Indian Rupee (INR) is often accepted in Sri Lanka for local purchases. Even though the Indian Rupee is endorsed as a designated foreign currency in the island nation, it is not a legal tender in Sri Lanka for domestic payments/settlements.
Sri Lanka’s Central Bank on August 2 clarified that the Indian Rupee cannot be used for domestic transactions in the country.
“Any transaction executed between or among residents in Sri Lanka shall be in LKR (Lankan Rupee), being the legal tender in Sri Lanka,” the Central Bank said in a statement, adding that the INR was designated a foreign currency in Sri Lanka in August 2022.
“Trade between Sri Lanka and India has grown rapidly after the Indo-Sri Lanka Free Trade Agreement, which came into force in March 2000,” the bank added.
“In view of the expanding economic activities between India and Sri Lanka, particularly in promoting existing trade relations between the two countries, on several occasions, CBSL (Central Bank of Sri Lanka) has communicated to the Reserve Bank of India (RBI), the Monetary Authority of India, its willingness to authorise INR as a designated foreign currency in Sri Lanka,” the statement added.
According to the apex bank, if the Indian Rupee becomes the designated foreign currency, banking transactions relating to INR, especially for small-scale traders, would be smooth.
“Moreover, since India remains a large source country for tourism in Sri Lanka, authorising INR as a designated foreign currency for banking transactions would add more convenience to Indian tourists,” the statement further said.
