Financial Institutions offering deposits and savings products generally publish a standard rate. However, in many instances deposit rates can be negotiated depending on the amount to be deposited and also the client’s relationship with the organization.

A deposit of funds placed at a financial institution, where the depositor earns a fixed rate of interest for a fixed period of time. Fixed Deposits can be for short, medium or long term. Funds can only be withdrawn before the maturity date with prior notice and could attract a penalty. A depositor has the facility to borrow funds from the institution using the deposit as collateral.

A deposit of money where the depositor earns a fixed rate of interest, for a fixed period of time. However, in the case of a certificate of deposit the investor deposits the discounted value of the certificate of deposit and receives the full value of the certificate on maturity.

i.e: The amount required to purchase a certificate of deposit of 100,000/- giving a yield of 8%p.a for 12 months would be 92,600/-

There are four types of foreign currency accounts that are generally operated in Sri Lanka.

1. Personal Foreign Currency Account (PFCA)
2. Business Foreign Currency Account (BFCA)
3. Inward Investment Account (IIA)
4. Outward Investment Account (OIA)

The following institutions are authorized by the Central Bank of Sri Lanka to accept deposits of money from the public.

1. Licensed Commercial Banks (LCB)
2. Registered Finance Companies
3. Licensed Specialized Banks (LSB)

A detailed list of these institution categories can be found in the Directory

Further inquiries can be made with the Central Bank of Sri Lanka

Bank Supervision Department : banksup@cbsl.lk
Dept. of Supervision of Non Bank Financial institutions : snbfi@cbsl.lk
Legal Department : legal@cbsl.lk

Savings accounts are interest bearing instruments and can be broadly categorized in to three groups.

1. Regular savings account
2. Savings schemes
3. Savings certificates

Regular Savings Account

This is the standard product offered by institutions. The main feature that differentiates one institution's product from another is the basis of interest calculation.

I.e : Interest can be calculated on the account balance, daily, weekly, monthly or any other period as decided by the institution.

Funds can be withdrawn from a savings account at any time.

Savings Schemes

Banks and other institutions authorized to operate savings accounts offer many types of schemes, in order to attract savings, by offering varied benefits to the saver in addition to the interest rates paid.
The schemes that are popular, focus on the following categories of savers,

1. Children
2. Youth
3. Women
4. Senior Citizens

Some of the features and benefits of these schemes are as follows,

• Enhanced interest rates
• Entry to competitions with attractive prizes
• Cash prizes for educational achievements (Children & Youth)
• Scholarships for students
• Gifts at specific birthdays or on the progressive increase in the account balance
• Insurance benefits – Life cover for parents (Children's schemes)
• Insurance benefits – Accident / Hospitalization
• Low interest loans
• Free ATM cards, Privilege cards and Credit cards
• Discounts when shopping at selected outlets
• Medical facilities (Senior citizens)

However most of these benefits accrue to the saver, when one or more criteria of the institution is met. (i.e : minimum balance or specific balance for minimum period etc.)

Savings Certificates

Savings certificates are another method of attracting savings. Unlike the regular savings account where the rate of interest could change, the interest rate payable on the certificate is fixed for a specific period. Savings certificates are generally issued at a discount. (i.e : a 12-month saving certificate which earns 7%p.a and has a value of LKR 100,000 at the end of the period will cost LKR 93,460)

Licensed Commercial Banks are authorized by the Central Bank of Sri Lanka,to operate savings accounts in currencies specified by the Central Bank. Foreign currency savings can be operated through the following accounts.

Personal Foreign Currency Account (PFCA)
Business Foreign Currency Account (BFCA)
Inward Investment Account (IIA)
Outward Investment Account (OIA)

Click on links for more details...

The following Institutions are authorized by the Central Bank of Sri Lanka to operate savings accounts.

