SL to name Indian rupee (INR) as a designated foreign currency

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The Central Bank of Sri Lanka (CBSL) is awaiting the approval of the Reserve Bank of India (RBI) to classify the Indian rupee (INR) as a designated foreign currency in Sri Lanka, in order to facilitate and promote trade and tourism in the SAARC region including India, a top Central Banker told Finance Today.

It is said, a proposal regarding this was presented by the high-level Indian delegation that visited Sri Lanka recently. The Sri Lanka Tourism Development Authority had also submitted similar requests for permission to use the Russian ruble as a designated foreign currency along with the Indian rupee in Sri Lanka.

The CBSL sources also say that the approval of the USA is expected through the Ministry of Foreign Affairs of Sri Lanka regarding the use of Russian rubles as well as introduce Russian payment platforms to Sri Lanka due to prevailing US sanctions against Russia.

There were 15 designated foreign currencies at the moment in Sri Lanka, namely the Australian Dollar, Norwegian Kroner ,Canadian Dollar, Pound Sterling, Chinese Renminbi, Singapore Dollar, Danish Kroner, Swedish Kroner, Euro, Swiss Franc, Hong Kong Dollar, Thai Baht, Japanese Yen, United States Dollar and New Zealand Dollar.

Meanwhile, this week, Indian media reported that the Reserve Bank of India (RBI) has put in place a mechanism to settle international trade in rupees “in order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in the rupee.”

“The Central Bank’s move has come in the wake of increasing pressure on the Indian currency in the wake of Russia’s invasion of Ukraine and sanctions by the US and the EU,” it stated.

The RBI mechanism is expected to facilitate importers and exporters to avoid rules that prevent the use of a global currency such as the US dollar for trade with certain countries. After Russia attacked Ukraine, several countries had imposed sanctions on Russia. Indian companies which were looking for alternative modes of payment for imports can make use of the new mechanism.

By Ishara Gamage