India and Sri Lanka are exploring the possibility of using the Indian Rupee for economic transactions and have discussed this initiative which will help build a stronger and closer partnership between the two countries through trade and investment-based measures.
The High Commission of India on Thursday organized a discussion on the use of Indian Rupee (INR) for transactions between India and Sri Lanka.
“Representatives from Bank of Ceylon, State Bank of India and Indian Bank shared their experiences and informed the audience that they have started undertaking INR-denominated trade transactions through respective Vostro/Nostro accounts after creation of enabling framework by the Reserve Bank. of India (RBI) and Central Bank of Sri Lanka (CBSL) in 2022,” the High Commission said in a statement.
Participating banks also highlighted the advantages of settlement in INR which include shorter timelines, lower exchange costs and easier availability of trade credit.
The beneficial impact of this initiative on the tourism and hospitality industry was also highlighted, including its role in helping increase collections, which can be used by other sectors.
India’s High Commissioner to Sri Lanka Gopal Baglay highlighted the positive impact that the initiative will have in joint efforts to build a stronger and closer economic partnership between the two countries through trade and investment led measures.
Sri Lankan Finance Minister Shehan Semasinghe appreciated the close economic ties between the two countries and the financial and humanitarian assistance extended by India over the past year, including the strong funding assurances provided by New Delhi in the context of the IMF assistance program for Sri Lanka Are included. ,
India extended over USD 3.8 billion in aid to Sri Lanka last year to help it deal with the economic crisis.
CBSL Governor Dr. P Nandlal Weerasinghe highlighted the strong desire between the Indian and Sri Lankan business communities to enable business settlement in Indian Rupees.
He called for expanding this facility from time to time to use it for the full range of capital and current account transactions. According to a report in The Island newspaper, he also appreciated the wide participation of stakeholders in Sri Lanka and India, which included over 300 attendees in physical format, apart from those who joined online.
A team from RBI joined the discussion in online format and indicated the possibility of settlement of current account transactions in goods and services in Indian Rupees, in addition to the option of permitted capital account transactions. The RBI team noted the close cooperation with the CBSL and the commitment of the RBI to further facilitate the process.
Sri Lanka will be hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, fueled by a severe shortage of foreign exchange reserves, sparking political turmoil in the country that has led to the all-powerful Rajapaksa family Was expelled.
The IMF in September last year approved a USD 2.9 billion bailout package to Sri Lanka over 4 years, with Sri Lanka’s ability to restructure its debt with creditors – both bilateral and sovereign bondholders. With the assurance of creditors, the USD 2.9 billion facilities may get IMF board approval in March.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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