Special Deposit Account with up to 2% higher rate to lure local and foreign money

• Funds could be placed either in Sri Lankan rupees or any other stipulated foreign currency 
• CB guarantees funds in the deposit could be freely convertible,remitted outside Sri Lanka upon maturity

The government has introduced a Special Deposit Account (SDA) offering 1 to 2 percent higher than the normal rate to lure funds from a broader cross section of people and institutes to help fight the economic consequences of the lockdowns induced by COVID-19 pandemic.

This is part of a string of measures implemented by the government in conjunction with the Central Bank since mid-March in their effort to mitigate the negative effects on the economy, which has been badly beset by the prolonged lockdowns. 

In a special announcement, the Department of Foreign Exchange of the Central Bank called on all well-wishers including but not limited to Sri Lankan individuals residing in or outside Sri Lanka, dual citizens, citizens of other States with Sri Lankan origin, non-national residents in or outside Sri Lanka and funds, corporate bodies, associations incorporated or registered outside Sri Lanka to place their funds in either Sri Lankan rupee or any other acceptable foreign currency stipulated in the announcement. 

This includes United States Dollars (USD), Euro, Sterling Pound, Australian Dollars, Singapore Dollars, Swedish Kroner, Swiss Franc, Canadian Dollars, Hong Kong Dollars, Japanese Yen, Danish Kroner, Norwegian Kroner, Chinese Renminbi and New Zealand Dollars. 

An SDA can be opened with any licensed commercial bank and National Savings Bank (NSB), only with inward remittances through the banking sector during the six months from April 8, 2020 by transferring funds to an inward investment account or an account in the offshore banking unit with an authorized dealer. 

While there is no minimum limit for the deposit, it will be in the form of a fixed deposit with a minimum of 6 months tenor and the Central Bank guarantees the funds in the deposit could be freely convertible and remitted outside Sri Lanka upon maturity. 

The deposits will receive interest at maturity at 1 percent above the normal rate for 6 months maturity and 2 percent above the normal rate for deposits with 12 months maturity. 

Two weeks ago, Central Bank Governor Prof. W.D. Lakshman along with the Treasury Secretary made an appeal to the diaspora community and the charities to consider depositing their savings and other funds with the Sri Lankan banking sector without being subjected to foreign exchange regulations.  

“All your forex remittances will be exempted from exchange control regulations and taxes, and protected under banking secrecy provisions,” the special announcement said.

Amid muted foreign inflows due to disruptions to exports and the continued selling of the government securities by foreigners, Sri Lankan rupee had come under severe pressure during the last two weeks. 

The rupee touched Rs.200.47 by the end of last week on April 9, extending the year-to-date fall to 9.1 percent against the USD. 

According to latest Central Bank data, for the week ended in April 8, the outstanding stock of the Treasury bills and bonds held by foreigners fell to Rs.36.1 billion or 12.11 percent from the previous week’s Rs.41.06 billion in the previous reporting week.