India, Sri Lanka mulling over using Indian Rupee for economic transactions


Image source: AP/FILE President Ranil Wickremesinghe shaking hands with Indian External Affairs Minister S Jaishankar in Colombo.

Amid economic turmoil, Sri Lanka is exploring the possibilities of using the Indian rupee for economic transactions. According to the Indian High Commission in Sri Lanka, the two countries have discussed the plans in several meetings. The commission said the plan, if finalised, would help build a stronger and closer partnership between the two countries through trade and investment-led measures.

The Indian High Commission in Colombo on Thursday organized a discussion on the use of the Indian Rupee (INR) for transactions between India and Sri Lanka.

“Representatives of Bank of Ceylon, State Bank of India and Indian Bank shared their experiences and informed the audience that they have been conducting INR-denominated business transactions through respective Vostro/Nostro accounts after creation of enabling infrastructure by the Reserve Bank. has started. RBI of India (RBI) and Central Bank of Sri Lanka (CBSL) in 2022,” the High Commission said in a statement.

Main points discussed during the meeting

Participating banks also outlined the benefits of settlements denominated in INR including shorter timeframes, lower exchange costs and easier availability of trade credit. The initiative’s beneficial effects on the tourism and hospitality industry were also highlighted, including its role in helping to increase collections that could be used by other sectors.

India’s High Commissioner to Sri Lanka Gopal Bagle highlighted the positive impact of this initiative which will usher in a joint effort to build a stronger and closer economic partnership between the two countries through trade and investment-led measures.

The Sri Lankan minister appreciated India’s efforts

Sri Lankan Finance Minister Shehan Semasinghe lauded the close economic ties between the two countries and the financial and humanitarian assistance provided by India last year, including the strong financial assurance provided by New Delhi, in the context of the IMF assistance program for Sri Lanka. .

India had given more than $3.8 billion in aid to Sri Lanka last year to deal with the economic crisis. Governor of CBSL, Dr. P. Nandalal Weerasinghe, highlighted the strong desire among the Indian and Sri Lankan business communities to enable trade settlements in INR.

He called for extending the facility over a period of time, to use it for the full range of capital and current account transactions. He also appreciated the wide participation of stakeholders in Sri Lanka and India, including more than 300 attendees in the physical format who joined online, according to a report in The Island newspaper.

A team from RBI joined the discussion in an online format and indicated the possibility of settlement of current account transactions in goods and services in INR, apart from the permitted capital account transaction option. The RBI team cited CBSL and RBI’s commitment to close cooperation to further streamline the process.

Sri Lanka economic crisis

Sri Lanka faced an unprecedented financial crisis in 2022, the worst since independence from Britain in 1948. The Rajapaksa family was kicked out. .

The IMF in September last year approved a $2.9 billion bailout package for Sri Lanka over four years as long as it has the ability to restructure its debt with Sri Lanka’s creditors – bilateral and sovereign bondholders. With creditor confidence, the USD 2.9 billion facility could get IMF board approval in March.

(With inputs from PTI)

Also read: Sri Lanka’s central bank hikes interest rates in anticipation of IMF bailout

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