Sri Lanka’s licensed banks are following mixed regulations for Over-The-Counter (OTC) dollar exchanges, The Sunday Morning Business learns.
The two State banks – Bank of Ceylon and People’s Bank – provide a maximum of Rs. 210 with the additional incentive offered by the Central Bank of Sri Lanka (CBSL) for a US Dollar OTC exchange with a declaration of the source of funds.
However, certain private banks also provide Rs. 201 plus the CBSL incentive of Rs. 10 after being provided a declaration on the source of funds and considering whether the individual has an account in the respective branch.
One private bank said that it would provide a maximum of Rs. 213 with the CBSL incentive after being provided a passport. When The Sunday Morning Business inquired about instances where dollars were received as a gift, it said it would not ask for a declaration as long as the individual or a relative had a bank account.
However, another private bank refused to exchange dollars OTC even with the source being provided as it was eager to exchange dollars of overseas trip returnees with a visa stamp on the passport; it said it would provide a maximum of Rs. 210 with the incentive at the point of exchange.
Moreover, a prominent private bank stated, upon inquiry, that they would not provide the Rs. 10 incentive for OTC exchanges but only for the transfer of remittances. However, customers of the bank can receive a maximum of Rs. 208 with the incentive for OTC exchanges, it said.
However, the CBSL has said the incentive should be offered to all dollar transactions, whether OTC or via transfer.
In December 2021, the CBSL issued a circular declaring an incentive of Rs. 8 in addition to the already-established incentive of Rs. 2 per US Dollar converted through the banking system.
However, later in the month CBSL said, having considered the requests made by Sri Lankans working abroad, it had decided to continue the payment of an additional Rs. 10 per US Dollar for worker remittances channelled through banks and other formal channels and converted into Sri Lankan Rupees, until 31 January this year.
“The decision to continue this additional incentive of Rs. 10 per US Dollar is in response to the favourable developments observed in workers’ remittances so far during December 2021,” CBSL said.
The main purpose of this incentive was to attract dollars via formal channels from informal channels which give rates of upto Rs. 250 per dollar as the CBSL is maintaining an unrealistic exchange rate between Rs. 198-Rs. 202 for a dollar.
However, some leading private banks told The Sunday Morning Business last month that the incentive had failed to attract any significant remittances to the banking system, adding that the incentive had failed.
Sri Lanka’s foreign remittances fell to a 12-year low of $ 271.4 million in November 2021, official statistics show. In April 2009, remittances hit $ 266.3 million when the rupee was floated.
(IR)
Banks follow mixed regulations for OTC forex conversion
16 Jan 2022
Banks follow mixed regulations for OTC forex conversion
16 Jan 2022
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