International 16 Jun, 2026

India, Sri Lanka discuss ways to enhance trade settlement in local currencies

Business To Business, Colombo, 16^th June, 2026:   India and Sri Lanka are exploring ways to expand the use of local currencies in bilateral trade, with the aim of reducing costs, improving efficiency, and lowering dependence on the US dollar.
Speaking at a round-table discussion titled "Rupee to Rupee: Strengthening the India-Sri Lanka Commercial Corridor", Santosh Jha highlighted the advantages of settling trade transactions directly in local currencies.
Benefits of local currency settlement
According to Jha, local currency settlement can:

• Reduce transaction costs.
• Eliminate currency conversion losses.
• Protect bilateral trade from fluctuations in the US dollar.
• Simplify cross-border payments.
• Strengthen economic integration between the two countries.

He noted that for Sri Lanka, the mechanism has an additional advantage:
"It reduces pressure on scarce hard currency reserves, preserving dollars for uses where they are truly necessary, while rupee-to-rupee trade flows freely between our two economies."
Traditionally, much of international trade is invoiced and settled in US dollars, even when neither trading partner uses the dollar domestically. This can create additional costs and expose businesses to exchange-rate volatility.
Using local currencies—such as the Indian rupee and the Sri Lankan rupee—can help businesses:

• Settle payments more quickly.
• Reduce foreign-exchange risks.
• Lower banking and conversion charges.
• Improve liquidity for importers and exporters.

Growing economic ties
India is one of Sri Lanka's largest trading partners and an important source of investment, tourism, and development assistance. Efforts to promote local-currency trade are part of a broader trend in which several countries are seeking alternative settlement mechanisms to make cross-border commerce more efficient and resilient.
If expanded successfully, rupee-based trade settlement could:

• Increase bilateral trade volumes.
• Strengthen financial connectivity between the two countries.
• Reduce dependence on third-country currencies.
• Provide greater stability during periods of global financial volatility.

The discussions reflect a shared interest by India and Sri Lanka in deepening economic cooperation and creating more flexible payment arrangements to support future trade growth.