Banks suspended from buying Sri Lanka International Sovereign Bonds for three months

The Central Bank of Sri Lanka (CBSL) has directed licensed commercial banks and National Savings Bank to suspend the purchase of Sri Lanka International Sovereign Bonds (ISBs) with immediate effect for a period of three months.

In a fresh directive issued last week (23 December), the CBSL stated that it has observed a sizable amount of investment in Sri Lanka ISBs by licensed banks thus far during the year.

“Furthermore, it has been observed that licensed banks continue to purchase Sri Lanka ISBs using inflows to the current account of the balance of payments, thereby adding undue pressure to the domestic foreign exchange market,” the CB said.

“In consideration of these developments, licensed commercial banks and National Savings Bank are required to suspend the purchase of Sri Lanka ISBs with immediate effect for a period of three months,” the CB added. 

With the latest directive, the Central Bank said the Banking Act Directions No.11 of 2020 – dated 11 December – on the same subject has been withdrawn, and the latest direction will be implemented with immediate effect.

The Banking Act Directions No.11 of 2020 – dated 11 December, suspended licensed commercial banks and National Savings Bank from purchasing Sri Lanka ISBs for a period of six months unless such purchase is funded by new foreign currency inflows to such licensed  banks sourced from abroad.

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