MONETARY LAW

(1) The standard unit of monetary value in Sri Lanka shall be the Sri Lanka rupee, which shall be represented by the signs ” Re. ” and ” Rs. “.

(2) The Sri Lanka rupee shall be divided into one hundred units each of which shall be called a” cent”.

(1) The Monetary Board shall, by unanimous decision, recommend to the Minister that the par value of the Sri Lanka rupee be determined in terms of special drawing rights or in terms of such other common denominator as may be prescribed by the International Monetary Fund, and upon such recommendation, the Minister shall, by Order published in the Gazette, determine and declare the par value of the Sri Lanka rupee in accordance with the terms specified in such recommendation :

Provided, however, that if the Monetary Board is of the view that international economic conditions do not warrant the introduction or maintenance of exchange arrangements based on stable but adjustable par values, it may, by unanimous decision, recommend to the Minister that no determination be made under the preceding provisions of this section or that any Order made under this section be revoked, and upon any such recommendation, the Minister shall desist from making an Order under this section, or, as the case may be, revoke any Order made under this section.

(2) The Monetary Board may by unanimous decision recommend to the Minister the alteration of the par value of the Sri Lanka rupee, if the Board is of the opinion that such alteration is rendered necessary in any of the following circumstances, that is to say”

(3) Any Order made under subsection (1) or subsection (2) shall cease to have effect after a period of ten days from the date of publication thereof, unless such Order is approved by Parliament within that period:

Provided, however, that if Parliament is not in session on the date of publication of the Order, the Order shall cease to have effect after a period of ten days from the date of the next meeting of Parliament, unless such Order is approved by Parliament within that period.

(1) Every obligation of the following description, that is to say, every contract, sale, payment, bill, note, instrument, and security for money, and every transaction, dealing, matter, and thing whatsoever relating to money, or involving the payment of money or the liability to pay any money, shall, in the absence of an express agreement to the contrary which is not rendered invalid or unlawful by any other written law, be held to be made, executed, entered into, done, and had in Sri Lanka according to the Sri Lanka rupee.

(2) In any case where any such obligation which is by agreement expressed in any monetary unit other than the Sri Lanka rupee has, by reason that such agreement is rendered invalid or unlawful by any other written law, to be executed or liquidated in Sri Lanka rupees, the necessary conversions shall be effected on the basis of the legal parities ruling at the time when such obligation falls to be executed or liquidated, or at such other time as may be specified in that behalf in the agreement.

(a) economic and price stability : and

(b) financial system stability. with a view to encouraging and promoting the development of the productive resources of Sri Lanka.

(1) For the purposes of section 69A of the Inland Revenue Act, No. 4 of 1963, the Central Bank may open, maintain and manage special deposit accounts.

(2) Where an institution is approved by the Minister in charge of the subject of Finance by Order made under paragraph (b) of subsection (2) of section 69A of the Inland Revenue Act, No. 4 of 1963, the Monetary Board may determine the terms and conditions subject to which that institution may open, maintain and manage special deposit accounts for the purposes of that section.

(1) The Monetary Board of the Central Bank shall, in addition to determining the policies or measures authorised to be adopted or taken under this Act, be vested with the powers, duties and functions of the Central Bank under this Act., and be generally responsible for the management operations and administration of the Bank :

Provided however, where the Monetary Board considers it appropriate, it may delegate to the Governor, or to any officer of the Central Bank or to a committee of such officers, any power, duty or function conferred or imposed on, or assigned to the Board by section 10 (a), (b), (bb),(d) and section 27,”;

(1A) Where any power, duty or function is delegated by the Monetary Board under subsection (1) the person or the group of persons to whom such power, duty or function is delegated shall exercise perform or discharge such power duty or function, in accordance with such general or special directions or guidelines as may be issued by the Monetary Board;

(2) The Monetary Board shall consist of-

(3) In the absence of the Governor from any meeting of the Monetary Board, the Deputy Governor designated as senior by the board shall act as his alternate and shall preside at the meeting and have the right to vote thereat.

(4) In the absence of the member of the Monetary Board mentioned in paragraph (b) of subsection (2) from any meeting of the board, the person holding office for the time being as Deputy Secretary to the Treasury shall act as that member’s alternate at the meeting and have the right to vote thereat.

(1) The Monetary Board of the Central Bank shall in that name be a body corporate with perpetual succession and a common seal and may sue or be sued in its corporate name.

