Local currency settlement reduces transaction costs, eliminates conversion losses in both directions, and insulates bilateral trade from dollar volatility, said Santosh Jha, Indian High Commissioner.
“And for Sri Lanka specifically, it reduces pressure on scarce hard currency reserves – preserving dollars for uses where they are truly necessary, while rupee-to-rupee trade flows freely between our two economies,” Jha said here at a round-table discussion on ‘Rupee to Rupee: Strengthening the India-Sri Lanka Commercial Corridor’ on Monday.
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The event, organised by the Indian High Commission in Colombo, brought together representatives from government institutions, banking and financial sector organisations, industry leaders, importers, exporters, and business stakeholders from both countries. The participants discussed opportunities to deepen India-Sri Lanka economic and commercial engagement through enhanced use of local currencies.
“It matters enormously. Every time an Indian exporter invoices in US dollars, and every time a Sri Lankan importer pays in US dollars, both sides are carrying unnecessary currency risk, paying unnecessary conversion costs, and adding a layer of dependency on a third-country currency that neither of them issues, controls, or in some cases, finds easy to acquire,” Jha said.
Also Read: India’s export outlook is challenging for FY27, but worst is over: Elara SecuritiesRepresentatives of the State Bank of India and the Indian Bank also shared their presentations, focusing on the operational aspects of INR-LKR trade settlements, available banking solutions, and recent policy guidelines permitting the disbursement of Indian rupee-denominated loans through authorized dealer banks in Sri Lanka.
The round table highlighted the growing acceptance of the INR-LKR settlement mechanism and its potential to facilitate smoother cross-border transactions, improve liquidity management, lower transaction costs, and enhance resilience in bilateral trade.
The discussion also emphasised the need for continued awareness-building, stronger banking linkages, and greater private sector participation to unlock the full potential of local currency settlements.
“An Indian bank’s branch here in Colombo can now lend in Indian rupees to a Sri Lankan importer buying Indian goods. A Sri Lankan bank can borrow in INR to finance trade with India, without touching the dollar at all. This is not incremental reform. It is a structural shift in how regional trade finance can work,” the Indian high commissioner said.