Reserve Bank of India allows settlement of trade transactions with Sri Lanka

New Delhi, May 20: The Reserve Bank of India (RBI) on Thursday (May 19) has allowed settlement of trade transactions in Indian rupee outside the Asian Clearing Union (ACU) mechanism with Sri Lanka. The decision is taken in view of difficulties being faced by exporters in getting payments from crisis struck island nation.

 

 

 

 

According to Business Standard, in Mar 2022, the Indian govt had guaranteed a term loan of USD 1 billion extended by the State Bank of India (SBI) to Sri Lanka for financing purchase of essential goods by the Sri Lanka, from India.

 

 

 

 

 

RBI's statement in this regard says, "In view of the difficulties being experienced by exporters in receipt of export proceeds from Sri Lanka and SBI's credit facility." It further reads, "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.".

 

Under the arrangement, financing of export of eligible goods and services from India would be allowed subject to conditions and whose purchase may be agreed to be financed by SBI under the agreement. Presently, Sri Lanka is facing its worst economic crisis, ever since becoming an independent nation, in 1948.