The Reserve Bank of India (RBI)  has given its approval to designate the Indian Rupee (INR) as a foreign currency for Sri Lanka. This means that Sri Lanka can use the Indian rupee for international trade. According to reports, banks in Sri Lanka have opened special rupee trading accounts called Vostro accounts.

The Central Bank of Sri Lanka (CBSL) was also awaiting this approval. Sri Lankan nationals can now physically possess $10,000 (INR 8,26,823). Additionally, this implies that Sri Lankans and Indians can conduct business abroad using the Indian rupee in place of  US dollars.

Sri Lanka was waiting for this decision to recognize the Indian rupee (INR) as a legal tender in Sri Lanka because it will give the nation the much-needed financial support it needs to weather its current economic crisis in the absence of a sufficient supply of US dollars. The economy of the country is more likely to be able to avert further escalation of the balance of payments problem by using a foreign currency (in Sri Lanka's case, the INR).

Since July of this year, the Indian government has sought to include nations lacking in dollars in its system of rupee settlement. As of now, it has approved the opening of 12 Vostro accounts by banks for the exchange of rupees with Russia. According to a Reserve Bank of India document quoted by the Economic Times, six other accounts have also been authorized, including five for trade with Sri Lanka and one for trade with Mauritius. According to reports, discussions about employing the rupee settlement method are also taking place in Tajikistan, Cuba, Luxembourg, and Sudan.