Asian Clearing Union - Background, Members, Objectives, and More

The Asian Clearing Union (ACU) was established in 1974 to boost regional cooperation, economize foreign exchange reserves, and promote trade among member nations under the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). In addition to stimulating regional trade, the ACU is a regional payment mechanism for clearing payments between member states through correspondent banks.

Asian ClearingUnion

Source: ACU

In this article, let us look at the Asian Clearing Union’s background, its objectives, the member countries, the Asian Clearing Union mechanism, and eligible and ineligible transactions for the UPSC IAS Examination, as the topic is important from the context of the section on International Relations which is a part of UPSC mains GS 2 paper.

What is the Asian Clearing Union (ACU)?

The Asian Clearing Union (ACU) is a regional payment arrangement. It facilitates the settlement of trade transactions among its member countries on a multilateral basis. It was established in 1974 by ten central banks of Asia. The ACU currently has 13 member countries.

Establishment of the Asian Clearing Union (ACU)

• The ACU was established in December 1974 when the region's nations needed help settling payments because of resource scarcity. A year later, in November 1975, the ACU commenced its operations.
• The Asian Clearing Union is a regional institution that intends to boost currency trade and enable payments among its member states. It has its headquarters in Tehran, Iran. In addition to delivering an effective means of currency exchange, the ACU also aids in coordinating national policies.
• At first, the ACU was constituted as a multilateral cooperation among Asian nations. By promoting payments among members, the group helps to lessen the costs related to clearing global transactions.

Check out this linked article on the Asian Development Bank for UPSC exams now!

Objectives of the Asian Clearing Union (ACU)

The ACU works with the following objectives:

• To provide a mechanism for settling payments for existing global transactions among the participating nations on a multilateral basis.
• To promote the utilization of participants’ currencies between their respective territories, thereby affecting economies in utilising participants’ foreign reserves and transfer expenses.
• To promote closer contact between the banking systems in the participants’ respective nations and fiscal cooperation among them, supporting the development of trade and economic activities between the member nations of the ESCAP region.
• To promote currency SWAP arrangements among participants to provide them with Asian Monetary Units (AMUs) for the time being.

Check out this linked article on the United Nations Principal Organs and its Affiliates for UPSC exams now!

Asian Clearing Union Members

Membership in the ACU is open to the central banks of the nations in the geographical area of ESCAP. The following list gives the ACU countries list: 

• Bangladesh – Bangladesh Bank
• Bhutan – Royal Monetary Authority of Bhutan
• India – Reserve Bank of India
• Iran – Central Bank of the Islamic Republic of Iran
• Maldives – Maldives Monetary Authority
• Myanmar – Central Bank of Myanmar
• Nepal – Nepal Rastra Bank
• Pakistan – State Bank of Pakistan
• Sri Lanka – Central Bank of Sri Lanka

By default, all monetary authorities, like the central banks of the member nations, are a part of the ACU.

Check out this linked article on the United Nations Conference on Trade and Development for UPSC exams now!

Benefits to Members of ACU

The ACU provides many benefits to its member countries, including:

• The ACU allows member countries to settle their trade transactions in their own currencies. This reduces the need to hold foreign exchange reserves.
• The ACU provides a more efficient and cost-effective way to settle trade transactions than traditional banking channels.
• The ACU facilitates trade and economic cooperation among its member countries. This is by providing a convenient and reliable payment mechanism.
• The ACU provides trade financing facilities to its members. This helps to support trade growth.

Check out this linked article on the Payment Banks in India for UPSC exams now!

Concluding Remarks

The ACU was constituted to encourage multilateral cooperation among its member nations and their central banks and monetary authorities. The Asian Clearing Union (ACU) is a payment system where participants settle payments related to intra-regional monetary transactions on a net multilateral basis among the participating central banks. The clearing union’s significant goals are to make it easier for member nations to pay for eligible transactions, thereby reinforcing trade and financial ties among the nations.

Download the PDF on Asian Clearing Union for UPSC Exams!

We hope all your doubts regarding the Asian Clearing Union UPSC (ACU) have been addressed after going through this article. Testbook provides good quality study material for various competitive examinations. Succeed in your preparation for the UPSC exams by downloading the Testbook App now!