Sri Lankans can now hold 10,000 US dollars worth of the Indian rupee (INR) in physical form, though the INR would not be legal tender in the island.
India has now approved a Sri Lankan request to designate the INR as a foreign currency,
Business Standard reported.
This will provide Sri Lanka 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 popularize 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 into 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 of Lankan banks have been permitted to accept savings, time and demand deposits from non-residents.