(2) The Monetary Board shall have the power, in the name of the Central Bank, to hold property, both movable and immovable, and to sell and dispose of the same, to enter into contracts and otherwise to do and perform all such acts or things as may be necessary for the purpose of carrying out the principles and provisions of this Act.

(3) The Monetary Board may, in the name of the Central Bank, acquire and hold such assets and incur such liabilities as result directly from operations authorized by this Act or as are essential for the proper conduct of such operations.

(a) may, subject to the provisions of section 22 and section 23, appoint such officers and servants as the board may consider necessary and remove them from office or dismiss them, and may fix the salaries or wages, or other remuneration, of such officers and servants, and may prescribe their conditions of service;

(b) may establish and regulate pensions or provident funds or schemes for the benefit of officers and servants and their dependants and nominees, and may make contributions to any such fund or scheme;

(bb) may, notwithstanding the provisions of paragraph (c) of section 117, grant loans and advances, for housing purposes, to officers and servants of the Central Bank on the mortgage of, or otherwise on the security of, immovable property ;

(c) may make such rules and regulations as the board may consider necessary in relation to any matter affecting or connected with or incidental to the exercise, discharge, or performance of the powers, functions, and duties of the Central Bank; and

(d) may utilize the funds of the Central Bank for the purpose of meeting all expenditure incurred by the board in the management, administration, and operation of the bank and in the exercise, performance, and discharge of powers, functions, and responsibilities of the bank under this Act.

(1) A person shall be disqualified for appointment as the Governor of the Central as the Governor of the Central Bank if-

(2) A person shall be disqualified for appointment as a member of the Monetary Board under paragraph (c) of subsection (2) of section 8 if-

(1) The Governor of the Central Bank shall be appointed by the President on the recommendation of the Minister in charge of the subject of Finance.

(2) The Governor shall devote his full professional time to the business of the bank; and accordingly the Governor shall not accept or hold any other office or employment whatsoever, whether public or private, and whether remunerated or not:

Provided, however, that nothing in the preceding provisions of this subsection shall be deemed to prevent the Governor from accepting or holding any academic office or position or any office or position in an institution or organization, established for the purpose of carrying on research in the subjects of economics, money, banking, statistics and finance or from being appointed to be or acting as a member of any commission constituted under the Commissions of Inquiry Act for the purposes of any inquiry relating to monetary, banking, financial or general economic matters or questions affecting the national welfare of Sri Lanka, or of any council, committee, or other body investigating or examining, or advising upon, any such matters or questions.

(3) The Governor shall receive such salary as may be fixed by the President on the recommendation of the Minister in charge of the subject of Finance.

(1) The term of office of the Governor, and of the person appointed under paragraph (c) of section 8 (2) (hereinafter referred to as the ” appointed member “), shall, subject to the provisions of subsection (2) of this section, be the period of six years commencing on the date of his appointment:

Provided, however, that the term of office of the Governor, and of any person appointed under paragraph (c) of subsection (2) of section 8 (hereinafter referred to as “an appointed member”) shall be the period of three years from the date of his appointment.

(2) In the event of the vacation of office by the Governor or by an appointed member, before the expiration of his term of office, another person shall be appointed in his place to hold office during the unexpired part of the term of office of the Governor or member so vacating office.

(3) Any person vacating office as Governor or as appointed member by effluxion of time shall be eligible for reappointment.

(1) An appointed member shall receive an allowance for each day on which he attends a meeting of the Monetary Board.

(2) The amount of such allowance shall be fixed by the Minister in charge of the subject of Finance in consultation with the President.

(1) Where an appointed member is, through illness, absence from Sri Lanka, or for any other reason, temporarily unable to perform the functions of his office, the President may, on the recommendation of the Minister in charge of the subject of Finance, appoint some other person to act in his place for such period as may be specified by the President

(2) The provisions of section 11 shall apply in relation to any such appointment.

(3) The person appointed to act as a member of the board under this section shall during the period of his appointment be deemed for the purposes of this Act to be an appointed member.

(a) if he becomes subject to any disqualification mentioned in section 11; or

(b) if he becomes permanently incapable of performing his duties ; or

(c) if he has done any act or thing which, in the opinion of the President, is of a fraudulent or illegal character or is manifestly opposed to the objects and interests of the Central Bank; or

(d) in the case of the Governor, if he acts in contravention of subsection (2) of section 12.

