CB sets record straight; says LKR, not INR legal tender in Sri Lanka

The Central Bank yesterday set the record straight, stating that the legal tender in Sri Lanka for domestic payments and settlements would remain as Sri Lankan rupees (LKR) and not the Indian rupee (INR).
Issuing a statement to the media, the Central Bank urged the public not to be misled by the misrepresentation of facts circulating in the public domain on the INR. “The authorisation of the INR as a designated currency does not make the INR a legal tender in Sri Lanka for domestic payments/settlements. Any transaction executed between or among residents in Sri Lanka shall be in the LKR, being the legal tender in Sri Lanka,” the Central Bank said.

In view of the expanding economic activities between India and Sri Lanka, particularly in promoting the existing trade relations between the two countries, on several occasions, the Central Bank has communicated to the Reserve Bank of India (RBI), the monetary authority of India, its willingness to authorise the INR as a designated foreign currency in Sri Lanka. 

Accordingly, in August 2022, with the concurrence of the RBI, the INR was authorised by the Central Bank as a designated foreign currency in Sri Lanka. 
However, the use of the INR as a designated foreign currency in Sri Lanka is subject to any restrictions imposed by the RBI, the Central Bank said. 
Authorising the INR as a designated foreign currency would bring many advantages to Sri Lanka, including the facilitation of smooth banking transactions relating to the INR, especially for small-scale traders, encouraging traders to use banking channels for trade transactions over informal channels, reducing additional transaction costs associated with the dual conversion of the INR into the USD and thereafter into the LKR and vice-versa. 

Since India remains a large source country for tourism in Sri Lanka, authorising the INR as a designated foreign currency for banking transactions would add more convenience to the Indian tourists, the Central Bank said. 
Currently, 16 currencies have been authorised as designated foreign currencies, under the provisions of the Banking Act and Foreign Exchange Act, with the latest inclusion being the INR in August 2022. 
The other designated foreign currencies are Australian dollar, New Zealand dollar, Canadian dollar, Norwegian kroner, Chinese renminbi, Pound sterling, Danish kroner, Singapore dollar, Euro, Swedish kroner, Hong Kong dollar, Swiss franc, Thai baht, Japanese yen and the United States dollar.

Accordingly, in August 2022, with the concurrence of the RBI, the INR was authorised by the Central Bank as a designated foreign currency in Sri Lanka. 
However, the use of the INR as a designated foreign currency in Sri Lanka is subject to any restrictions imposed by the RBI, the Central Bank said. 
Authorising the INR as a designated foreign currency would bring many advantages to Sri Lanka, including the facilitation of smooth banking transactions relating to the INR, especially for small-scale traders, encouraging traders to use banking channels for trade transactions over informal channels, reducing additional transaction costs associated with the dual conversion of the INR into the USD and thereafter into the LKR and vice-versa. 
Since India remains a large source country for tourism in Sri Lanka, authorising the INR as a designated foreign currency for banking transactions would add more convenience to the Indian tourists, the Central Bank said. 
Currently, 16 currencies have been authorised as designated foreign currencies, under the provisions of the Banking Act and Foreign Exchange Act, with the latest inclusion being the INR in August 2022. 
The other designated foreign currencies are Australian dollar, New Zealand dollar, Canadian dollar, Norwegian kroner, Chinese renminbi, Pound sterling, Danish kroner, Singapore dollar, Euro, Swedish kroner, Hong Kong dollar, Swiss franc, Thai baht, Japanese yen and the United States dollar.