Central Bank of Sri Lanka

Central Bank of Sri Lanka

The Central Bank of Ceylon was established by the Monetary Law Act (MLA) No.58 of 1949 and commenced operations on August 28, 1950. It was renamed the Central Bank of Sri Lanka (CBSL) in 1985. The Central Bank was given wide powers to administer and regulate the entire money, banking and credit system of the country. The founder governor of the Central Bank of Sri Lanka was John Exter.

The objectives of the Central Bank as specified in 1949 were;

·         The stabilisation of domestic monetary values (maintenance of price stability).

·         The preservation of the par value or the stability of the exchange rate of the Sri Lankan Rupee (maintenance of exchange rate stability).

·         The promotion and maintenance of a high level of production, employment and real income in Sri Lanka.

·         The encouragement and promotion of the full development of the productive resources of Sri Lanka

These four Objectives bringing down to two core objectives in 2000.such as

·         The maintaining of economic and price stability

·         The maintaining of financial system stability

VISION

A credible and dynamic central bank contributing to the prosperity of Sri Lanka

MISSION

Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence.

Non-Bank Finance and Leasing Sector includes Licensed Finance Companies (LFCs) and Specialized Leasing Companies (SLCs). The Supervision of Non-Bank Finance and Leasing Sector is conducted through Examinations, Continuous surveillance, granting regulatory approvals, Issuance of directions and prudential requirements, investigating into companies carrying on finance business and accepting deposits without authority and investigating in to public complaints. The directions, regulations and rules issued under the provisions of the Finance Business Act (FBA) mainly cover minimum capital adequacy, liquidity requirements, provisioning for bad and doubtful debts, single borrower limits, limits on equity investments etc.

In the event of any non-compliance with the prudential requirements, the FBA empowers the Monetary Board and Director of Supervision of Non-Bank Financial Institutions (SNBFI) to take necessary corrective actions such as penalty, business restrictions, license cancellation and further investigation of books etc.

The primary function of the central bank is to control the money supply in the economy. It is responsible for issuing currency on behalf of the government. In addition to this primary function, the central bank performs the following duties:

1.     It receives the state revenues, keeps deposits of various departments and makes payments on behalf of the government.

2.    It keeps the cash reserves of the commercial banks, acts as a clearing-house for the inter-bank transactions and as a lender of last resort. It supervises the commercial banking system and ensures its smooth running.

3.    It controls the money and capital markets by changing the supply of money and thereby the rate of interest. The objective is to keep equilibrium in these markets.

4.   It is the custodian of the foreign exchange. It has to keep a closer check on the external value of the domestic currency and prevent its deterioration.

It is the adviser to the government in all the monetary affairs. It is responsible for the formulation and implementation of the monetary policy