The possibility of settling current account transactions in goods as well as services in Indian rupees (INR) apart from the option of undertaking permitted capital account transactions was suggested in a recent discussion among Indian and Sri Lankan officials.
The use of Indian rupee for selected INR denominated trade transactions through respective Vostro/Nostro accounts has already begun following the creation of enabling framework by the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CBSL).
The High Commission of India organized a discussion on the use of INR for economic transactions between India and Sri Lanka and representatives from the Bank of Ceylon, State Bank of India and the Indian Bank shared their experiences.
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 utilized by other sectors.
A team from RBI joined the discussion in the online format and indicated the possibility of settlement of current account transactions in goods as well as services in INR apart from the option of undertaking permitted capital account transactions. The RBI team referred to the close cooperation with CBSL and RBI’s commitment to further facilitate this process.
State Minister of Finance, Shehan Semasinghe appreciated the close economic relationship between the two countries and the financial and humanitarian support extended by India over the past year including the strong financing assurance in context of the IMF support programme for Sri Lanka.
Governor of CBSL, 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 utilize it for 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 CBSL, Government of Sri Lanka, representatives from business and industry including tourism sector, media personnel, bank representatives, economists and journalists. Participants from India that connected in the online format included representatives from RBI, Government of India, trade and industry associations and export promotion councils.
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