ව්‍යවහාර මුදල් කළමනාකරණය
Foreign Exchange Management

Domestic Banking Units of Commercial Banks

Facilities to Residents
The categories of residents are defined in the Government Gazette Notification No. 15007 dated 12, April 1972 ( “A Guide to Foreign Exchange Transactions”.) 

Current International Transactions
Authorised Dealers (commercial banks) are permitted to call for relevant documentary evidence and release foreign exchange without restriction, for all current international transactions, exercising their judgment and discretion and satisfying themselves of the bonafides of such transactions.

The following are considered current international transactions.

Import and Export of Goods and Services
grey dot Merchandise Exports
  Exports of goods and services are freely permitted. Exports are also free to repatriate proceeds
  on such exports to the credit of a rupee account/ to an Exporters Foreign Currency Account (EFCA) in a domestic banking unit of a commercial bank in Sri Lanka or to retain such export proceeds abroad provided such monies are not used for acquisition of capital assets abroad.  However, export of a few items such as coral shanks and shells, ivory, ebony (handicraft form), timber (logs and plank form) and vintage motor vehicles, require a license from the Controller of Imports and Exports.
  Therefore except for exports requiring a license from the Controller of Imports and Exports, exporters are in a position to make exports through commercial banks without any restrictions.
   
grey dot Merchandise imports
  Payments for import of goods are permitted without restriction, subject to the trade policy of the
  government specified in Gazette Notification No. 291/7 of 15/11/1977, No. 1022/6 of 08/04/98, and subsequent amendments thereto i.e. Gazette Notification No. 1277/12 of 27th February 2003 and No. 1319/28 dated 18th December 2003 issued under the Import and Export Control Act.
   
grey dot Entrepot Trade
  Import of goods for entrepot trade is permitted on DP, DA terms and on LCs being established in accordance with the following procedure:
   
 
01 Goods imported to be stored in a custom bonded warehouse until they are re-exported to a
  third country.
02 Re-packing/labeling/simple processing of goods imported to be carried out in a customs
  bonded warehouse before re-export to a third country.
03 Exportation of goods directly from a second country to a third country without the goods
  physically arriving in the trader’s country.
04 Transfer from one ship/air-craft to another within the port without the cargo being taken into
  a bonded warehouse.

However, the items such as Textile fabric, Garments, Narcotic and Arms and Ammunition are prohibited to be imported for re-export under entrepot trade.

Re- export under entrepot trade is permitted only on payment terms of advanced payment, DP and letters of credit terms. Re-export on DA terms is not yet permitted.

Service payments
Payments for services falling under current international (non capital) transactions are permitted freely by commercial banks on the submission of documentary evidence to establish the bona fide of the transactions. It should, however, be noted that restrictions under any other statute such as payment of tax, if any, have to be complied with.
grey dot Shipping, Air lines
  Shipping Agents and General Sales Agents of Airlines are permitted to collect freight on behalf of
  their principals and credit to a Rupee current account or a special foreign currency account maintained at a commercial bank on behalf of principals. All local disbursements such as port dues, container handling charges and agency commissions, have to be made out of this account. Agents should ensure the receipt of inward remittances from their principals to meet any shortfall in the account.  Any surplus funds due to principals in the account after meeting all disbursements in Sri Lanka are permitted to be remitted without the prior approval of the ECD.
  Therefore except for exports requiring a license from the Controller of Imports and Exports, exporters are in a position to make exports through commercial banks without any restrictions.
   
grey dot Freight Forwarding
  Companies carrying out the business of freight forwarding are required to be registered with the
  ECD under the Government Gazette Notification No. 641/15 of 20/12/90 and those companies may operate a rupee current account for their freight forwarding transactions.
   
grey dot Income remittances
  The following transactions are permitted through commercial banks:
   
 
01 Payment to expatriate employees, including wages, salaries and other benefits paid by
  employers in terms of their employment contracts.
02 Investment income including dividends, interest, rent and profits

Capital Account Transactions
Foreign exchange transactions relating to acquisition/sale of real and /or financial assets are classified as capital account transactions. The sequential liberalization of capital transactions was started in the early 1990s and still continues.

