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By: Isuru Parakrama
February 12, Colombo (LNW): The Central Bank of Sri Lanka (CBSL) has issued a stern reminder that all transactions carried out between residents within the country must be settled in Sri Lanka Rupees, unless prior approval has been expressly granted under the Foreign Exchange Act, No. 12 of 2017.
In a formal communication, the Bank noted that it has recently detected cases where individuals and businesses have been conducting local payments in foreign currencies, prompting the need for clarification. Officials stressed that such practices fall outside the legal framework governing foreign exchange operations in Sri Lanka.
The CBSL further made clear that it has not authorised merchants to accept payments from local customers in foreign currency by converting rupee payments into foreign-denominated funds, including through electronic fund transfer cards such as credit and debit cards. Any arrangement that results in a domestic payment being credited to a Foreign Currency Account without explicit approval is deemed unlawful.
Under the provisions of the Central Bank of Sri Lanka Act, No. 16 of 2023, both the payer and the recipient may be held accountable if a transaction in foreign currency is carried out locally without authorisation. Conviction before a Magistrate’s Court could result in a fine of up to Rs. 25 million, a prison term of up to three years, or both.
The Bank underscored that the regulation is intended to safeguard monetary stability and ensure proper oversight of foreign exchange flows. Businesses engaged in trade, hospitality and service industries were particularly urged to review their payment practices to ensure full compliance.
Members of the public and the corporate sector have been advised to adhere strictly to the legal requirements and to seek guidance from the Central Bank if there is any uncertainty regarding permissible foreign exchange transactions.
