RBI allows settlement of trade transactions with Sri Lanka in INR

Looking at the current economic crisis in Sri Lanka and the difficulties faced by exporters in getting payments from the failing island nation. The Reserve bank of India on Thursday allowed settlement of trade transactions in Indian rupees outside the Asian Clearing Union (ACU) mechanism.

Looking at the current economic crisis in Sri Lanka and the difficulties faced by exporters in getting payments from the failing island nation. Therefore, the Reserve bank of India on Thursday allowed settlement of trade transactions in Indian rupees outside the Asian Clearing Union (ACU) mechanism.

RBI circular says. “In view of the difficulties being experienced by exporters. In receipt of export proceeds from Sri Lanka. And SBI’s credit facility…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”.

The government had guaranteed a term loan of USD 1 billion. Extended by the State bank of India. To the Island nation for financing purchase of essential goods from India.

The crisis has been caused  by a lack of foreign currency.

And the main reason for this crisis began in 2019. Also, when the tourism industry in Sri Lanka was hit badly due to the nationwide lockdown restricting trade.

The tourism industry was considered to be the backbone of Sri Lanka’s economy. However, now the industry is now failing.

This led the country in a state where they cannot afford to pay for imports of staple foods and fuel. As well as important commodities of survival. Hence, leading to acute shortages and very high prices.

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