in the member countries benefited from lower transaction costs. the acu has established a creditable settlement record in that there has been no default at all since the union started functioning. a significant contributory factor for the success of the acu was the switching over of the union ’ s accounting unit from amu ( asian monetary unit ) to the acu dollar. under the current system, in vogue since 1996, traders are being allowed not only to invoice their documents in us dollars but also to make and receive payments in dollars. commercial banks in member countries are allowed to open nostro accounts in acu dollars to facilitate all receipts and payments. further the central banks are arranging to fund as well as absorb excess liquidity from these accounts. the switchover has facilitated the application of real time rates and up - gradation of the entire acu mechanism to be in tune with the rapid changes in the international forex markets due to the revolutionary changes in satellite communications and wide ranging financial sector liberalization in the developing economies. as a result, the transactions are now being settled expeditiously and in true reflection of the market value of the currencies of member countries. further, the switchover to acu dollar for accounting of all the transactions of the union has facilitated market participants in member countries to get forward cover for their transactions and also made them eligible to get pre - shipment and post - shipment credit denominated in foreign currencies. it is heartening to note that india has been playing a key role in the success of the acu mechanism, topping the turnover table year after year. its share in the volume of transactions has been around 40 % followed by the islamic republic of iran and bangladesh at 23 per cent and 17 per cent respectively on an average, during the last three years. in the last board meeting my distinguished colleague from sri lanka, governor jayawardena rightly described acu as the oldest institution for regional co - operation in asia. having been set up at a time of severe shortage of foreign exchange and having served the member countries well, the union has reached a stage where there is a need to evaluate the future role of the acu to adjust to new realities. in this context, governor jayawardena had suggested that the terms of reference of the acu needs to be revisited, and i am glad that a technical team with the help of escap has gone into this aspect. future role of acu for the evolution of acu in

bimal jalan : a review of the asian clearing union welcome address by dr bimal jalan, governor of the reserve bank of india, at the 32nd acu board meeting, bangalore, 16 june 2003. * * * honourable governors and distinguished delegates, guests, ladies and gentlemen : nd it is a great privilege for me to welcome you to this 32 board meeting of the asian clearing union ( acu ). i am happy that this meeting is being held in the city of bangalore, known as the ‘ city of gardens ’, with a great tradition in music, literature, architecture, science and technology. the city is now known even more as india ’ s leading city for information technology. before proceeding further, i should mention with immense grief that dr. mohsen nourbaksh, the governor of the central bank of the islamic republic of iran is no more with us. he was one of the finest and leading personalities of the acu fraternity. i request this house to stand in silence and pay our humble respect to the memory of dr. nourbaksh. the acu board meeting is being held in india after a gap of seven years - the previous one was held in may 1996 at mumbai. i am sure that this meeting, as was the case with all the earlier occasions, will also prove to be a fruitful one and would be an important landmark in the consolidation and further strengthening of the acu. the asian clearing union ( acu ), which started functioning in november 1975, has completed 27 years of successful operations. it has proved to be a strong and purposeful regional arrangement benefiting its members by optimizing the use of their foreign exchange resources. from a humble beginning of trade worth usd 51. 4 million during the first year of its operations, the union has grown into a reasonably powerful entity for regional co - operation in asia. during the year 2002 it clocked a turnover of almost usd 7 billion. benefits of acu we may recall that acu was formed at a time when the countries in the region were facing acute shortage of foreign exchange and, therefore, had stringent exchange controls. the union provided the member countries with the twin advantages of economizing on the use of foreign exchange and also availing of short term credits during the period of the settlement cycle. in the process, the governments of the member countries, their monetary authorities and central banks have established close and purposeful relationships. further, the bankers and traders