India, Iran agree on formula for oil payments

• India and Iran on Tuesday agreed on a "formula" for making payments for oil through a Hamburg-based German bank.
• Oil companies State Bank of India, whose Frankfurt branch will transfer the money to NIOC's EIH Bank account.
  

• The RBI on December 23 had stated that oil and other import payments to Iran will have to be settled outside the existing Asian Clearing Union (ACU) mechanism, which involves the Central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka.
• Under the ACU mechanism, imports by the nine nations are settled every two months with every member paying for imports after netting out its exports among the union. Till 2008, payments under the ACU mechanism was done in U.S. dollars, but after the United States imposed sanctions on Iran over its suspected nuclear programme, the currency was shifted to Euro.
  

• After the RBI directive, oil firms began searching for a European bank which could accept payments on behalf of the NIOC. Iran is understood to have expressed its willingness to accept payments in rupee, but the RBI expressed reservations on this account.