1. Licensed Commercial Banks (LCB)
2. Licensed Specialized Banks (LSB)
3. Licensed Finance Companies (LFC)
4. Co-operative Societies

A detailed list of these organizations and their contact information can be found in the Directory under the relevant categories. Further inquiries can be made with the Central Bank of Sri Lanka, which regulates these institutions.

Central Bank of Sri Lanka,
P O Box 590,
Colombo 1,
Sri Lanka
Telephone:94 11 247 7000
Fax:94 11 247 7000
Email:cbslgen@cbsl.lk

Bank Supervision Department : banksup@cbsl.lk
Dept of Supervision of Non Bank Financial Institutions: snbfi@cbsl.lk
Legal Department : legal@cbsl.lk

Treasuries are securities issued by the Central bank of Sri Lanka on behalf of the government of Sri Lanka to fund the government budget through public borrowing. There are two types of securities which are commonly issued. The Treasury Bill and the Treasury Bond. Interest and Maturity proceeds of Treasuries are guaranteed by the government of Sri Lanka. Treasury Bills and Bonds are issued in scrip-less form and transactions are recorded electronically in the LankaSecure system of the Central Bank.

Treasury Bills are promissory notes issued by the Central Bank of Sri Lanka on behalf of the government of Sri Lanka, which stipulate that the holder of the Treasury Bill will be paid the face value on a specific date. Treasury Bills are zero coupon securities and are sold at a discount to the face value which is paid at maturity. The difference between the purchase price and the face value is the interest income to the investor. Treasury Bills are considered liquid assets, as they can be easily converted to cash. Treasury Bills are issued in three maturity periods - 91 days, 182 days, 364 days, at the weekly auction held by the Central Bank,and can be purchased from Primary Dealers who are appointed by the Central Bank to competitively bid and purchase Treasury Bills at the auctions.

Treasury Bonds are medium to long term securities issued by the Central Bank on behalf of the government of Sri Lanka. The maturity periods of Treasury Bonds issued to date, range from 2 years to 30 years. Treasury Bonds carry a coupon which pays the holder of the bond a fixed rate of interest semi-annually. While Treasury Bonds are issued at par, they can be purchased at a discount or a premium depending on the prevailing market interest rates. Treasury Bonds are issued at auctions held by the Central Bank and can be purchased from Primary Dealers who are appointed by the Central Bank to competitively bid and purchase Treasury Bonds at the auctions.

This is an agreement between two parties which involve the sale of securities (usually Government Securities) at a specific price with a commitment to repurchase the same or similar securities at a fixed price on a specified future date. The difference between the sale price and repurchase price is the interest income. Popularly known as “repo” the transaction is generally short term in nature and within the maturity date of the security offered. A flexible instrument, which offers a method of short-term funding for dealers in Treasury Bills/Bonds and an attractive and secure avenue of investment for investors. Rates are competitive and market driven.

A repo is similar to a loan that is collateralized by the securities underlying the agreement.

The repo agreement is called a reverse repo when viewed from the perspective of the securities buyer. Investors in Treasury Bills/Bonds can pledge their securities and borrow funds to meet short term needs. Rates are generally competitive and market driven.

The Yield Curve is a graphical representation of yields of specific maturities at a given point in time.

Primary Dealers are specialized companies who have been appointed by the Central Bank to buy and sell Treasury Bills and Bonds. Besides the commercial banks that have been issued a primary dealer license by the Central Bank, Primary Dealers are the only companies permitted to participate in the Central Bank’s primary market auctions for the issue of Treasury Bills and Treasury Bonds. Investors who wish to buy and sell Treasuries or bid at the Treasury Bill/Bond auctions can contact these companies.

Contact details of Primary Dealers can be found in the Directory

Transactions other than those at the Central Bank Auctions (primary market) are treated as secondary market transactions.

The Colombo Stock Exchange (CSE) has facilities for the secondary trading of Corporate and Government Debt Securities. Participants have the luxury of carrying out the trading of Equity and Debt Securities on a single trading platform.
For Debt Securities investors have a choice of doing trades on two separate settlement boards.

