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 Funds can only be withdrawn before the maturity date with prior notice and could attract a penalty.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.
Personal Foreign Currency Account (PFCA)
Business Foreign Currency Account (BFCA)
Inward Investment Account (IIA)
Outward Investment Account (OIA)
Personal Foreign Currency Account (PFCA) is a special account which can be opened in designated foreign currencies and could be invested in many attractive investment products.
Eligibility
An individual, including a minor, who is a Sri Lankan national
An individual of Sri Lankan origin, including a minor who is a resident outside Sri Lanka
A non-national resident in Sri Lanka
A non-national either on temporary visit to Sri Lanka or intending to visit Sri Lanka
An administrator or executor of the estates of a deceased person, who maintained a personal foreign currency account with that authorized dealer or restricted dealer until the completion of the administration of the deceased person’s estate
Permitted Credits
Inward remittances
Foreign currency brought into Sri Lanka
Transfer from PFCA Accounts/Business Foreign Currency Accounts (BFCA) and accounts in Offshore Banking Unit
Transfers from own Inward Investment Account (IIA), if the account holder is a resident outside Sri Lanka or a non-national resident in Sri Lanka
The monthly salary, employment benefits and other related benefits, if the account holder is a non-national employee resident in Sri Lanka
Permitted Debits
Any outward remittance
Local disbursements
Transfer to PFCA Accounts/Business Foreign Currency Accounts (BFCA) and accounts in Offshore Banking Unit
Transfers to own Inward Investment Account (IIA), if the account holder is a resident outside Sri Lanka or a non-national resident in Sri Lanka
Withdrawal in foreign currency notes up to USD 10,000 (or equivalent in any other foreign currency) for the purpose of travel
Foreign currency withdrawals for non-national resident outside Sri Lanka who is on a temporary visit to Sri Lanka
Eligibility
An individual resident in Sri Lanka
A sole proprietorship or partnership registered in Sri Lanka where the proprietor or a majority of partners are resident in Sri Lanka (in case of a partnership with two partners, at least one partner shall be a resident in Sri Lanka)
A company incorporated in Sri Lanka
A company incorporated outside Sri Lanka which is registered as an overseas company under the Companies Act No 7 of 2007
A State Institution with the recommendation of the secretary to the relevant line ministry or appropriate authority
A person authorized to carry on a business as a shipping agent or a general sales agent in Sri Lanka on behalf of a foreign shipping line or airline (foreign principal) who possesses a valid license, or an authorized letter issued by the Director General of Merchant Shipping or Director General of Civil Aviation Authority of Sri Lanka as relevant
An administrator or executor of the estate of a deceased person, who maintains a Business Foreign Currency Account with that authorized dealer or restricted dealer, until the completion of the administration of the deceased person’s estate
A receiver or liquidator in the name of a company that maintained a Business Foreign Currency Account with that authorized dealer or restricted dealer, until proceedings are concluded
Permitted Credits
Business, investment and salaries related inward remittances
Foreign currency in the form of travelers’ cheques, bank drafts or currency notes
Foreign currency brought into Sri Lanka by the account holder upon declaration
Transfers from BFCA & Offshore Banking accounts
Proceeds of foreign currency loans and advances with the prior approval of the Central Bank
Sale proceeds of foreign assets acquired by debiting BFCA
Capital gains in respect from investments made in Sri Lanka in foreign currency if the original transfer has been made by debiting the BFCA of the account holder
Permitted Debits
Any outward remittance
Disbursements in LKR
Funds Transfers to BFCA, PFCA and Offshore Banking accounts
Transfers to an Outward Investment Account of the same account holder
Debt servicing expenses and repayment of foreign currency loans obtained by the account holder from authorized dealers or restricted dealers
Transfers in respect of any investment permitted to be made in Sri Lanka
Transfers to an Inward Investment Account (IIA) of a resident outside Sri Lanka for repayment of a foreign currency loan obtained from foreign lender
Withdrawal in foreign currency notes up to USD 10,000 or equivalent for the purpose of travel
Inward Investment Account is a special account designated for eligible investors, resident in or outside Sri Lanka to route funds to invest in permitted investments.Licensed Commercial Banks and Licensed Specialized Banks (as permitted) are permitted to open and maintain IIA in the Domestic Banking Unit of a Licensed Commercial Bank and Licensed Specialized Banks (as permitted) in the name of the eligible investor. IIA may be maintained in Sri Lanka Rupees or in any designated foreign currency and may be held jointly by eligible investors.
