CBSL issues operating instructions to banks on forex at hand of customers

Central Bank Governor Nivard Cabraal

• Lists incentives to the general public who deposit, convert or invest foreign currency between 13 and 31 Dec.
• Banks requested to sell 20% of such currency converted into rupees on a weekly basis as CBSL steps up multiple efforts to boost foreign reserves

The Central Bank (CBSL) yesterday issued operating instructions to all banks on incentives for the general public for depositing, converting and investing of foreign currency held on hand. 

The fresh move is on top of the earlier operating instructions given on an additional incentive scheme on inward workers› remittances on 1 December, as CBSL steps up multiple measures to boost the country’s foreign reserves and early conversion. Sri Lanka’s reserves were speculated at $ 1.5 billion or lower as of end November, and amounts to one month of imports. 

CBSL Governor Nivard Cabraal said with an objective of promoting all the foreign currency (FCY) in the country to be channelled through the formal banking system, the general public is encouraged to deposit, convert or invest FCY held on hand through a licensed bank (LB) immediately.

These includes FCY held on hand by the general public by: purchasing from a LB or from an Authorised Money Changer for the purpose of travel abroad and brought back unutilised into Sri Lanka (up to $ 15,000 or in equivalent of other FCY), withdrawing from a Personal Foreign Currency Account (PFCA) for the purpose of travel abroad and brought back unutilised to Sri Lanka (up to $ 15,000 or in equivalent of other FCY), earnings from employment, profession or business while abroad and brought into Sri Lanka, and acquiring and bringing into Sri Lanka to deposit in Special Deposit Accounts (SDAs) on or after 1 January 2020.

As per the operating instructions issued yesterday, LBs are required to provide following incentives to the general public who deposit, convert or invest such FCY, during the period from 13-31 December.

Pay Rs. 210.00 per dollar or in equivalent for other FCY, when converting such FCY into rupees (during the month of December)

Pay Rs. 210.00 per dollar or in equivalent for other FCY, when converting and depositing such FCY into a rupee deposit account (during the month of December)

Permit to deposit such FCY into the customers’ PFCA or SDA

Allow to invest in Sri Lanka Development Bonds

Further, all the LBs have been requested to sell 20% of such FCY converted into rupees during the period from 13 to 31 December (including both days) on a weekly basis, to the Central Bank in dollars. LBs are required to sell such dollars for a particular working week (Monday to Friday), on Friday (or the last working day) of the same week, starting from 17 December, subject to the usual foreign exchange market holiday conventions.

Transactions between the CBSL and LBs will be at the exchange rate of Rs. 200 per dollar and transactions between the CBSL and LBs will be on ‘TOM’ (ie. T+1) basis.

In settling, LBs are required by CBSL to follow the standard dollar/rupees settlement instructions. In executing, LBs are required to execute deals through ‘Thomson Reuters’ or ‘Bloomberg’ trading platforms. However, if an LB does not have access to such trading platforms, the LB is required to use official e-mail as a source for deal execution.

Further, LBs are required to diligently submit a weekly certification on the sale of such FCY to the CBSL, which are accepted from the general public in summary form along with the excel worksheets to support the calculation of the same and forward the same to CBSL together with the sale of US , for the particular working week.

LBs are instructed to submit the claim application to the CBSL with respect to the incentive of Rs. 10 per dollar (Rs. 210.00 – Rs. 200.00), which is the usual buying exchange rate as per the request of the CBSL to LBs dated 6 September, that LBs pay to the general public on or before 15 January 2022.