The followings are considered as capital account transactions.

grey dot Investment abroad
  Applications are made by Sri Lankan residents to the Controller of Exchange for release of
  foreign exchange to make investments abroad. Where such investments involve the acquisition of shares prescribed under Section 17 of the Exchange Control Act, the law requires that the investments could be made only with the permission of the Hon. Minister of Finance.  Even when the foreign investment does not involve the acquisition of prescribed shares, there has been a directive from the Minister of Finance on 19th November 1985 that all applications for investment abroad should be put up to him for approval with a recommendation from the Controller of Exchange. These include even applications by local enterprises for release of foreign exchange to establish liaison and branch offices.
   
grey dot Portfolio investment abroad by employees of companies
  Shares to be purchased by employees of local branches/subsidiaries of foreign companies
  under “Employee Share Option Schemes” are recommended to the Minister on the basis of benefits accruing to such employees in foreign exchange on acquisition of such shares.
   
grey dot Investment to establish liaison/branch offices abroad by local companies
  Applications to establish branch/liaison offices for the purposes of entering into overseas marketing arrangements for Sri Lankan exports or to engage in overseas contracts for construction or to supply technical services etc. are recommended to the Ministry of Finance.

However, enterprises approved by the Board of Investment of Sri Lanka (BOI) with full exemption from the Exchange Control laws would not require permission under the Exchange Control Act to make investments abroad provided that the investment is in respect of the business activities agreed upon with the BOI. 
   
grey dot Private borrowings from abroad
  Applications for borrowing from abroad by resident companies are perused by the ECD and approved or rejected, depending on the merits of the case. 
   
grey dot Foreign currency borrowings by resident exporting companies
  Commercial banks are permitted to grant loans in foreign currency to exporters of goods and services (direct exporters) who satisfy the bank that they have adequate foreign currency earnings to meet their working and fixed capital requirements. These loans are granted to meet the working capital and fixed capital requirement of the exporter without restrictions on the duration of the period of the loan. Repayment of these loans and the interest on the loans should be in foreign currency. In the event of default of such loans every endeavor must be taken by the bank that granted the loan to sell any assets mortgaged as security for the loan for a consideration in foreign currency. If such efforts fail, rupee proceeds may be converted upto the extent of the amount required for the settlement of the outstanding balance of the loan.
   
grey dot Approval of Guarantees
  The issue of guarantees by a resident in respect of any debt or other obligation or liability outside Sri Lanka requires general or special permission of the Controller of Exchange. The Controller of Exchange has permitted all Authorized Dealers to issue or renew guarantees or similar undertakings, the implementation of which would involve a payment of Sri Lanka rupees remittable to a non resident or a payment in foreign currency for the following purposes.
 
   
01 Bid bonds in favour of persons resident outside Sri Lanka without a limit in respect of exports
  and other service contracts, subject to conditions stipulated in the tender or quotation as per conditions of the tender.
   
02 Performance bonds in favour of persons resident outside Sri Lanka without a limit in respect
  of exports or other service contracts subject to proof of the award of the contact and conditions stipulated in the contact
   
03 Letters of guarantee favouring non residents to be issued at the request of agents resident
  in Sri Lanka on behalf of their foreign principals upto the value of US$ 500,000, subject to obtaining a counter guarantee or counter indemnity on identical terms from the non resident principal in addition to other terms and conditions stipulated above in respect of guarantees.
Authorized dealers may also issue and renew guarantees and make payments in respect of claims on such guarantees.
Bank guarantees to be issued of the value over US$ 500,000/- have to be approved by the ECD.
   
grey dot Contracts abroad by Residents
  Local companies who enter into contracts with parties abroad are permitted to take out their initial capital with prior approval of the ECD subject to monitoring of surplus funds to be received in Sri Lanka.
   
grey dot Purchase of Patent Rights
  Remittance for the acquisition of patent rights, copy rights, trade marks and franchises requires prior approval of the ECD which is granted on a recommendation of the relevant line ministry.

