India's petroleum and finance ministry are holding talks to work out an alternate settlement mechanism for Iranian crude imports, after the Reserve Bank of India said Indian companies cannot use the Asian Clearing Union (ACU) to settle dues with Iran any more.
"We are working on an alternate settlement mechanism. It is being discussed at length with the ministry of finance and a solution will be found in the course of the next few days," Petroleum Secretary S Sundareshan told reporters.
The Tehran-based ACU, comprising Iran, India and seven other countries, settles payments for intra-regional transactions among the participating central banks on a multilateral basis. In order to avoid US sanctions, Indian companies had been using the ACU for payment exchanges. The RBI, however, on December 23 said companies will be allowed to settle current account and trade transactions with Iran only outside the ACU.
"Officials of RBI and the Iranian central bank are meeting in Mumbai tomorrow (Friday) ... Alternate mechanism payments could be in any currency, Japanese yen or their local currency," said Sundareshan.
India is Iran's second largest importer of crude, having bought 21 million tonnes in 2009-10.
On Wednesday, the US had praised the RBI's move to reduce dealings with Iran's central bank.