Lankan institutions trade in Indian rupees

Sri Lankan banks and institutions have begun trading in Indian currencies, according to a recent seminar hosted by the Indian High Commission in Colombo.

The seminar was organised to discuss the use of Indian Rupee (INR) for economic transactions between India and Sri Lanka. Representatives from the Bank of Ceylon, State Bank of India and the Indian Bank shared their experiences, and informed the audience that they had started carrying out INR-denominated trade transactions through respective Vostro/ Nostro accounts after the creation of an enabling framework by the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CB) in 2022.

It was stated that the participating banks also outlined the benefits of settlements denominated in INR which includes shorter timelines, lower exchange costs and easier availability of trade credits etc. The beneficial impact of this initiative on the tourism and hospitality industry was also highlighted, including its role in helping increase collections which could be utilised by other sectors.

A team from RBI joined the discussion online and indicated the possibility of settlement of current account transactions in goods and services in INR, apart from the option of undertaking permitted capital account transactions. The RBI team referred to the close cooperation with Sri Lanka’s CB, and RBI’s commitment to further facilitate this process.

CB Governor Dr P Nandalal

Weerasinghe mentioned the strong desire among Indian and Sri Lankan business communities for enabling trade settlements in INR. He called for expanding this facility over a period of time to utilise the full range of capital and current account transactions.

High Commissioner of India to Sri Lanka, Gopal Baglay highlighted the positive impact that the initiative will have in the joint efforts for building a stronger and closer economic partnership between the two countries through trade and investment-led measures.

Participants from Sri Lanka included officials from the CB, Government of Sri Lanka, representatives from business and industry including tourism sector, media personnel, bank representatives, economists and journalists.