Foreign Deposits

June 2, 2008 (LBO) – Sri Lanka has allowed commercial banks to raise deposits from foreigners for their domestic banking units, from June 02, the Central Bank said. Analysts say the ability to raise more deposits (borrow abroad) may fill the dearth of dollars in the banking system which has helped create an interest rate anomaly in the swap market.

In addition, analysts say the ability of non-residents to maintain rupee deposits may also help regularize some rupee accounts maintained by Sri Lankan expatriates which are now being operated in unorthodox ways. "This is one of the series of policy initiatives implemented by the Central Bank to secure comparative advantages by moving to global financial markets for mobilization of foreign savings to fill the country’s domestic savings-investment gap in the interest of enhancing its macro-economic performances," the Central Bank said in a statement.

"The new deposit scheme will facilitate offering and promoting international financial services and improve further investor confidence in Sri Lanka in line with its long term objective of becoming a financial hub in the region."

The central bank said the Foreig