(1) Meetings of the Monetary Board shall be held at least once in every two weeks and, in addition, as frequently as is necessary for the purpose of the discharge of its responsibilities under this Act.

(2) Meetings of the board shall be convened by the Governor.

*(3) At any meeting of the board three members shall constitute a quorum.

*(4) No decision taken at any meeting of the board shall be deemed to be a decision of the board unless it has the concurrence of at least three members, or, in any case where any other provision of this Act requires a unanimous decision, the concurrence of all five members.

(1) The Governor shall be the chief executive officer of the Central Bank and shall accordingly be charged with the following powers, duties, and functions :”

(2) Every instrument of the following description, that is to say, every contract, promissory note, security, report, balance sheet, statement, or other document and every rule, regulation, order, direction, notice, or requirement which bears the signature of the Governor or such other officer as may be authorized in that behalf by the Monetary Board, shall be deemed for all purposes to be an instrument executed, made, or issued by the Central Bank or by the Monetary Board, as the case may be.

(a) to represent the Central Bank and the board in all relations with other persons, including the Government and any body of persons, corporate or unincorporate, whether public or private, domestic, foreign, or international; and

(b) to represent the Central Bank and the board in any legal proceedings either personally or through an attomey-at-law.

(1) A person shall be disqualified for appointment as a Deputy Governor if”

Nothing in paragraph (b) or (c) shall be held to disqualify an officer or servant of the Central Bank who has been temporarily released to serve in any office or position for which salary or remuneration is payable out of public funds or who is a director of any banking institution which is a public corporation, for appointment as a Deputy Governor.

(2) The Monetary Board may, with the concurrence of the Minister in charge of the subject of Finance, remove any Deputy Governor from office”

(3) The Monetary Board may, with the concurrence of the Minister, temporarily release a Deputy Governor to

(1) A Deputy Governor may require any person

(2) Any person who, without reasonable cause, fails or refuses to comply with any requirement under subsection (1) shall be guilty of an offence.

(3) In this section” person” includes any officer of any department of Government and any body of persons, corporate or unincorporate, whether established or constituted under any written law or otherwise.

(1) The Central Bank shall establish and maintain a department of economic research which shall prepare data and conduct economic research, for the guidance of the Monetary Board and the Governor in formulating, implementing, and executing policies and measures and for the information of the public, in the subjects of money and banking and other economic subjects of general interest.

(2) The head of the department established under subsection (1) shall be called the Director of Economic Research.

(1) The Director of Economic Research or any officer of the department of economic research authorized for- the purpose by the Director may in such manner as may be prescribed by rules made under section 10″

(2) Any person who without reasonable cause fails or refuses to comply with any requirement made under subsection (1) shall be guilty of an offence.

(3) In this section ” person” includes any officer of any department of Government, and any body of persons, corporate or unincorporate, whether established or constituted under any written law or otherwise.

(1) For the purposes of the continuous supervision and periodical examination of all banking institutions in Sri Lanka, the Central Bank shall establish and maintain a department of bank supervision.

(2) The head of the department established under subsection (1) shall be called the Director of Bank Supervision.

(1) The Director of Bank Supervision shall examine, or cause an examiner of his department to examine, the books and accounts of every commercial bank in Sri Lanka at least once in each examination period, and shall make such further examinations in respect of any specified bank whenever required so to do by the Governor,

(2) Examination of books and accounts of banking institutions other than commercial banks, or of any specified banking institution, shall be made if directions in that behalf are given by the Monetary Board.

(3) A report on the results of each examination under this section shall be furnished by the Director of Bank Supervision to the Governor.

(4) It shall be lawful for the Director of Bank Supervision or for any examiner of his department”

(6) In this section ” examination period ” means each period of such duration as may be fixed for the purpose by the Monetary Board.

(a) require any commercial bank, and if so authorized by the Monetary Board any banking institution other than a commercial bank, to furnish from time to time and within such period as may be specified by him, such statement and information relating to the business or affairs of a commercial bank or a banking institution, as the case may be, as he may consider necessary to obtain for the purpose of ascertaining the true condition of the affairs of the commercial bank or the banking institution;

(b) require the auditor of any commercial bank, and if so authorized by the Monetary Board of any banking institution other than a commercial bank, to furnish to him within such period as may be specified by him, any information in relation to an audit carried out by such auditor of the commercial bank or banking institution, as the case may be, as he may consider necessary to obtain for the purpose referred to in paragraph (a) ; and

(c) examine or cause an examiner of his department to examine the books and accounts kept by any commercial bank, or other banking institution as he may deem necessary for the purpose of verifying the accuracy of any statement or information so furnished.

