Forex rules tightened for exporters as calls mount to curb offshore lending by banks

• Merchandise exporters’ timeline to convert foreign exchange reduced from 3 months to 1 month
• Legal expert urges government to restrict commercial banks from utilising domestic inflows for offshore lending

The Central Bank of Sri Lanka has introduced new amendments to the export proceeds repatriation regulations, significantly tightening the timeline for the exporters to convert their foreign exchange earnings into local currency. 

Through an extraordinary gazette notification issued by Central Bank Governor Dr. P. Nandalal Weerasinghe on June 9, 2026, the timeline for the merchandise exporters to convert their residual foreign currency earnings into rupees has been reduced from three months to just one month.

Furthermore, the directives mandate the indirect exporters of goods and services to convert their residual foreign currency receipts into rupees by the 10th day of the following month.

This regulatory adjustment is viewed as a response to the recent fluctuations of the local currency. 

Commenting on the macroeconomic developments, Sudath Perera Associates Partner and Head of Corporate and Commercial Law Dushyantha Perera noted that this is “part of a series of administrative/policy measures taken to counter the recent steep depreciation in the rupee”. 

He highlighted that the currency has slipped “from around Rs.305 to a US dollar ... to a high of around Rs.345, in the last three months, driven largely by the issues in the Straits of Hormuz”.

Perera added that the repatriation mandate complements other recent macroeconomic interventions, including “restrictions on vehicle imports and increasing interest rates”, designed to stabilise the domestic foreign exchange market.

While acknowledging the necessity of these tightened rules to enhance domestic liquidity, Perera raised critical concerns regarding the subsequent utilisation of these funds within the domestic banking sector.

“Whilst arguably necessary, the government should also look at imposing more stringent controls on Sri Lankan commercial banks engaging in offshore lending using these funds,” he stated. 

According to Perera, this practice of offshore lending by the local commercial banks has “grown, fairly unchecked, over the last few years after the economic crisis”.

The overarching objective of the Central Bank’s move is to ensure that foreign currency flows more efficiently into the domestic banking system to support the immediate national requirements. 

“After all, if there’s a forex crisis brewing (although unlikely – given the current reserves), whatever in the market should (also arguably) be for the benefit of the country and its residents,” Perera pointed out, emphasising the need to prioritise the essential imports over the offshore lending portfolios by the commercial banks. 

(NF)