• TOM Board - Settlement on T+1(Early Settlement)
• SPOT Board - Settlement on T+2(Normal Settlement)

Accordingly, cash settlement can be done on T+1 or T+2 and Debt Securities Settlement is on DVP (Delivery versus Payment) basis.
Participants also have the facility to do negotiated trades through the Crossing Board.

Central Bank of Sri Lanka

Treasury Bills Auction Results
7th August 2020

A “Unit Trust” is a pooled investment plan where the capital contributions of investors are combined into a legally formed Trust Fund. The money is then invested by professional Fund Managers, acting on behalf of the investors, in a portfolio of marketable securities. A “Trustee” is appointed to safeguard the rights and interests of the investors. The investors receive “Units” (shares) in proportion to the amount of money they have contributed to the Fund. The income derived by the Fund by way of dividends, interest and capital gains are divided among the unit holders in proportion to their investments. Unit Trusts are regulated and licensed by the Securities & Exchange Commission of Sri Lanka (SEC).

Structurally these unit trusts can be identified as Open-end and Closed-end Funds.

Open-end Funds are not limited by the number of units they can issue and do not have a maturity date. Investors can invest in or divest their investment at any given time.

Closed-end Funds generally issue a fixed number of units and have a time period during which they will mature,and the investors will be paid back. Investors can invest only up to the number of units offered by the Fund. Withdrawals will depend on the conditions set by the Fund in the Explanatory Memorandum.

Some companies opt to list these Closed-end Funds on the Colombo Stock Exchange (CSE) in order to provide an avenue for investors to withdraw from the Fund before its maturity.

Equity Funds

These Funds primarily invest in the stock market. Equity Funds carry a high level of risk and are expected to provide a high return in the long term. The following Fund types can be considered as Equity Funds.

Equity Growth Funds – Funds which are predominantly invested in Equity Securities
Equity Index Funds – Funds which allocate Assets (construct portfolio) to match or track the composition of a specific index.
Equity Sector Funds – Funds which invest only in a specific sector of the Colombo Stock Exchange
Equity Shariah Funds – Funds which invest in Equity Securities that conform to Shariah Investment principles
Equity IPO Funds– Funds which invest in Equity Securities at the Initial Public Offer of the company

Balanced Funds (Income & Growth Funds)

These Funds invest in a combination of equity and fixed income securities. They have a higher risk level than Income Funds but are expected to provide a higher return in the long term, by way of capital appreciation and dividend payments from time to time.

Income Funds

Income Funds invest in fixed income securities, such as Government Securities and Securities issued by Corporates. Generally, these Funds have a lower level of risk in relation to Equity Funds and pay regular dividend to unit holders. The Following Fund types can be considered as Income Funds

Income Funds – Funds which invest in fixed income securities
Gilt Edge Funds – Funds which invest exclusively in Government Securities (i.e.: Treasury Bills/Bonds)
Money Market Funds – Funds which invest in fixed Income securities that are restricted to maturities less than one year
Shariah Money Market Funds - Funds which adhere to Shariah principles of investment and investments are restricted to maturities less than one year

There are two types of Asset Management Companies, which are regulated and licensed by the Securities & Exchange Commission of Sri Lanka.

1. Unit Trust Management Companies which manage Unit Trust Funds
2. Investment Managers who manage Investor Portfolios

In addition to investing in the Stock Market (Colombo Stock Exchange) Expatriate Sri Lankans and Non-Nationals are currently permitted to invest in Unit Trusts. Investors who wish to repatriate funds can do so by opening an Inward Investment Account (IIA), which is a special account that facilitates such transactions.

Performance Summary of Unit Trusts as at 31st May 2020

Home loans are granted for the purchase of a house,a land, to construct a house, complete extend or renovate an existing house or refinance a housing loan obtained from another lending institution.

