The High Commission of India organised a discussion on the use of the Indian Rupee (INR) for economic transactions between India and Sri Lanka last week.
Representatives of 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 Vostro/Nostro accounts after the creation of enabling framework by the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CBSL) in 2022.
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 used 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 assurances provided by India in context of the IMF support program for Sri Lanka. Governor of CBSL, Dr. P. Nandalal Weerasinghe outlined the 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 use it for the full range of capital and current account transactions.
High Commissioner of India to Sri Lanka, Gopal Baglay outlined 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. He said the ongoing cooperation between India and Sri Lanka in the area of digital payments and the potential it possesses for enhancing the economic relationship between the two countries.
Participants from Sri Lanka included officials from CBSL, Government, representatives from business and industry including tourism sector, media personnel, bank representatives, economists and journalists.
Participants from India that connected via the online format included representatives from RBI, Government of India, trade and industry associations and export promotion councils.