The Asian Clearing Union (ACU), including India, Bangladesh, Maldives, Myanmar, Pakistan, Bhutan, Nepal and Sri Lanka, facilitates payments among members, economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among participants.
The Reserve Bank of India decided in December 2010 not to facilitate oil trades through the ACU system. That left India and Iran, the only oil producer in the union, scouting for a stable payment mechanism to settle trade, reports the Economic Times.
But a permanent banking channel could not be established due to pressure from Western nations, leading to a drastic reduction in India's oil imports from Tehran.
The Indian central bank has sought the consent of the finance ministry to get Iran back into the fold of ACU, junior foreign affairs minister V.K. Singh told parliament.
He said the government is also considering a request from Iranian banks to open branches in India and reactivate their accounts.
Despite Western sanctions India continued with its engagement with Iran and was among a handful of countries that were sourcing oil from Tehran.
As ties deepen further, India has extended a $150 million credit line to Iran to help develop its Chabahar port.
The port in southeast Iran is central to New Delhi's efforts to circumvent Pakistan and open up a route to Central Asia as well as Afghanistan where it has developed close security ties and economic interests.
'A contract between Indian Special Purpose Vehicle and Arya Bandar of Iran for development of Chahbahar Port has been finalized,' Singh said.
He also said in January India decided to extend the credit for the start of a contract to supply 250,000 tonnes of steel rails to Iran through State Trading Corp.