The Central Bank has reminded commercial banks not to encourage the grey market for foreign exchange dealings.

In a memo to all CEOs of commercial banks as well as the Sri Lanka Banks’ Association from the Director of Bank Supervision and Director of International Operations, it has referred to the need for preventing foreign exchange transactions taking place outside the banking system following the CB Governor’s notice on 6 September requesting banks to execute dollar/rupee transactions at the range between Rs. 200 and Rs. 203.

The CB memo said that at recent meetings with senior officers of licensed banks, it has been brought to its attention that a separate market exists among exporters and importers outside the formal banking system to arrange their foreign exchange requirements, leading to an unhealthy development undermining the stability of the exchange rate and the smooth functioning of the domestic foreign exchange market.

Banks have been requested to take necessary measures to prevent such arrangements and transactions taking place outside the banking system and to promote the utilisation of export proceeds received through the banking channels for import payments via the banking system, improving the transparency of foreign exchange transactions in the market, while facilitating the CB to maintain the dollar/rupee exchange rate at the stipulated range and ensuring the smooth functioning of the domestic foreign exchange market activities.

Year to date, the rupee has depreciated against the dollar by 6.9%. 7.4% against the pound sterling, 6.1% against the Indian rupee, 2.4% against the Euro and 0.4% against the Japanese yen according to the Central Bank. 

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