No restrictions or higher rates on foreign payments of personal nature via credit cards

After reports and a bevy of queries if certain foreign currency transactions via credit and debt cards are restricted, the Central Bank reiterated that no such restrictions were imposed nor additional charges had been levied on credit card payments made on cross broader transactions provided such transaction are  ‘current transactions of personal nature’. 

At the monetary policy press conference held on Thursday, the Central Bank officials were inundated with queries relating to higher foreign exchange rate charged for the overseas transactions made via credit cards which in certain cases tantamount to a premium of 7.5 percent over the official exchange rate at the point of conversion of such transactions into rupees. 

The Central Bank officials categorically denied any such moves but added transactions of commercial nature could face problems. 

“For example if somebody wants to get a laptop for personal use that is fine. The credit card can be used. But if someone wants to bring 10 or 15 laptops for commercial purposes, that may be questionable”, stressed the Central Bank Governor, Professor W.D.Lakshman. 

After looking into the allegations, the Central Bank said that they observed that some banks have introduced certain limits on use of Electronic Fund Transfer Cards (EFTCs) such as credit, debit or other stored value cards for transactions in foreign exchange with a view to prevent misusing of such cards and to prioritise transactions in line with foreign exchange positions of such banks. 

As importers face difficulties in getting foreign exchange due to the banks prioritise imports, and sometime ration amid the trying foreign currency situation at present, some may be attempting to use their credit cards for big ticket items which may be commercial in nature. In these circumstances banks may be charging a premium over the official foreign exchange rate to prevent people from trying to avoid the official import channel. 

“The public is informed that the Central Bank has not introduced any new restrictions on the use of EFTCs, i.e., credit cards, debit cards and other stored value cards, and holders of such cards are permitted to use them to make payments to persons resident outside Sri Lanka in respect of current transactions of personal nature”, 

a statement issued by the Department of Foreign Exchange said.  Further if the people encounter any difficulties in making legitimate transactions using EFTCs, the Central Bank requested the public to contact the respective banks or to inform the Department of Foreign Exchange at the Central Bank. 

“May be if there is any specific need, we can be informed and we can check with our Foreign Exchange Department,” said Deputy Governor, T.M.J.Y P. Fernando responding to multiple queries received last week on the matter. 

Sri Lanka’s outstanding credit card balance has been on a descent for the second months in a row in June to Rs.118.6 billion.  The Central Bank slashed the ceiling rate on credit cards to 18 percent in August last year from the hitherto existed 28 percent to both reflect the broader descent in the market lending rates and also to encourage consumer spending via credit cards.