• SBI country head for Sri Lanka says move to decrease USD dependency 

Indian rupee (INR)-denominated trade settlements between India and Sri Lanka do not cause a volatility in foreign exchange reserves of Sri Lanka, but benefits the Sri Lankan importers, says State Bank of India (SBI) Country Head for Sri Lanka Ravindra Kumar Jha.

He said: “That (INR trade settlements) will be beneficial for both the countries because trade settling in more than one currency will decrease the dependency on US dollar or Euro. It helps forex management and the volatility of the currency will be very less.” 

SBI Country Head for Sri Lanka made this statement during the “Indian rupee-denominated trade settlements between India and Sri Lanka and the impact to importers” session, organised by the Import Section of the Ceylon Chamber of Commerce (CCC) on Wednesday (29) at its premises. 

Jha explained that since the economic crisis of Sri Lanka was caused due to the dwindled dollar reserve, a similar situation would neither be created as INR is an alternative currency to US dollar (USD) for Sri Lanka.  

According to the statistics of the Central Bank of Sri Lanka (CBSL), India is the second importer in the top five import markets for Sri Lanka in 2021 with an approximate of $ 4.6 billion worth imports. 

He also noted: “LKR and INR can be officially converted without having any interim hard currency,” as there is no delay in transactions they can even be made within the same day. Thus, the usage of INR is efficient compared to Euro or US dollars for transactions. 

He further noted that INR-denominated transactions between Sri Lanka and India, in fact, have come into operation since the first week of March this year.  

Bank of Ceylon (BOC) International, Treasury and Investment Deputy General Manager R.M.N. Jeewantha said that the bank currently conducts educational programmes for the merchants at Pettah market in trading currency.  

Reserve Bank of India and CBSL as the regulators, are also looking forward to issuing further guidelines of INR-denominated Letters of Credit (LCs) in order to make seamless transactions between Indian exporters and Sri Lankan importers.  

Speaking at the event, Jeewantha stated: “There are a number of Indian tourists coming to Sri Lanka and they bring their country currency to Sri Lanka and exchange the currency they (Indian tourists) prefer from (Sri Lankan) airports as a trading settlement currency while it is not new to BOC.”

Jeewantha also said that BOC has initiated a similar attempt in August 2022 in order to encourage the Indian devotees to visit the island by accepting Indian currency when it is not even a designated currency with the permission of the Central Bank, in exchange of Sri Lankan rupees to be spent during their stay on the island.    

However, the passengers are to be charged in US dollars instead of INR once the Ferry Service from Karaikal Port, Pondicherry in India to Kankesanthurai, Sri Lanka  which is to be commenced from 29th April. Accordingly, $ 50 will be charged from a passenger for a one way trip.