1. The Loan amount offered is generally between 60 – 80 % of the total estimated cost of purpose (purchase, build, renovate etc.)
2. Minimum and maximum amounts vary with each institution and scheme
3. Repayment periods on home loans are generally within 5 – 20 years. However, some institutions offer up to 30 years, subject to the applicant's retirement age not exceeding the repayment period.
4. Interest rates on home loans are offered in two ways - Fixed rate / Floating rate
   
   The fixed rate of interest gives the borrower a rate of interest that will prevail during the full period of the loan, and also a fixed amount on the installment.
   
   The floating rate of interest is based on a benchmark rate and will fluctuate depending on the movement of the benchmark. [The typical benchmark for home loans could be the Average Weighted Fixed Deposit Rate (AWFDR) of the Commercial banks plus a premium]. The loan installment would change with each change in the benchmark.
5. The Loan is generally secured by a primary mortgage over the property.

Charges & Costs

1. Most lending institutions charge a processing fee which could be a fixed fee or a percentage of the loan amount. This fee generally covers costs such as valuation of property
2. Some institutions require the borrower to obtain a life insurance cover and fire policy favoring the lending institution
3. The other charge payable by the borrower is for the mortgage bond
4. Early settlement of loans attracts a penalty with some lending organizations

Most lending institutions have similar criteria in assessing the eligibility of home loan applicants. Some of the most common criteria are listed below.

1. Applicants should have a regular income
2. Applicants should be willing to mortgage the property as collateral (security) for the loan
3. Applicant should furnish required documents requested by the lending institution
4. Applicants (if individuals) should be able to meet living expenses after paying the loan installment. The monthly installment generally does not exceed 40% of the applicants net monthly income.

Documents required by the lending institution. (Some lending institutions arrange for the preparation some of these reports for a fee.)

1. Letter from the vendor for the purchase of property.
2. Building plan approved by the local authority. If approval not required a letter stating it from the local authority
3. Bill of Quantities for proposed construction acceptable to the lending institution.
4. Valuation report of property to be mortgaged, from a valuer acceptable to the lender.
5. Letter from employer confirming income (if employed)
6. If self-employed proof of income.
7. Letter of employment contract for required period if employed abroad. Copies of passport and visa documents.

Legal documents

1. Title report
2. Survey plans
3. Title deeds
4. Extracts

From Local authority

1. Ownership certificate
2. Street line certificate
3. Non-vesting certificate
4. Assessment notice – receipt in respect of assessment tax.

The “Viyana” loan scheme exclusively serves Employees Trust Fund Board (ETFB) members, who are eligible to borrow for the purpose of purchasing or constructing a house, extension or improvement of a house. Loans are given with the agreement of the ETFB and the lending institution.

The main features of the scheme are,

• Applicant should be a member of the ETF continuously for 5 years
• The applicant should be currently employed at an organization that is approved by both the lending institution and the ETF Board.
• The maximum loan period is 20 years
• The minimum and the maximum amount on the loan depends on the member balance
• Interest rates are generally attractive to current market rates
• The lending institution will secure a mortgage over the property.
• Repayment of the loan is through a pay sheet deduction arrangement.

Some institutions offer foreign currency home loans to Sri Lankans working overseas. These loans are granted for housing in Sri Lanka and can be obtained and repaid in foreign currencies as permitted in the specific Foreign Currency account. Most lending institutions have minimum loan amount requirements. Repayment of the loan is generally over a period of five years.

Most other conditions applicable to home loans are also applicable to foreign currency loans too. See 'Home Loans – General Features'.

Corporate housing loans are generally offered to a company to provide housing facilities for its employees.

Lending institutions offer various methods of financing for Corporate Housing.

• Financing the purchase or construction of homes for the use of employees
• Finance an employee owned housing loan scheme
• Provide housing loans to employees where the company guarantees the repayment of the loan

The rates of interest, the period of the loan and the security required by the lending institution will differ for each company and depend on the performance of the company and the security/guarantee offered.

Personal loans can be obtained for varied personal purposes.

