India steps up rupee’s internationalisation for Sri Lanka’s economic recovery

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India and Sri Lanka stepped up their talks to proceed with trade in Indian Rupee as New Delhi and Colombo look set to expand their bilateral cooperation in “power and energy sector as well as aspects relating to Rupee trade”.

Dr Pramod Kumar Mishra, a cabinet rank official in India’s Prime Minister Narendra Modi’s administration, met with Sri Lankan High Commissioner Milinda Moragoda in New Delhi on Friday to continue the bilateral dialogue between two South Asian neighbours on a number of issues, including on debt restructuring matters crucial for Colombo’s economic recovery. 

“The High Commissioner stressed the vital role that economic integration between the two countries could play in Sri Lanka’s economic recovery,” an official readout stated. 

“High Commissioner Moragoda also followed up [Pramod Kumar Mishra] on a range of issues pertaining to the bilateral relationship that had been discussed during their last meeting in February,” the readout added, while referring to a previous round of bilateral talks between New Delhi and Colombo that addressed former’s support for latter’s economic recovery alongside aforementioned matters of bilateral cooperation.

“The matters discussed included further economic integration between Sri Lanka and India, enhancing Indian investments and tourism in Sri Lanka, ways and means to further promote bilateral trade, cooperation in power and energy sector as well as aspects relating to Rupee trade,” the official readout stated further.

Several banks in Sri Lanka have opened special rupee trading accounts, called Vostro accounts. This means that Sri Lankan citizens can now hold $10,000 (₹8,26,823) in physical form and for transactions with their Indian counterparts, they can use Indian rupees instead of US dollars. 

India’s Prime Minister Narendra Modi’s administration since July 2022, has been looking to bring countries that are short of dollars, into its rupee settlement mechanism.

ALSO WATCH | Sri Lanka mull using Indian rupee for economic transactions

Designating Indian Rupee as a legal currency in Sri Lanka has provided India’s coastal neighbour at its south much-needed liquidity support to help tide over its economic crisis amid inadequate availability of the US dollar.

Meanwhile, India’s finance ministry has asked the Indian Banks’ Association (IBA) and the Federation of Indian Export Organisations (FIEO) to proceed with an awareness campaign to sensitise stakeholders about the rupee trade. 

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