(1) The Director of Bank Supervision shall examine or cause an examiner of his department to examine the books and accounts of any subsidiary or agency of any commercial bank, or the books and accounts of any subsidiary or agency of any banking institution other than a commercial bank, if directions in that behalf are given by the Monetary Board, or the books and accounts of any society registered under the Co-operative Societies Law, No. 5 of 1972, which carries on banking business, if directions in that behalf are given by the Governor.

(2) The provisions of subsections (3), (4) and (5) of section 29 and sections 30, 31 and 32 of this Act shall, mutatis mutandis apply, to and in relation to, all or any of the institutions referred to in subsection (1) of this section.

(1) In any case where the Director of Bank Supervision is satisfied, after examination by himself or any examiner of the affairs of any banking institution, or upon information received from the institution, that the institution is insolvent or is likely to become unable to meet the demands of its depositors, or that its continuance in business is likely to involve loss to its depositors or creditors, the Director shall make a report accordingly to the Governor for submission to the Monetary Board; and if the board, upon review of the facts and circumstances, is of opinion that action should be taken as hereinafter provided, the board may make order directing the institution forthwith to suspend business in Sri Lanka and directing the Director to take charge of all books, records and assets of the institution and to take such measures as may be necessary to prevent the continuance of business by the institution.

(2) Notwithstanding anything in any written or other law, no action or proceeding may be instituted in any court for the purpose of securing the review or revocation of any order made under subsection (I) or in respect of any loss or damage incurred, or likely to be or alleged to be incurred, by reason of such order.

(3) An order made by the Monetary Board under subsection (1) in respect of any banking institution shall cease to have effect upon the expiration of a period of six months from the date on which it is made ; and it shall be the duty of the board, as soon as practicable and in any event before the expiration of the said period”

(4) Where an order has been made by the Monetary Board under subsection (3) permitting the resumption of business by any banking institution subject to such conditions as may be specified in the order, the competent court may, on application made to it in that behalf by the banking institution at any time while the order is in force, make a declaration permitting the institution to resume business unconditionally, or varying or altering, in such manner as the court may determine, any or all of the conditions specified by the board ; and any such declaration shall have effect notwithstanding anything in the order made by the board under subsection (3). The Director of Bank Supervision shall be named respondent to any such application and shall be entitled on behalf of the board to be heard and to adduce evidence at the hearing thereof.

(5) In any case where application is made by the Director as provided in subsection (3) for the winding up of any banking institution”

(6) Every order made by a competent court under this section shall be subject to an appeal to the Court of Appeal and the provisions of the Civil Procedure Code relating to appeals in civil actions shall apply mutatis mutandis in the case of any such appeal:

Provided that an order under paragraph (t) of subsection (5) shall be final and shall not be subject to appeal.

(7) Every application to a competent court under this section shall be deemed to be an action of the value of five thousand rupees.

(8) In this section, ” competent court “, in relation to any banking institution, means the District Court of Colombo or of the district in which the principal office in Sri Lanka of the institution is maintained.

(9) Where the business of a banking institution has been suspended under subsection (1), the Director of Bank Supervision may-

(10)

(a) in the case of a commercial bank, the Monetary Board shall cancel the licence issued to it under the Banking Act and the provisions of part VIII of that Act shall apply as if it were a compulsory winding up of the bank. In the case of a bank incorporated or established within Sri Lanka or a compulsory winding up of the affairs or closure of the business of the bank, in the case of a bank incorporated outside Sri Lanka:

(b) in the case of any other banking institution not being a licensed specialised bank to which subsection (10) of section 30 is applicable, the Director of Bank Supervision shall nominated a person to be the liquidator for the purpose of winding up and subject to such nomination, such institution shall be wound up in accordance with the law applicable to such institution.

(I) Any owner, agent, director, officer, or employee of any banking institution, who fails to furnish any information or to produce any book, record, or other document when required so to do by the Director of Bank Supervision or any examiner under the preceding provisions of this Part or who obstructs or fails to permit the Director or any examiner to make any examination authorized to be made under any such provision, shall be guilty of an offence.

(2) Any person who in any report or information furnished to the Director of Bank Supervision, or to any examiner, makes any statement which he knows to be false shall be guilty of an offence.