Foreign Currency Accounts
Resident individuals and companies are free to open the following foreign currency accounts in the Domestic Banking Unit (DBU). 
 
01 Non-Resident Foreign Currency Accounts (NRFC)
  (“A Guide to Foreign Exchange Transactions”)
02 Resident Foreign Currency Accounts (RFC) (-do-)
03 Residents Non National Foreign Currency Accounts (RNNFC) (-do-)
04 Exporters Foreign Currency Accounts (EFC) (-do-)
05 Resident Guest Foreign Currency Accounts (RGFC) (-do-)
06 Indirect Exporters Foreign Currency Accounts (IEFC)
   
grey dot Indirect Exporters Foreign Currency Accounts (IEFC)
  The foreign currency scheme of “Indirect Exporters Foreign Currency Accounts” was introduced as an added incentive to exporters, thereby permitting indirect exporters to receive payments in foreign currency from direct exporters who are in a position to make payments in foreign currency for their supplies.
The facility of receiving foreign currency to the credit of an IEFCA from a direct exporter for the products supplied by an indirect exporter should be available only to those indirect exporters whose products contain at least 35% of domestic value addition. The commercial banks will have to obtain a certificate issued by the Sri Lanka Export Development Board (SLEDB) or the Board of Investment of Sri Lanka (BOI) to the indirect exporters, confirming that the domestic value addition of his supplies to the direct exporter is 35% or more of the value of the products. Such certificates will be issued by the SLEDB in respect of non-BOI enterprises and BOI in respect of BOI enterprises.

Miscellaneous
grey dot Electronic Fund transfer Cards
  Credit, debit and other electronic fund transfer cards (EFTCs) may be issued to residents of Sri Lanka by authorized dealers. However, such cards may also be issued to NRFC, RNNFC, RFC and FCBU account holders, irrespective of their residential status provided that expenditure incurred on such EFTCs would be debited to the above mentioned accounts. EFTCs with international access can be used to make foreign currency payments for following purposes. 
 
01 Payment to be made abroad by a cardholder for services of a personal nature including
  travel, accommodation, medical, living and educational expenses.
02 Payment for purchase of goods abroad for personal use
03 Payment for import of goods into Sri Lanka for personal use subject to a limit of US$ 3,000
  (c. i. f) or its equivalent in any other foreign currency per consignment.
04 Payment of registration fees, examination fees and annual subscription fees of a personal
  nature payable to a foreign professional body or academic institution.
05 Payment to be made in respect of insurance premium only for travel and health insurance of
  personal nature
   
grey dot Gold Trade
  General permission for import of gold into the country has been granted in terms of the Government Gazette Notification No. 1263/10 of November 22, 2002 for:
 
01 Buying of gold in Sri Lanka by any person
02 Selling of gold in Sri Lanka by any person resident in Sri Lanka
03 Importing into Sri Lanka and exporting from Sri Lanka of gold by any person provided that the
  importer/exporter makes a declaration to the Director General of Customs of the quantity and value of gold and purpose for which the gold is imported/exported and also complies with the provisions of the Import and Export Control Act and regulations made there under regulating the import and export of goods
04 Import of gold on consignment account basis could be done only by a licensed commercial
  bank or any other limited liability company approved by the Controller of Exchange for that purpose.
   
grey dot Post Tsunami Inward Remittance Account
  With effect from 15/02/2005 all inward remittances received from foreign persons and entities, including foreign governments, to Non Governmental Organizations (NGOs) operating in Sri Lanka were required to be channeled through a special account titled, “Post Tsunami Inward Remittance Account (PTIRA)”.

Facilities to Non-Residents
The categories of non-residents are defined in the Government Gazette No. 15007 dated 12th April 1972. (link to the page 23 of the publication, “A Guide to Foreign Exchange Transactions”.) 

