Govt. keen on investments beyond 1-year via SDAs

• Cabinet green-lights PM to get P’ment approval; at present SDAs have 1-year maximum tenure

The Government is keen to draw investments beyond one year via the Special Deposit Accounts (SDA) scheme which offers a higher interest rate.

At present, the SDA scheme, in force since April last year, is limited only to six months and one year. As per the last disclosure by the Central Bank, the scheme has attracted foreign currency deposits worth $ 360.3 million by April 2021. SDAs can be opened in any licenced commercial bank or the National Savings Bank.

Under the existing provisions, it is possible to reinvest an SDA with a term of six or 12 months and award additional interest on such SDAs. But there is no provision to pay an additional interest rate for SDAs that are reinvested for a period of more than 12 months. 

To facilitate this, the Cabinet of Ministers at their meeting on Monday approved a proposal by Prime Minister and Finance Minister Mahinda Rajapaksa, to make an order in terms of Section 7 (1) of the Foreign Exchange Act No. 12 of 2017, including the necessary provisions for that, and to submit such orders to Parliament for approval. 

An SDA for six-month deposits gets one percentage point per annum above the normal rate, and for 12-month deposits gets two percentage points per annum above the normal rate. They are freely convertible and remittable outside Sri Lanka upon maturity. SDAs will not be subject to procedural requirements of Foreign Exchange Regulations published in Gazette Notification No. 2045/56 dated 17.11.2017. It is also permitted to transfer maturity proceeds into an Inward Investment Account or a Personal Foreign Currency Account, if the account holder is eligible to open or currently maintains such an account.

Persons residing in Sri Lanka or outside Sri Lanka as permitted in the Foreign Exchange Regulations can open SDAs with remittances received into Sri Lanka through the banking system until 07.04.2021, with remittances received into Sri Lanka through an Inward Investment Account or an account at the Offshore Banking Unit, maintained with an authorised dealer in Sri Lanka, to the credit of SDA, out of foreign exchange legitimately acquired and brought into Sri Lanka by persons who have arrived in Sri Lanka from overseas on or after 01.01.2020 subject to a declaration made to the Sri Lanka Customs (if the amount exceeds $ 15,000) and the relevant authorised dealer (if the amount equals to or less than $ 15,000), or out of foreign currency notes in the possession of any person in, or resident in, Sri Lanka, up to the limit of $ 15,000 and subject to a declaration on the source of funds to the relevant authorized dealer and applicable Foreign Exchange Regulations, Orders and Directions.

SDAs can be opened either in any of the 15 designated foreign currencies or Sri Lankan Rupees, and also a joint account. 

The 15 designated currencies are Australian Dollar, Canadian Dollar, Chinese Renminbi, Danish Krone, Euro, Hong Kong Dollar, Japanese Yen, New Zealand Dollar, Norwegian Krone, Pound Sterling, Singapore Dollar, Swedish Krona, Swiss Franc, Thai Baht and US Dollar.  

SDA holders can obtain loans from authorized dealers against SDAs. Loans, in Sri Lankan Rupees, can be obtained by residents and non-residents who are eligible to obtain loans as per the prevailing foreign exchange regulations.

They can also continue SDAs beyond the designated date of maturity as normal deposits with authorized dealers. The deposits so continued will be eligible only for the interest rates offered by the respective authorized dealer for normal term deposits.