(1) Any banking institution, or any society registered under the Cooperative Societies Law and carrying on banking business of any kind, may, as prescribed, apply to the Central Bank to insure deposits held by such institution or society.

(2) The Central Bank may, in its discretion, accept any application made under subsection (1).

(3) Every banking institution or society, whose application has been accepted under subsection (2), is hereafter in this Part of this Act referred to as ” insured bank ” or ” insured society “, as the case may be.

(1) Every insured bank or insured society shall be liable to pay a premium to the Central Bank on its deposits on such basis as may be determined by the Monetary Board from time to time, with the approval of the Minister: Provided that the premium payable by any insured bank or insured society for any period shall not exceed fifteen cents per annum for every hundred rupees of the total amount of the deposits in that bank or that society.

(2) The premium shall be payable for such periods, at such times and in such manner as may be determined by the Monetary Board.

(3) If an insured bank or insured society makes any default in the payment of any premium, it shall, for the period of such default, be liable to pay to the Central Bank, interest on the amount of such premium at such rate as may be determined by the Monetary Board.

(1) The Director of Bank Supervision may, at his discretion, examine, or cause an examiner of his department to examine, the books and accounts of any insured bank or insured society.

(2) The provisions of subsections (4) and (5) of section 29, paragraph (b) of section 29A, section 30, section 31 and section 32 of this Act shall, mutatis mutandis, apply to insured banks and insured societies.

(a) the periods for which, the times at which and the manner in which premiums will be calculated and may be paid by an insured bank or an insured society;

(b) the interest which may be charged from an insured bank or an insured society where it makes default in the payment of premiums;

(c) any matter that is stated or is required to be prescribed or in respect of which a regulation is authorized to be made under this Part of this Act; and

(d) any other matter affecting, connected with, or incidental to, the exercise, discharge, or performance of the powers, functions and duties of the Central Bank under this Part of this Act.

(1) Within four months after the end of each financial year, the Monetary Board shall submit to the Minister in charge of the subject of Finance, and shall publish and annual report on the condition of the Central Bank and a review of the policies and measures adopted by the Monetary Board during the financial year and an analysis of the economic and financial circumstances which prompted those policies and measures.

(2) The annual report shall include a statement of the financial condition of the Central Bank, and shall present as a minimum the following data:”

(3) The annual report shall be laid before Parliament within fourteen days after the receipt thereof by the Minister in charge of the subject of Finance, if Parliament is then in session, or, if Parliament is not in session, within fourteen days after the commencement of the next ensuing session.

(a) Firstly” all the net profits of the Central Bank shall be used to reduce the Monetary Adjustment Account, defined in the following section, whenever such account exists, until the account has been completely liquidated.

(b) Secondly” any net profits remaining after liquidation of the Monetary Adjustment Account, if any, shall be carried to surplus until such time as the total capital accounts of the bank reach a sum equal to at least fifteen per centum of the difference between the total assets of the bank and its assets in gold and in foreign currencies.

(c) Thirdly” any net profits remaining after compliance with the preceding provisions shall, after consultation with the Minister in charge of the subject of Finance, either be applied in liquidation of any outstanding Government obligations to the Central Bank or be paid and credited to the Consolidated Fund.

(a) the costs of any extraordinary coin or note issue;

(b) expenditures incurred in the issue and placing of, and the payment of interest on, the securities to which reference is made in section 91;

(c) interest paid on bank reserves in accordance with section 95. The amounts so excluded from the computation of profits and losses shall be entered in a suspense account which shall be called the ” Monetary Adjustment Account”. The expenses charged to such account shall in every case be amortized not later than five years after they are so charged.

(1) Profits or losses arising from any revaluation of the Central Bank’s net assets or liabilities in gold or foreign currencies as a result of changes in the par value of the Sri Lanka rupee or of changes in the parities or exchange rates of foreign currencies with respect to the Sri Lanka rupee, or profits or losses assumed by the Central Bank in accordance with the provisions of section 79, shall not be included in the computation of the annual profits and losses of the Central Bank.

(2) All such profits or losses shall be carried in a special account, which shall be named ” International Reserve Revaluation Account”, and the net balance of which shall appear either among the liabilities or among the assets of the Central Bank, according as the revaluations have produced net profits or net losses.

(3) The International Reserve Revaluation Account shall be neither credited nor debited for any purposes other than those specifically mentioned in this section.