Current International Transactions
Non-residents are permitted to enter into current international transactions with residents.
The following transactions are permitted through Authorized Dealers:
grey dot Import and export of goods and services
grey dot Income remittances
  Repatriations of Investment income including capital, profit and income which includes dividends, interest, rent and profits, wages, salaries and other benefits paid by employers in terms of their employment contracts

Capital Transactions
Foreign exchange transactions relating to acquisition/sale of real and/or financial assets are classified as capital transactions. The following capital transactions are permitted for non-residents.
grey dot Foreign Direct Investments in Sri Lanka
  Share investments
  Issuance of shares by resident companies to foreign investors (non residents) are permitted without prior approval of the ECD in terms of a general permission granted in Gazette Notification No.1232/14 of 19/04/2002 and 1248/19 of 08/08/2002 subject to certain exclusions and limitations. In the areas of investment, movement of funds of such transactions will be through a scheme of account titled, “Share Investment External Rupee Account” (SIERA). The SIERA should be credited by inward remittances received in convertible foreign currencies from the investors and the dividends and sale proceeds realized on this investment are remittable through this account.
When foreign investors (non-residents) do not make their investments in resident companies through a SIERA, the resident company should obtain approval from the ECD for the issuance of shares in favour of the foreign investors.  To obtain the required approval, the company is required to make an application to ECD along with documentary evidence/bank confirmation with regard to the funds remitted by the foreign investor to the company.  Resident companies should also obtain approval from ECD for the issuance of bonus shares to their non-resident shareholders. The areas of exclusions, limitations for non-resident investments are as follows.
   
grey dot The areas of exclusion for non-resident investment
 
01 Money Lending
02 Pawn Broking,
03 Retail Trade with a capital of less than one Million U.S. Dollars,
04 Coastal Fishing.
   
grey dot The areas of limitation for non-resident investment:
  (Limitation is up to 40 percent of total share capital)
 
01 Production of goods where Sri Lanka’s exports are subject to internationally determined  
  quota restrictions
02 Growing and primary processing of Tea, Rubber, Coconut, Cocoa, Rice, Sugar and Spices
03 Mining and primary processing of non-renewable national resources
04 Timber based industries using local timber
05 Fishing (deep sea fishing);
06 Mass communications
07 Education
08 Freight forwarding
09 Travel agencies
10 Shipping agencies
   
grey dot Limitations upto permitted share of total share capital
  The permission hereby granted shall apply in respect of shares of a company carrying on or proposing to carry on any of the businesses set out below only up to the percentage of the issued capital of the company for which percentage either general or special permission had been granted by the Government of Sri Lanka or any legal or administrative authority set up for the approval of foreign investment in such businesses -
 
01 Air transportation
02 Coastal shipping
03 Industrial undertaking specified in the second schedule of the Industrial Promotion
  Act, No.46 of 1990 namely- 
  any industry manufacturing arms, ammunition, explosives, military vehicles
  equipment aircraft and other military hardware
  any industry manufacturing poison, narcotics, alcohol, dangerous drugs and toxic
  hazardous or carcinogenic materials
  any industry producing currency, coins or security documents
04 Large scale mechanised mining of gems
05 Lotteries
   
grey dot Sri Lanka Development Bonds 
  Dollar denominated government bonds, titled Sri Lanka Development Bonds (SLDBs), were permitted to be issued by the Government of Sri Lanka in 2001 and exchange control permission was granted to designated agents (commercial banks and Primary Dealers) to market such bonds to the categories of non resident persons and entities given below.
 
01 Citizen of foreign states whether resident in Sri Lanka or outside Sri Lanka
02 Citizens of Sri Lanka who have made their permanent abode outside Sri Lanka
03 Citizens of Sri Lanka who have proceeded outside Sri Lanka to take up employment or to set
  up business or engage in a profession and are residing abroad
04 Citizens of Sri Lanka who have dual citizenship, provided that those citizens substantiate that
  permanent place of abode outside Sri Lanka. 
05 Bodies corporate or un-incorporate established under the laws of a country other than
  Sri Lanka
06 Companies who have entered into agreements in terms of Section 17 of the Board of
  Investment (BOI) of Sri Lanka Act No. 4 of 1978 with full exemptions from the provisions of the Exchange Control Act (ECA) provided that all purchases of SLDBs are made against debits to foreign currency accounts maintained only for the purpose of crediting earnings from exports of such companies.
07 Companies registered to carry on insurance business in Sri Lanka under the provisions of
  the regulation of Insurance Industry Act No. 43 of 2000 provided that all purchases of SLDBs are made against debits to Special Foreign Currency Accounts maintained with commercial banks in terms of the approval of the Controller of Exchange.
08 Authorized Dealers appointed in terms of Section 4 of the Exchange Control Act.
09 Primary Dealers appointed by the Monetary Board under the registered Stocks and Securities
  Ordinance No. 7 of 1937 and the Local Treasury Bill Ordinance No. 8 of 1923.
   
