India and Sri Lanka are exploring greater use of local currencies in bilateral trade as part of efforts to deepen economic integration, reduce transaction costs and enhance the resilience of cross-border commerce.
The initiative was discussed at a high-level roundtable titled “Rupee to Rupee: Strengthening India-Sri Lanka Commercial Corridor”, hosted by the High Commission of India in Colombo, bringing together policymakers, central bankers, bankers and business leaders from both countries.
Addressing the forum, Indian High Commissioner to Sri Lanka Santosh Jha said the proposed “Rupee-to-Rupee” commercial corridor would enable businesses to settle transactions directly in Indian Rupees and Sri Lankan Rupees, reducing reliance on third-country currencies and improving trade efficiency. He noted that the initiative builds on the strong economic partnership
between the two neighbours and follows recent discussions between President Anura Kumara Dissanayake and Indian Prime Minister Narendra Modi on expanding bilateral economic cooperation.
A technical presentation by Dr. Aditya Gaiha, Chief General Manager of the Reserve Bank of India (RBI), outlined measures being implemented to facilitate local currency settlements. These include recent amendments to India’s Foreign Exchange Management Act (FEMA) and new provisions enabling Indian businesses to invest directly in Sri Lankan enterprises using Indian Rupees.
Central Bank Governor Dr. P. Nandalal Weerasinghe highlighted the importance of practical implementation and called on commercial banks in both countries to work closely with regulators to address operational challenges and ensure the smooth functioning of the settlement framework.
The discussion took place against a backdrop of growing economic engagement between the two countries. India has emerged as the second-largest destination for Sri Lankan exports, while more than half of the foreign direct investment received by Sri Lanka during the past year originated from Indian investors. India also remains the largest source market for tourist arrivals to Sri Lanka.
Participants agreed that a robust INR-LKR settlement mechanism could particularly benefit small and medium-sized enterprises by reducing exposure to exchange rate volatility and facilitating greater trade and investment flows between the two countries.
Source : Daily News
