Indian government allows Sri Lankans to hold $10,000 worth of rupee in cash

Sri Lankans can now hold $10,000 worth of the Indian rupee (INR) in a physical form, though the INR would not be legal tender in Sri Lanka, after India approved a Sri Lankan request to designate the INR as the foreign currency. The decision is also in accordance with the Indian government’s efforts to popularize the Indian Rupee among Asian nations and reduce dollar dependence.

According to India media reports, the government of India approved the request of Sri Lanka to designate the Indian Rupee as the foreign currency.

This will provide the Sri Lanka much needed liquidity support to help it tide over its economic crisis amid inadequate dollar liquidity

The report said, Sri Lankan residents will now be able to convert the Indian Rupee into another currency and to enable this, Sri Lankan banks must sign an agreement with an Indian bank to open “INR nostro accounts” which means the accounts that banks hold in a foreign currency in another bank.

India had earlier allowed such transactions, but Sri Lanka’s central bank had not declared the rupee as a foreign currency. This has changed now. Sri Lanka’s foreign currency list includes 15 currencies including the US Dollar, Pound Sterling, Renminbi, Kroner and Swiss Franc.

The benefit of the new decision is that Sri Lanka and India will be able to trade without the dollar. Dealing in rupees will help Sri Lanka, which is facing a crisis in dollar availability, overcome the trade crisis. For example, Sri Lanka can export textiles to India and receive Rs. Rupees earned through exports can also be used to pay for products imported from India. In this way, the ruble-rupee trade is currently taking place between India and Russia