Fresh instructions appear to carry broad based effect, going beyond remittances
CBSL earlier asked banks to give Rs.10 extra for worker remittances during December
New incentive scheme ranges from foreign currency conversions to deposits to FX investments made using hard currency
Banks asked to sell 20% of such foreign currency back to the Central Bank on weekly basis
But instructions appeared to have caused some confusion
Licensed banks have been asked to offer extra Rs.10 for foreign currency notes “held in hand”, as part of a broader incentive package offered to encourage the general public to channel all their foreign currency through the formal banking system.
As the latest attempt to draw foreign currency notes lying outside the banking system, the Central Bank issued fresh instructions roughly a fortnight ago to all licensed banks outlining the newest incentive scheme applicable from December 13 to 31.
At the start of the month, the Central Bank announced an additional incentive of Rs.8.00 in addition to the Rs.2.00 already in place when converting worker remittances during December, to woo back such incomes lost lately to informal money changers. Sri Lanka lost 50 percent of foreign remittances each during October and November due to parallel exchange rates, which offered much higher rates than the official rate of Rs.200 starting June this year. Meanwhile, the new incentive schemes will offer Rs.210 for each dollar or equivalent of any other foreign currency when converting and depositing in a rupee account by the general public.
General public who may have any remaining foreign currency notes at hand after returning from abroad could now walk into any licensed bank to convert or deposit such foreign currency in a rupee deposit account at a conversion value of Rs.210 per US$, up to US$ 15,000 or equivalent in any other foreign currency.
This incentive will also apply to those who earn in foreign currency from employment, professional service or business while working abroad and brought into Sri Lanka, and those foreign currency acquired and brought into Sri Lanka after January 1, 2020 with the intention of depositing in the Special Deposit Account (SDA) introduced last year.
Further, the general public is also permitted to deposit such foreign currency notes into their Personal Foreign Currency Account or SDA.
Such foreign currency notes are also allowed to be invested in Sri Lanka Development Bonds.
However, banks are required to sell back 20 percent of such foreign currency converted during the period of the incentive scheme in force to the Central Bank.
Banks were earlier required to sell 10 percent of worker remittances and 20 percent of export proceed conversions back to the Central Bank.
Meanwhile, reflecting an element of confusion caused by the instructions on worker remittance conversions, some remittance recipients were turned down by their banks to offer Rs.210 for remittances made via online transfers and others have been declined altogether citing that no proper instructions had been received.
One leading private bank had told a migrant worker in a correspondence that the additional Rs.10.00 would be, “applicable at the time of converting/exchanging foreign currency notes (hard currency) only”, and, “would not be applicable for fund transfers converting to LKR”.
Nevertheless, there are banks, which offer the additional Rs.10.00 for worker remittances regardless of the medium of transfer, provided the recipient could show proof that money had been received from foreign employment.