Foreign Currency Borrowings by Residents

published by admin on Sat, 08/06/2011 - 09:40

Direct Exporters

Commercial banks are permitted to grant loans in foreign currency to exporters of goods and services (direct exporters) who satisfy the bank that they have adequate foreign currency earnings to meet their working capital and fixed capital requirements. These loans are granted to meet the working capital and fixed capital requirement of the exporter without restrictions on the duration of the period of the loan. Repayments of these loans and the interest on the loans should be in foreign currency.  In the event of default of such loans every endeavour must be taken by the bank that granted the loan to sell any assets mortgaged as security for the loan for a consideration in foreign currency.  If such attempts have been made and have failed, the bank may convert sale proceeds of mortgaged assets to foreign currency up to the extent of the amount required for the settlement of the outstanding balance of the loan.

Indirect Exporters

Commercial banks are also permitted to grant loans to suppliers of accessories to direct exporters (indirect exporters) for the purpose of importing inputs required or the manufacture of accessories subject to the following conditions:

(i) In the case of indirect exporters supplying accessories to enterprises approved by the Board of Investment of Sri Lanka, loans granted should be based on confirmed orders placed with the indirect exporter by such enterprises payable in foreign currency and should be repaid in foreign currency received from those orders.

(ii) Loans granted to an indirect exporter supplying accessories to a direct exporter, other than an enterprise approved by the Board of Investment of Sri Lanka should be based on -

(a) domestic rupee letters of credit opened by the direct exporter in favour of the

indirect exporter; or

(b) confirmed orders placed by the direct exporter with the indirect exporter in

which the values are given in rupees.

Sri ankans Employed abroad

Sri Lankans employed abroad are permitted to obtain foreign currency loans against their NRFC deposits which are released in rupees but repayable out of their foreign currency earnings for the purpose of construction or purchase of residential houses in Sri Lanka. Such persons are also permitted to borrow in foreign currency for any purpose against the pledge of their NRFC deposits.  These loans may also be released in rupees but are repayable in foreign currency out of the foreign currency earnings of the borrower