COLOMBO, NOV 29 : Although the Indian rupee will not be accepted as legal cash in Sri Lanka, Sri Lankans can now physically hold $10,000 worth of the currency.

After India granted Sri Lanka’s request to designate the INR as a foreign currency, the action was taken.

According to the Daily Mirror, this will give Sri Lanka the much-needed liquidity support it needs to get through its economic crisis amid a lack of dollar liquidity.

The choice is also in line with the Indian government’s initiatives to promote the Indian Rupee among Asian countries and lessen reliance on the US dollar.

Residents of Sri Lanka will now be allowed to exchange INR for foreign currencies. To make this possible, Sri Lankan banks must enter into an agreement with an Indian bank to open “INR nostro accounts,” which are simply accounts held by banks in another bank that are denominated in a different currency.

Another significant step is the approval of non-resident savings, time, and demand deposits for Lankan banks’ offshore banking units (OBU).

All current account activities, including exports, imports, and remittances, are permissible between Lankan citizens and non-residents, according to media reports.

According to bankers, transactions between Sri Lankans can only be made through financial channels and only for legal businesses.

Although India agreed of this arrangement a few months earlier, the Central Bank of Sri Lanka has not yet declared the rupee to be a designated foreign currency.(PHN)