in specified proportion and in specified circumstances for settling imbalances in clearing.

4. Ineligible payments - The following payments shall not be eligible to be made through the clearing facility:

5. Eligible instruments of payment and the currency in which they are to be denominated – All instruments of payment denominated in AMUs or U.S. dollars, may be used to effect payment through the clearing facility. Settlement of such instruments will be made by the commercial banks through operations of the accounts referred to in Rule 6.

1. The participants will permit the banks in their respective countries to maintain ACU dollar 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.

2. When a commercial bank desires to fund its ACU dollar account with its correspondent bank in another participating country, it may purchase the required amount of ACU dollar either from a local commercial bank having a surplus in that participating country or 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, 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 to the concerned bank in that country. After making the payment, the second participant will advise the Secretary General of the ACU to credit its account by debit to the first participant’s account.

3. When a commercial bank desires to repatriate funds from its ACU dollar account with its correspondent bank in another participating country, it may sell the desired amount of ACU dollar either to a local commercial bank which desires to fund its ACU dollar account in that participating country, or to its central bank. In the latter case, 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 participant’s account.

4. On receipt of the advices referred to in sub-rules (b) and (c) above, the Clearing Union shall effect the necessary transfers under advice to both the participants.

1. Eligibility

Subject to sub-rule (d) of this rule any participant in deficit at the end of a settlement period shall be eligible to avail of the facility. Participants whose countries have special payment arrangements between themselves will not be eligible to avail of this facility from each other.

2. Entitlement

Every eligible participant shall be entitled to the facility from every other participant up to 20% of the average gross payments 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 overall deficit at the end of a settlement period. The drawal by each participant from each other participant shall be in the same proportion as its overall deficit to its maximum entitlement.

3. Rate of Interest

The rate of interest chargeable on each drawal should be equal to LIMEAN on U.S. dollars for the period of 2 months. The reference LIMEAN will be of Barclay’s Bank, London at 11.00 a.m. applicable for the concerned value date. If the rate is not available from Barclay's Bank, the Secretary General shall ascertain it from any other London clearing bank at his discretion and if it is not available from any such bank, the rate of Barclay’s Bank applicable for the immediately preceding value date will apply.

4. Other conditions

8. Accounts kept by the Clearing Union - 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. Interest will be payable by the participants on the net debit balances and receivable on the net credit balances, calculated at the interest rate referred to in Rule 9, on the daily balances outstanding.

1. Interest on the net debit and net credit balance will be calculated by the Clearing Union on the daily outstanding by the product method, taking a year as comprising 360 days and shall be debited or credited to the participants’ accounts at the end of each settlement period. The rate of interest applicable for a settlement period will be the closing rate on the first working day of the last week of the previous calendar month offered by the Bank for International Settlements for one month Euro-dollar deposits. In the event that the Bank for International Settlements does not quote rates for such deposits, the last available rate will apply until such rates become available. However, the board may decide upon a substitute rate if necessary.

2. In the case of delayed payments referred to in Article VII Section 2 of the Agreement and default referred to in Section 3 of the same Article, interest for the period of delay or default shall be calculated by the Clearing Union at :

10. Notification of net position at the end of settlement period – At the end of each settlement period, the Secretary General shall notify each participant by telex or cable of its net position and accrued interest, and of the amounts it shall pay to or receive from other participants.

1. 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 payment in U.S. dollar or in any other mutually acceptable currency, under telex or cable intimation to the Secretary General .

2. If settlement is desired to be effected in a currency other than the US dollar, the participants shall, by mutual agreement, decide on the exchange rate to be made applicable for such settlement.

12. 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 any discrepancy detected in such position to the notice of the Secretary General as soon as possible thereafter for eventual rectification and further settlement, if necessary. Such rectification shall be made at the same rate of exchange at which the original settlement was made.

13. Default – In the event that a participant fails to make any payment notified to it by the Secretary General under Rule 10 within the time specified, the provisions of Article VII Section 3 of the Agreement shall apply.

14. Amendment - Unless otherwise provided in the Agreement, these rules may be amended by a decision of the Board taken by a majority of the votes of all the Directors.

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