The Central Bank of Sri Lanka (CBSL) is set to reduce the capital requirement for local money transfer service providers - colloquially known as hawala and Undiyal operators – from Rs 20 million to Rs 15 million, in an effort to encourage formal registration, CBSL Payments and Settlements Department Director Vasantha Alwis said during a Committee on Public Finance (COPF) meeting last week (30 June).
Referring to the Money or Value Transfer Service Providers Regulations No. 1 of 2025, which is yet to be presented to Parliament, Alwis said: "This particular regulation also mentions the capital requirement of such money transfer service providers who are registered overseas, and also this particular regulation reduces the capital requirement for local money transfer service providers, if they are operating in Sri Lanka, from Rs 20 million to Rs 15 million to encourage them to obtain a registration with the central bank."
According to Alwis, the Money or Value Transfer Service (MVTS) Providers Regulations No. 1 of 2024 (via Gazette No. 2382/11), which was subsequently amended by Regulations No. 1 of 2025 (via Gazette No. 2468/06), previously did not include service providers incorporated overseas, excluding offshore and foreign-registered entities.
However, authorities identified that several foreign money or value transfer service providers continued to serve Sri Lankan customers through local agents and intermediaries, effectively operating outside the direct regulatory framework.
"In 2024, we issued the Regulations under the Payments and Settlements Act to register money or value transfer service providers, but that particular regulation was limited to money or value transfer services who are registered and operating in Sri Lanka," Alwis told the committee.
"However we found that there are money transfer service providers who are operating in Sri Lanka, but are registered overseas. This amendment is to bring those money transfer services providers who are operating in Sri Lanka and registered abroad."
The newly introduced Money or Value Transfer Service Providers Regulations No. 1 of 2025, published via Extraordinary Gazette No. 2468/06 dated 23 December 2025, explicitly allows foreign operators to obtain registration, subject to CBSL requirements.
When questioned on the number of local service providers that had been registered under the 2024 regulations, Alwis stated: "With the earlier regulation, no one has registered yet, the number of registered businesses is 0. No one has registered yet. One of the reasons might be the capital requirement."
When questioned whether a Rs 5 million reduction would meaningfully encourage registration, Alwis responded: "This was something communicated to us and we considered favourably."
The CBSL had set a deadline of 31 March 2026, for compliance with the 2024 regulations, and by that date, three foreign-registered money transfer service providers had submitted applications for registration with the central bank. "After we issued this circular, which was gazetted – the deadline given to those money transfer service providers was 31 March this year. By that time there were three such money transfer service providers who had submitted applications to us, to be registered with the Central Bank of Sri Lanka," Alwis confirmed.