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India and Sri Lanka will start trading in Indian rupees


January, 09 2023
watermark Economic news

The Reserve Bank of India has granted permission to the commercial bank Indian Bank to open three special vostro accounts for trading with Sri Lanka using the Indian rupee. The accounts are expected to start working in the coming days.


Representatives of the Indian central bank noted that vostro accounts in local currency will allow Sri Lanka to import goods from India without spending dwindling reserves of US dollars. In addition, Sri Lanka will be able to use credit lines in rupees opened by India, which will contribute to the stabilization of the Lankan economy.


Earlier, India provided Sri Lanka with a financial package worth about $4 billion.


Sri Lanka is currently experiencing the worst economic crisis since independence in 1948, caused by a shortage of foreign currency due to the coronavirus pandemic. In mid-April last year, the Sri Lankan authorities defaulted on the external debt for the interim period. The island state's external debt is currently estimated at $51 billion. 


It is worth noting that the Government of India allowed the use of the rupee in international trade settlements back in November 2022. As noted by the Ministry of Trade, this will contribute to the promotion of exports within the framework of foreign trade policy.


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Foreign exchange is highly speculative and complex in nature, and may not be suitable for all investors. Forex trading may result in a substantial gain or loss. Therefore, it is not advisable to invest money you cannot afford to lose. Before using the services offered by ForexMart, please acknowledge the risks associated with forex trading. Seek independent financial advice if necessary. Please note that neither past performance nor forecasts are reliable indicators of future results.