Senior central bank officials from Sri Lanka and India have engaged in discussions to enhance the use of their local currencies for cross-border transactions, the Indian High Commission in Colombo announced. The roundtable, titled “INR-LKR Trade Settlement: Strengthening Bilateral Economic Ties,” aligns with India’s broader efforts to internationalize the Indian Rupee (INR).
India remains Sri Lanka’s largest trading partner, with annual bilateral trade exceeding $5.5 billion. In August 2022, Sri Lanka’s central bank recognized the INR as an authorized foreign currency, simplifying banking transactions and reducing conversion costs, especially for small-scale traders.
At the event, Reserve Bank of India (RBI) Chief General Manager Aditya Gaiha outlined the INR’s internationalization and recent amendments to the Foreign Exchange Management Act (FEMA) to facilitate INR-LKR trade settlements. Sri Lanka’s central bank governor, Nandalal Weerasinghe, emphasized the importance of streamlining the mechanism and urged banks to collaborate with policymakers.
This initiative was reinforced during Sri Lankan President Anura Kumara Dissanayake’s recent visit to India, where he and Prime Minister Narendra Modi prioritized strengthening INR-LKR trade settlements to deepen bilateral trade and investment.
RBI has recently relaxed forex regulations, enabling Indian exporters to open accounts in foreign currencies for cross-border trade. Several Sri Lankan banks have also established INR Nostro accounts to facilitate direct transactions, signaling growing interest in the mechanism.