By: Chandrashekar Bhat
INDIA and Sri Lanka are exploring the possibility of using the Indian rupee (INR) for bilateral trade.
They have discussed the initiative that will help in building a stronger and closer partnership through trade and investment-led measures between the two countries.
The high commission of India in Colombo organised a discussion on Thursday (2) on the use of the Indian rupee for transactions between India and Sri Lanka.
“Representatives from the Bank of Ceylon, State Bank of India and the Indian Bank shared their experiences and informed the audience that they had started carrying out INR-denominated trade transactions through respective Vostro/Nostro accounts after the creation of enabling framework by the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CBSL) in 2022,” the high commission said in a statement.
The participating banks also outlined the benefits of settlements denominated in INR which includes shorter timelines, lower exchange costs and easier availability of trade credits.
The beneficial impact of this initiative on the tourism and hospitality industry was also highlighted including its role in helping increase collections which could be utilised by other sectors.
India’s high commissioner to Sri Lanka, Gopal Baglay, highlighted the positive impact that the initiative will have in the joint efforts for building a stronger and closer economic partnership between the two countries through trade and investment-led measures.
Sri Lanka’s finance minister Shehan Semasinghe appreciated the close economic relationship between the two countries and the financial and humanitarian support extended by India over the past year.
India extended assistance worth more than $3.8 billion (£3.17 bn) to Sri Lanka last year to help it deal with the economic crisis.
CBSL governor P Nandalal Weerasinghe highlighted the strong desire among Indian and Sri Lankan business communities for enabling trade settlements in INR.
He called for expanding this facility to utilise it for the full range of capital and current account transactions.
He also appreciated the wide-ranging participation from stakeholders in Sri Lanka and India which included more than 300 in-person attendees, apart from those that joined online, according to a report in The Island newspaper.
A team from RBI joined the discussion online and indicated the possibility of settlement of current account transactions in goods, as well as services, in INR, apart from the option of undertaking permitted capital account transactions.