Sri Lankans holding Indian rupee (INR) in physical form

 

Sri Lankans can now hold $10,000 worth of the Indian rupee (INR) in physical form, though the INR would not be legal tender in the island nation, after India approved a Sri Lankan request to designate the INR as a foreign currency, Indian media reported.

This will provide the island nation much needed liquidity support to help it tide over its economic crisis amid inadequate dollar liquidity.The decision is also in sync with the Indian government’s efforts to popularise the INR among Asian nations and reduce dollar dependence.

Sri Lankans will now be able to convert the INR into another currency.To enable this, Sri Lankan banks must enter an agreement with an Indian bank to open INR nostro accounts — accounts that banks hold in a foreign currency in another bank.

Another significant development is that offshore banking units (OBU) of Lankan banks have been permitted to accept savings, time and demand deposits from non-residents.According to sources familiar with the development, all current account transactions including exports, imports, and remittances can be undertaken between Lankan residents and non-residents.

Transactions between Sri Lankan residents can only be done through banking channels and only for permitted activities, bankers said.While this arrangement was approved by India a few months ago, the Central Bank of Sri Lanka was yet to notify the rupee as a designated foreign currency.