grey dot Sri Lanka Nation Building Bonds
  Dollar denominated Government bonds, titled Sri Lanka Nation Building Bonds(SLNBBs), were permitted to be issued by the Government of Sri Lanka in 2006 to the following categories of investors.
 
01 Sri Lankans who have made their permanent residence overseas
02 Citizens of Sri Lanka who have taken up overseas employment/set up business overseas
03 Citizens of Sri Lanka with dual citizenship
04 Sri Lankan professionals living in Sri Lanka or abroad who earn foreign currency and
05 Banks acting in fiduciary capacity on behalf of the above categories
   
grey dot Foreign currency loans to Sri Lankans employed abroad
  Sri Lankans employed abroad are permitted to obtain foreign currency loans which are released in rupees but repayable out of their foreign currency earnings for the purpose of construction or purchase of residential houses in Sri Lanka. Such persons are also permitted to borrow in foreign currency for any purpose against the pledge of their NRFC deposits. These loans should also be released in rupees but are repayable in foreign currency out of the foreign currency earnings of the borrower.
   
grey dot Rupee credits facilities to companies controlled by Non residents
  Authorized dealers in foreign exchange are permitted to grant rupee loans and advances to companies incorporated in Sri Lanka with a majority of non-resident shareholders.
   
grey dot Capital transfers to emigrants
  Transfer of funds realized from capital assets is limited to a sum of Rs. 750,000/- for each individual emigrant, subject to a ceiling of Rs. 1 million per family.
   
grey dot Blocked accounts
  Any payments made to the credit of an emigrant must be to a blocked account only, and payments to a blocked account would be good discharge to persons from whom payments are due to an emigrant. All residual funds from capital transactions after remitting out of the emigrant’s entitlements must be maintained in a blocked account. Interest is payable on such blocked accounts and this interest is remittable. Funds in a blocked account shall be dealt with only as directed by the Controller of Exchange.
   
grey dot Other facilities available to Emigrants
 
01 Remittance of the full value of the emigrants’ income
  (including interest and rent) derived from any investment made by the emigrant in Sri Lanka.
02 The interest earned on funds in any blocked account payable to the emigrant
03 Remittance of any other funds after the emigrant’s departure from Sri Lanka requires
  the prior approval of the Controller of Exchange
   
grey dot Acquisition and Disposal of fixed assets by non-residents
  In the disposal of property by persons resident outside Sri Lanka, the remittance of sales proceeds is permitted without prior approval of ECD to the extent of investment made in foreign exchange for the purchase and development of the property, while any capital gain realised should be placed in a blocked account. In respect of foreign citizens who are not emigrants, remittance of blocked funds is permitted up to a limit of Rs. 350,000.
   
grey dot Contracts in Sri Lanka by non residents 
  Foreign companies and foreign personnel engaged in contracts with the government or private organizations in Sri Lanka are permitted to maintain Resident Current Accounts which may be credited with inward remittances and payments made in respect of the contract. Debits to the account may be made in respect of local disbursements, and outward remittances relating only to the maintenance of dependants abroad.  

Rupee Accounts for Non-Residents
Commercial banks are permitted to open and maintain the following rupee accounts for non-residents:
 
Non-Resident Rupee Accounts (NRRA)
Share investment External Rupee Accounts (SIERA)
Rupee Account for Non Resident Sri Lankan Investment (RANSI)
   
grey dot Non-Resident Rupee Accounts (NRRA)
  Non residents rupee accounts may be opened for foreign nationals resident outside Sri Lanka, companies and firms registered outside Sri Lanka, Sri Lankan nationals resident outside Sri Lanka (other than emigrants), foreign banks, which do not carry on banking activities in Sri Lanka.
Permitted credits and debits to Non Resident Rupee Accounts (NRRA) held by foreign nationals resident outside Sri Lanka and companies and firms registered outside Sri Lanka are the following.
 
