The apex bank said that even though the Indian Rupee has been endorsed as a designated foreign currency, it is not a legal tender in Sri Lanka for domestic payments.
Sri Lanka's Central Bank said on Wednesday that no domestic transactions would be allowed with the Indian Rupee in the island country, as it warned people not to be misled by inaccurate information surrounding the issue.
The apex bank said that even though the Indian Rupee (INR) has been endorsed as a designated foreign currency, it is not a legal tender in Sri Lanka for domestic payments/settlements. “Any transaction executed between or among residents in Sri Lanka...
It added that the INR was designated a foreign currency in Sri Lanka in August 2022. “Trade between Sri Lanka and India has grown rapidly after the Indo-Sri Lanka Free Trade Agreement, which came into force in March 2000," the bank said. "
"In view of the expanding economic activities between India and Sri Lanka, particularly in promoting existing trade relations between the two countries, on several occasions, CBSL (Central Bank of Sri Lanka) has communicated to the Reserve Bank of of India (RBI), the Monetary Authority of India, its willingness to authorise INR as a designated foreign currency in Sri Lanka," the statement said.
The statement came days after Sri Lankan President Ranil Wickremesinghe's official visit to India and talks with the top Indian leadership, including Prime Minister Narendra Modi.
Listing the advantages of authorising INR as a designated foreign currency, the bank said that smooth banking transactions relating to INR, especially for small-scale traders, would be facilitated, traders would be encouraged to use banking channels for trade transactions over informal channels, the additional transaction costs associated with the dual conversion of INR into USD would be reduced, and thereafter, into LKR and vice-versa.
“Moreover, since India remains a large source country for tourism in Sri Lanka, authorising INR as a designated foreign currency for banking transactions would add more convenience to Indian tourists,” it said.
The bank warned the public not to be misled by inaccurate information on the issue currently being circulated.