Reserve Bank of India (RBI) has issued a circular allowing trade transactions between India and the Maldives to be settled in Indian Rupees (INR) and Maldivian Rufiyaa (MVR), in addition to the existing Asian Clearing Union (ACU) mechanism. This decision follows the signing of a Memorandum of Understanding (MoU) between the RBI and the Maldives Monetary Authority in November 2024, aimed at promoting the use of local currencies for bilateral trade.
The directive, effective immediately, instructs all Category-I Authorised Dealer (AD) banks to facilitate these transactions in compliance with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023. The move is expected to streamline trade settlements and reduce dependency on third-party currencies.
The circular, issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999, directs AD banks to inform their constituents about the changes while ensuring compliance with other applicable regulations.
Reserve Bank of India
India’s Central Bank
Notifications
Asian Clearing Union (ACU) Mechanism – Indo-Maldives trade
RBI/2024-2025/125
A.P. (DIR Series) Circular No. 22
March 17, 2025
To
All Category-I Authorised Dealer Banks
Madam/ Sir
Asian Clearing Union (ACU) Mechanism – Indo-Maldives trade
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Subclause (a)(ii) of Clause (I) of Sub regulation 2 of Regulations 3 of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 in terms of which trade transactions between ACU member countries are to be routed through the ACU mechanism or as per the directions issued by the Reserve Bank of India.
2. In the wake of signing of Memorandum of Understanding (MoU) between RBI and Maldives Monetary Authority in November 2024 for establishing a framework to promote the use of local currencies i.e., Indian Rupee (INR) and Maldivian Rufiyaa (MVR) for bilateral transactions, it has been decided that India’s bilateral trade transactions with Maldives may also be settled in INR and/or MVR in addition to the ACU mechanism, as hitherto.
3. The above instructions shall come into force with immediate effect. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.
4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(N. Senthil Kumar)
Chief General Manager
