Trade with Sri Lanka in rupees: how INR settlement works

Yes, Indian companies can trade with Sri Lanka in rupees. Price the invoice in INR, get paid in INR, and never touch a dollar in between. Here is how it works and what changed in 2025 and 2026.

How it works

1. Your counterparty's bank holds a rupee account in India. A Sri Lankan bank opens a Special Rupee Vostro Account (SRVA) with an Indian bank.
2. You invoice in INR. An Indian exporter prices and bills the Sri Lankan buyer in rupees. An Indian importer can be billed in rupees the same way.
3. Money moves inside rupee accounts. When a Sri Lankan importer pays, rupees move from its bank's vostro account to the Indian exporter. When an Indian importer pays a Sri Lankan supplier, rupees go into that vostro account. No dollar leg at either end.
4. Surplus rupees stay useful. The Sri Lankan side can spend the balance on more imports from India or invest it in eligible Indian debt, such as government securities.

What changed, and when

• July 2022: RBI opened its framework for invoicing, payment and settlement of exports and imports in INR. Sri Lanka, short of dollars after its 2022 crisis, was one of the first partners to use it.
• Sri Lanka's side: the Indian rupee was added to Sri Lanka's list of designated foreign currencies, so Sri Lankan banks can hold and deal in it. By August 2023, eight Sri Lankan banks held rupee vostro accounts with Indian banks, according to India's commerce ministry.
• October 2025: RBI allowed Indian banks to lend in rupees to people and businesses in Sri Lanka, Nepal and Bhutan, including banks there, for cross border trade. Vostro balances also became investable in Indian corporate bonds and commercial paper.
• July 2026: RBI pulled the rules into one consolidated circular. Indian banks can now open vostro accounts for overseas banks without referring each one to RBI.

Why it matters for your business

• No double conversion: skip INR to USD to LKR on every invoice.
• Less currency risk: your receivable sits in the currency you report in.
• An easier sale: rupee billing removes your Sri Lankan buyer's need to find dollars, and rupee credit from Indian banks can now fund the purchase.
• Port City fit: Port City businesses transact in Sri Lanka's designated foreign currencies, and the rupee is on that list. Confirm the terms of your own approval with your advisor.

How to start

1. Ask your Indian bank's trade desk whether it runs rupee vostro accounts and which Sri Lankan banks it works with.
2. Ask your Sri Lankan buyer or supplier to confirm their bank can settle in INR.
3. Put INR pricing in the contract and the invoice. Exchange rates are market determined.
4. Keep the usual FEMA paperwork. Rupee settlement changes the currency, not the documentation.

Investing in a Sri Lankan company from India still follows RBI's Overseas Investment rules. This page is a guide, not financial or legal advice. Talk to your bank and CA before you change how you invoice.

Sources: RBI framework for international trade settlement in INR (July 2022) and A.P. (DIR Series) Circular No. 19 of 17 July 2026; RBI notification FEMA 3(R)(4)/2025-RB of 6 October 2025; India's Ministry of Commerce reply in the Lok Sabha, August 2023.