According to foreign media, reports have emerged saying banks from India's neighbouring island nation have opened special rupee trading accounts, called Vostro accounts, this comes days after the Central Bank of Sri Lanka said that it was awaiting the Reserve Bank of India's approval to designate Indian Rupee (INR) as a foreign currency in Sri Lanka.
Sri Lanka had requested the RBI to facilitate and promote trade and tourism in the SAARC region. It means that Sri Lankan citizens can now hold $10,000 (INR 8,26,823) in physical form.
This also means that Sri Lankans and Indians can use Indian rupees instead of US dollars for international transactions with each other.
The Indian government since July this year, has been looking to bring countries that are short of dollars, into its rupee settlement mechanism.The reason behind this is that designating INR as a legal currency in Sri Lanka will provide the country with much-needed liquidity support to help it tide over its economic crisis amid inadequate availability of the US dollar. .