As India and Sri Lanka look to strengthen their ties through trade and investments, they have now begun discussing shifting from the usage of dollars in settlements to using the Indian rupee.

The nations expect that the usage of rupees would offer benefits such as shorter timelines for clearance, lower exchange expenses, and easier availability of trade credits for financial entities. Such a shift might even benefit the nation’s tourism and hospitality industries.

Last week, the High Commission of India held a discussion of the issue in the Sri Lankan capital of Colombo.

A statement by the commission, seen by the PTI news agency, said, “Representatives from the Bank of Ceylon, State Bank of India, and the Indian Bank shared their experiences and informed the audience that they had started carrying out INR-denominated trade transactions through respective Vostro/Nostro accounts after the creation of [an] enabling framework by the Reserve Bank of India [RBI] and the Central Bank of Sri Lanka [CBSL] in 2022.”

Gopal Baglay, India’s High Commissioner to Sri Lanka, said, “The shift can only boost the countries’ joint efforts in building a stronger and closer economic partnership through trade and investment-led measures.”

Sri Lanka is making the shift after coming off the worst economic crisis the South Asian nation had seen since the country declared its independence in 1948. The crisis had been touched off by the pandemic’s limitation of its tourism industry. That led to a shortage of foreign currency, which produced shortages of fuel, food, and other basic necessities, since the government did not have the funds to arrange imports.

The country eventually defaulted on its foreign debt of $34.8 billion in April according to its Department of External Resources.

The currency switch measure was praised by Governor of the Central Bank of Sri Lanka Nandalal Weerasinghe, who said, the Indian and Sri Lankan business communities strongly support it.