The Central Bank Of Sri Lanka (CBSL, Sinhala ：ශ් රී ලංකා මහ බැංකු， Sri Lanka Maha Bankuwa) Is The Highest Authority For Monetary Administration In Sri Lanka. Established In 1950 Under The Currency Act No. 58 Of 1949 (MLA), It Is A Semi-autonomous Body Governed By A Five-member Monetary Board. Following Amendments To The MLA In December 2002, It Is Governed By A Five-member Monetary Board Consisting Of The Governor As Chairperson And The Ministry Of Finance And Planning As Secretary. The Remaining Three Members Are Appointed By The President Of Sri Lanka On The Recommendation Of The Minister Of Finance And With The Consent Of The Constitutional Council.
History
In Keeping With The Development Of The Economic And Financial System After Independence In 1948, The Post-independence Government Of Sri Lanka (then Known As Ceylon) Established The Central Bank Of Ceylon To Maintain The Monetary Policy Regime And The Development Of The Financial Sector, As Well As To Support And Promote Economic Growth.
Prior To The Establishment Of The Central Bank, The Currency Board System, Established Under The Notes Ordinance No. 32 Of 1884, Functioned As The Country's Monetary Authority. Although Its Functions Were Very Limited, The System Was Not Considered Suitable.
In July 1948, Seeking Technical Expertise In Establishing A Central Bank From The United States, John Exeter, An American Economist With The Federal Reserve Of The United States, Was Appointed To Perform The Task.
An External Report On The Rationale And Legal Framework Of The Central Bank Was Submitted To The United States House Of Representatives In November 1949. A Draft Bill With Explanatory Comments Was Also Attached As The Second Part Of The Report And Submitted Together. The Bill Was Passed By The House Of Representatives On November 25, 1949 As Currency Act No. 58 Of 1949, Creating Conditions For The Establishment Of The Central Bank Of Ceylon And The End Of The Currency Board System.
The Central Bank Of Ceylon Was Established By The Currency Act No. 58 Of 1949 (MLA) And Began Operations On August 28, 1950. It Was Renamed The Central Bank Of Sri Lanka (CBSL) In 1985. The Objectives Of The Central Bank Were Set Out In The Priorities Of Action 1949, To Provide For The Stability Of The Face Value And Exchange Rate Of The Currency Of Sri Lanka, As Well As To Promote And Maintain Domestic Production, Employment And Real Income.
With The Rapid Changes And Trends In International Financial Marekts, As Well As Economic Liberalization And Significant Advances In Information Technology, The Central Bank Launched The Modernization Programme In 2000 And Adjusted Its Objectives Accordingly, Reducing Them To Two Core Objectives:
- Maintaining Economic And Price Stability
- Maintaining Financial System Stability
Functions
Executing Monetary Policy
Responsible For The Implementation Of Sri Lanka's Monetary Policy, Primarily Involving Setting Policy Interest Rates And Managing Liquidity In The Economy.
Implementation Of Exchange Rate Policy
Since January 23, 2001, Sri Lanka Has Implemented An Independent Floating Exchange Rate Policy. The Country's Exchange Rate Is Determined By The Supply And Demand Of Foreign Exchange In The Economy. The Central Bank Also Reserves The Right To Intervene In The Domestic Foreign Exchange Market Through The Supply And Absorption Of Foreign Exchange In Order To Limit Excessive Short-term Fluctuations In The Exchange Rate. In Addition, Under The Currency Act, The Monetary Board Shall Adopt Appropriate Policies.
Management Of Official International Reserves
Under The Currency Act (MLA), The CBSL Is Responsible For The Management Of The Country's Official Foreign Exchange Reserves, With A Primary Focus On The Objective Of "enhancing Security, Liquidity And Returns."
Supervising The Financial System
Supervising And Supervising The Entire Financial System To Monitor And Limit Systemic Risks That May Lead To Financial And Economic Crises.
Licensing, Supervision And Supervision Of Banks And Selected Non-bank Financial Institution Groups
Responsible For Regulating And Supervising Banks And Selected Non-bank Financial Institution Groups To Promote Their Soundness And Safeguard The Interests Of Depositors And Investors. In Addition, Non-bank Financial Institution Groups Such As Licensed Financial Companies, Specialized Leasing Companies And Licensed Microfinance Companies Are Regulated Under The Financial Business Act, The Financial Leasing Act And The Microfinance Act.
As A Lender Of Last Resort (LOLR), It Can Provide Funds And Lend Them To Banks That Encounter Financial Difficulties And Cannot Obtain Funds Elsewhere.
Issuing And Distributing Countries
Have The Exclusive Right To Issue Banknotes And Coins, The Legal Tender Of Sri Lanka.
Compilation, Dissemination And Analysis Of Economic Data And Statistics
Design, Collect, Compile And Analyze Information Needed To Formulate Macroeconomic Policies And Disseminate Or Publish Economic Information And International Organizations To The Public, Government Or Private Institutions. This Economic Information Includes Real Sector, Monetary Sector, Financial Sector, Financial Sector, Financial Sector, External Sector And Provincial Statistics. Economic, Financial And Business Surveys Are Also Conducted To Reveal Patterns And Trends In The Economy And Financial System, As Well As For Research And Analysis.
As A Banker And Official Depositor To The Government
Under Section 89 Of The MLA Act, CBSL Provides Temporary Advances To The Government Free Of Charge, Capped At 10% Of The Government's Estimated Gross Income For A Given Financial Year, And Provides Current Account Facilities To LCB And Non-commercial Bank Primary Dealers In Government Securities