01 Credits:
  Proceeds of inward remittances received in favour of the account holder and permitted local
  credits other than funds derived from capital transactions
02 Debits:
  Outward remittances in respect of current account transactions and local disbursements
Permitted credits and debits to NRRA held by Sri Lankan nationals resident outside Sri Lanka are the following.
03 Credits:
  Proceeds of inward remittances in favour of the account holder and local credits
04 Debits:
  Outward remittances in respect of current account transactions
05 NRRAs
  in respect of foreign banks may be operated without any restrictions 
   
grey dot Share investment External Rupee Accounts (SIERA)
  Permitted credits and debits to SIERA are given below. However Authorized Dealers should examine documentary evidence to determine the source of these credits/debits.
 
01 Permitted Credits to SIERA
 
- Inward remittances
- Transfers from NRFC/Off shore accounts
- Sale proceeds of shares and dividends earned on shares
- Commissions relating to transactions of shares
- Fees and any corporate benefits received by a non resident lender in respect of
  shareslent   to a borrower under the Stock Borrowing and Lending Scheme (SBL)
- Cash to be credited to the lender in the event of any failure to transfer shares by the
  borrower under the SBL scheme
   
02 Permitted Debits to SIERA
 
- Expenses for the purchase of shares
- Remittances of dividends of shares
- Remittances of sale proceeds of shares
- Local expenses of the account holder
- Payments to stockbrokers or commercial banks as commissions
- Fees and funds required to pay corporate benefits to the security lender on shares
  borrowed by a non resident borrower under the SBL scheme
- Any cash collateral to be provided by a non-resident borrower
   
grey dot Other issues with regard to investment in Sri Lanka through a SIERA
  Authorized Dealers may enter into contracts with foreign investors for the purchase of foreign exchange forward, for settlement of payments in respect of shares purchased on their behalf up to a period calculated in accordance with the rules laid down by the Colombo Stock Exchange (CSE) for buyers’ settlements. The duration of such contracts is limited to a period from the date of transaction to the date of settlements i.e. trade plus five market days.
Foreign currency remitted by the foreign investors as subscription for primary shares may be held in an off shore-banking unit and upon allotment of shares, to the SIERA of the investor. Authorised Dealers are permitted to approve applications for export of share certificates issued by companies in the CSE in respect of shares purchased by SIERA account holders out of the funds in the account.
   
grey dot Rupee Accounts for Non Resident Sri Lankan Investment (RANSI)
  Non-resident Sri Lankans, that is Sri Lankan citizens who have proceeded abroad to take up employment or to set up a business or engage in a profession and continue to live abroad, and citizens of Sri Lanka who have made their permanent place of abode outside Sri Lanka, are exempted from all exchange control restrictions applicable to non resident investment provided that they remit foreign exchange earnings for investment through a Rupee Account for Non Resident Sri Lankan Investment (RANSI). Funds channeled through this account may be invested in shares, government securities, debentures, units in Unit Trust and in real assets such as land and building.  (The exclusions and restrictions applicable to non-resident investment in terms of the Government Gazette Notification 1232/14 of 19.04.2002 do not apply for investments under the RANSI scheme.) Payments for investment under the scheme have to be made by bank drafts purchased out of funds in a RANSI account. All income from investments such as interest, dividends, profits and rental income could be credited to the RANSI account. Funds realized on the sale and liquidation of investment could also be credited to the RANSI account. There are no exchange control restrictions on remittance abroad of funds lying to the credit of a RANSI account.
   
grey dot Miscellaneous
  Pensions
  Pensions drawn by a Sri Lankan living abroad on migration or temporarily may be remitted through an Authorized Dealer on production of documentary evidence of residence outside Sri Lanka.