Eligibility
An individual of Sri Lankan origin who is a resident outside Sri Lanka
A non-national resident in or outside Sri Lanka
A non-national either on temporary visit to Sri Lanka or intending to visit Sri Lanka
A Company incorporated outside Sri Lanka
Permitted Credits
Inward remittances infavor of account holder
Foreign currency brought into Sri Lanka by the account holder upon declaration
Sales proceeds of immovable property including capital gains, leasehold rights, sub-lease hold rights, received in Sri Lanka Rupees where such investment made through IIA
Transfers from Personal Foreign Currency Accounts (PFCA), Inward Investment Accounts (IIA) or Offshore Banking accounts of the same account holder
Transfers from Business Foreign Currency Account (BFCA) of a person resident in Sri Lanka as repayment of foreign currency loans
Transfer from Diplomatic Foreign Currency Accounts (DRA) and Diplomatic Rupee Account (DRA) of the same account holder
Transfers from IIA of another person in respect of investments where such investment has been made by the account holder through the same IIA
Dividend, sale or maturity proceeds, disposal of liquidation, capital redemption, share buyback, profits, surplus funds, rental income, recovery of principal, interest or any other related income received from capital transactions undertaken in Sri Lanka by persons resident outside Sri Lanka as permitted under Foreign Exchange Act
Permitted Debits
Disbursements in Sri Lanka
Outward remittance favoring account holder
Own account fund transfers to IIA, PFCA or Offshore Banking accounts
Payments relating to capital transactions undertaken in Sri Lanka by persons resident outside Sri Lanka
Transfers to an IIA of another person in respect of the purchase of any permitted investment
Disbursement relating to foreign currency loans to persons resident in Sri Lanka
Transfer of proceeds of foreign currency loans to an Outward Investment Account (OIA) of the borrower where such loans have been obtained for financing an overseas capital transaction
Transfers to Diplomatic Foreign Currency Accounts (DFA) and Diplomatic Rupee Accounts (DRA) of the same account holder
OIA is a special account designated for persons resident in Sri Lanka to channel funds abroad for eligible overseas investments such as investments in Shares, Units, Debt Securities, Sovereign Bonds and establishing of an overseas company of a company incorporated in Sri Lanka. Licensed Commercial Banks are permitted to open and maintain OIA in the name of resident investors in the domestic banking unit of a Licensed Commercial Bank in any designated foreign currency.
Eligibility
An individual, including a minor, who is a Sri Lankan national
An individual of Sri Lankan origin, including a minor who is a resident outside Sri Lanka
A non-national resident in Sri Lanka
A non-national either on temporary visit to Sri Lanka or intending to visit Sri Lanka
An administrator or executor of the estates of a deceased person, who maintained a personal foreign currency account with that authorized dealer or restricted dealer until the completion of the administration of the deceased person’s estate
Permitted Credits
Inward remittances
Foreign currency brought into Sri Lanka
Transfers from PFCA Accounts/Business Foreign Currency Accounts (BFCA) and accounts in Offshore Banking Unit
Transfers from own Inward Investment Account (IIA), if the account holder is a resident outside Sri Lanka or a non-national resident in Sri Lanka
The monthly salary, employment benefits and other related benefits, if the account holder is a non-national employee resident in Sri Lanka
Permitted Debits
Any outward remittance
Local disbursements
Transfers to PFCA Accounts/Business Foreign Currency Accounts (BFCA) and accounts in Offshore Banking Unit
Transfers to own Inward Investment Account (IIA), if the account holder is a resident outside Sri Lanka or a non-national resident in Sri Lanka
Withdrawal in foreign currency notes up to USD 10,000 (or equivalent in any other foreign currency) for the purpose of travel
Foreign currency withdrawals for non-national resident outside Sri Lanka who is on temporary visit to Sri Lanka
Limits for Outward Investments
Eligible Resident Investor
Type of Investment
Permitted Limit
(i) A company listed in the Colombo Stock Exchange
Shares, Units, Debt Securities and Sovereign Bonds
USD 2,000,000 or an equivalent amount in any foreign currency designated by the Central Bank, per calendar year
(ii) A company not listed in the Colombo Stock Exchange
USD 500,000 or an equivalent amount in any foreign currency designated by the Central Bank, per calendar year
(iii) A partnership registered in Sri Lanka
USD 300,000 or an equivalent amount in any foreign currency designated by the Central Bank, for life time
(iv) An individual
USD 200,000 or an equivalent amount in any foreign currency designated by the Central Bank, for life time
(v) A company or a partnership
Setting up of Overseas offices
USD 300,000 or an equivalent amount in any foreign currency designated by the Central Bank, per calendar year
As at September 2018
The following institutions are authorized by the Central Bank of Sri Lanka to accept deposits of money from the public.
Licensed Commercial Banks (LCB)
Registered Finance Companies
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
Savings accounts are interest bearing instruments and can be broadly categorized in to three groups.
Regular savings account
Savings schemes
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,
Children
Youth
Women
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.
The following Institutions are authorized by the Central Bank of Sri Lanka to operate savings accounts.
Licensed Commercial Banks (LCB)
Licensed Specialized Banks (LSB)
Licensed Finance Companies (LFC)
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.
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.