• The loan is generally does not require security
• Short term in nature (3 – 5 years)
• Loan amount depends on repayment capacity of borrower
• Repayment could be reducing balance or equal installments
• Charges on early repayment vary for each institution

• Age of borrower between 20 and 50 years
• Employed in a company approved by the lender
• Confirmed in current employment
• Minimum monthly remuneration –specified by lending institution
• Monthly salary should be remitted to an account at the lending institution or a standing order for the installment to be paid to the lender.

• Completed application form
• Letter from employer confirming employment and remuneration details
• Copy of Identification (National ID/ Passport)
• Letter confirming transfer of repayment installment to lending institution, or repayment method

Educational loans can be obtained for educational and career advancement purposes. This includes money to purchase books, pay tuition fees and even purchase educational items such as computers. Loans are available at various stages of your educational career ranging from college through university and post graduate studies, also for professional studies. Some organizations also grant loans to meet career development expenses such as training or commencing a professional practice.

• Short term in nature (3 – 5 years)
• Loan amount decided on a case by case basis
• Repayment by regular installment.
• Loans are generally secured by personal guarantors or in some cases against the mortgage of immovable property.
• Loans can be obtained jointly with an adult (parent) or alone if the borrower has a regular income.

A marketplace (exchange) created by the Colombo Stock Exchange (CSE) for the transaction of secondary market Treasury bills and Bonds. The intermediaries on the DEX are the stockbrokers and debt dealers appointed by the CSE.

SIERA (Share Investment External Rupee Account)

The SIERA is a transactional account used for the purpose of making investments in Sri Lanka using foreign currency. The Investor who brings in foreign currency is permitted to repatriate the investment and profit without specific exchange control approval.

Documentation required to open a Share Investment External Rupee Account (SIERA)

1. Account opening forms and signature cards
2. Copy of Passport
3. Letter of Introduction

The following transactions could be routed through the SIERA

Debits

1. Payments for investments
2. Debits in respect of the account holder's expenses in Sri Lanka
3. Payments to brokers and bank charges
4. Debits in respect of outward remittances of dividends and sale SSproceeds of shares and units of permitted unit trusts
5. Funds payable pertaining to Stock borrowing and Lending SStransactions.

Credits

1. Inward remittances or NRFC/ FCBU transfers of the investor.
2. Sales proceeds of shares and units of permitted unit trusts SSsupported by documentary evidence
3. Dividend paid on shares supported by documentary evidence
4. Commissions relating to item 2 and 3 above supported by SSdocumentary evidence.
5. Funds received from participating in Stock borrowing and SSLending transactions.

RANSI (Rupee Accounts for Non Resident Sri Lankan nvestment)

The purpose of this account is to encourage persons who are citizens of Sri Lanka and are resident outside Sri Lanka, to remit their foreign exchange earnings for investment in Sri Lanka.

The following are eligible to operate RANSI

1. Citizens of Sri Lanka who have made their permanent place of SSabode outside Sri Lanka.
2. Citizens of Sri Lanka who have proceeded outside Sri Lanka for SStaking up employment or setting up a business or profession and SScontinue to reside abroad.

Opening the Account

RANSI should be opened only with the proceeds of foreign exchange received through a licensed commercial bank, appointed as an authorised dealer to the credit of the person opening the account. The account should be opened in the domestic unit of the bank and should be maintained in Sri Lanka Rupees.

Credits to RANSI

1. Proceeds of inward remittances made by the account holder SSthrough banking channels
2. Interest earned on funds lying to the credit of the account.
3. Income derived from investments made out of funds in the SSaccount.
4. Sale /liquidation proceeds of investments made out of funds in SSthe account (other than proceeds of bearer certificates of SSdeposits)

Debits to RANSI

1. For capital funds required for making investment in securities SSsuch as shares, government securities, debentures and units in SSunit trusts and other financial assets and real assets including SSland and buildings.
2. For outward remittances from funds lying to the credit of the SSaccount.
3. for any other local disbursements.