Three state-owned and public banks from India and Sri Lanka recently participated in a trial using rupee-denominated trade transactions, organized by the High Commission of India in Sri Lanka's largest city and co-capital of Colombo, which also held discussions on using the rupee and abandoning the dollar. (Related: Global DE-DOLLARIZATION is on the way as world's central banks buy gold at fastest pace in 55 years.)
"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 [Indian rupee]-denominated trade transactions through respective Vostro/Nostro accounts after the creation of enabling framework by the Reserve Bank of India and the Central Bank of Sri Lanka in 2022," said the High Commission in a statement.
The participating banks outlined the many benefits that came with making settlements denominated in the Indian rupee, including shorter timelines, lower exchange costs with the Sri Lankan rupee and easier availability of trade credits for financial institutions.
The banks also highlighted how beneficial standardizing transactions in the rupee would be for tourism and the hospitality industry, including how this can also help increase transactions in other economic sectors.
Central Bank of Sri Lanka Gov. P. Nandalal Weerasinghe noted in a statement that there is a strong desire among both Indian and Sri Lankan business communities alike for enabling easier trade by allowing settlements in the rupee.
He called for expanding the possibility of using the rupee over time to utilize it for a full range of capital and current account transactions. Weerasinghe also appreciated how many stakeholders in Sri Lanka and India participated in the trial, including more than 300 who participated in person.
Many more teams participated online, including one group from the Reserve Bank of India, which indicated the possibility of conducting future current account transactions both in goods and services using Indian rupee, apart from the option of undertaking permitted capital account transactions. The team referred to the close cooperation with its Sri Lankan counterpart and their mutual commitment to further facilitate this process.
High Commissioner of India to Sri Lanka Gopal Baglay noted the positive impact the initiative will have in the joint efforts for building stronger and closer economic ties between the two nations through easier trade and investment.
Sri Lankan Minister of Finance Shehan Semasinghe noted his appreciation for the close economic relationship between the two nations and the financial and humanitarian support India has extended over the past year during Sri Lanka's worst economic crisis since it declared independence from the United Kingdom in 1948.
The Western-controlled International Monetary Fund approved a $2.9 billion bailout package over four years, pending Sri Lanka's ability to restructure its debt with creditors, both bilateral and sovereign bondholders.
India, on the other hand, has already extended over $3.8 billion worth of assistance to Sri Lanka over the past year with less red tape attached.
Learn more about other nations considering foregoing using the American dollar in international trade at DollarDemise.news.
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