(1) The accounts of the Central Bank shall be audited by the Auditor- General and the cost of the audit shall be paid by the bank.

(2) The Auditor-General shall submit an annual report on the accounts of the Central Bank to the Minister in charge of the subject of Finance who shall lay such report before Parliament.

(1) The Auditor-General and any officer of his department authorized by him in that behalf shall at all times have the right of access to, and examination of, the accounts of the Central Bank and of all books and documents containing information with respect to matters connected with such accounts.

(2) The Auditor-General shall at such intervals as may be fixed by the Minister in charge of the subject of Finance furnish to him reports setting out the results of the examination of the accounts of the Central Bank.

(1) Except in the performance of his duties under this Act, every officer and servant of the Central Bank shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any banking institution or of any client of any such institution or of any matter relating to the affairs of any department of Government, corporation, company, partnership or person that may come to his knowledge in the performance of his duties under this Act, the Control of Finance Companies Act, No. 27 of 1979, or any other law for the time being in force, and any such officer or servant who communicates any such matter to any person, other than the Monetary Board or an officer of the Central Bank authorized in that behalf by the Governor, or suffers or permits any unauthorized person to have access to any books, papers or other records relating to any banking institution, department of Government, corporation, company, partnership or person, shall be guilty of an offence.

(2) No officer or servant of the Central Bank shall be required to produce in any court any book or document or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties under this Act, except as may be necessary for the purpose of carrying into effect the provisions of this Act.

(3) Where, in any legal proceedings, a certified copy of any book or document of the Central Bank or of any entry in such book or document is produced, such certified copy shall be received as prima facie evidence of the existence of such book, document or entry, as the case may be, and shall be admitted as evidence of the matters, transactions or accounts therein recorded in every case where, and to the same extent as, the original book, document or entry is now by law admissible, but not further or otherwise. In this subsection, ” certified copy” in relation to any book, document or entry, means a copy of such book, document or entry, together with a certificate written at the foot of such copy that it is a true copy of such book, document or entry; that such book or document is still in the custody of the Central Bank; that such entry is contained in one of the ordinary books of the Central Bank, and was made in the usual and ordinary course of business, such certificate being dated and subscribed with his name and official title, by such officer as may be authorized for the purpose by the Governor of the Central Bank.

(1) No member of the Monetary Board or officer or servant of the Central Bank shall be liable for any damage or loss suffered by the bank unless such damage or loss was caused by his misconduct or willful default.

(2) Every member of the Monetary Board and every officer or servant of the Central Bank shall be indemnified by the bank from all losses and expenses incurred by him in or about the discharge of his duties, other than such losses and expenses as the board may deem to have been occasioned by his misconduct or willful default.

(1) No person other than the Central Bank shall draw, accept, make, or issue any bill of exchange, promissory note, or engagement for the payment of money payable to bearer on demand, or borrow, owe, or take up any sum or sums of money on the bills or notes payable to bearer on demand of any such person :

Provided that cheques or drafts payable to bearer on demand may be drawn on commercial banks or agents by their customers or constituents in respect of moneys in the hands of such banks or agents held by them at the disposal of the person drawing such cheques or drafts.

(2) Every person who contravenes any provision of this section shall be guilty of an offence.

(1) The Monetary Board shall, with the approval of the Minister in charge of the subject of Finance, prescribe the denominations, dimensions, designs, inscriptions, and other characteristics of currency notes issued by the Central Bank.

(2) Every currency note shall bear the signatures in facsimile of the Minister in charge of the subject of Finance and of the Governor of the Central Bank and shall be stated on the face thereof to be issued on behalf of the Government of Sri Lanka.

(3) The Monetary Board shall, with the approval of the Minister in charge of the subject of Finance, prescribe the metals, fineness, weight, size, designs, denominations, and other characteristics of the coins issued by the Central Bank.

(1) The Monetary Board may in its discretion, by notice published in the Gazette, call in for replacement currency notes or coins of any issue or denomination.

(2) Notes and coins called in for replacement in accordance with this section shall remain legal tender for such period not exceeding one year from the date of call as may be prescribed by the Monetary Board and shall thereafter cease to be legal tender.

(3) During the period of five years succeeding the date of call, or such longer period as the Monetary Board may determine, the Central Bank or any agent authorized by the board for the purpose, shall, upon surrender of any currency notes or coins so called in for replacement, replace such notes or coins, at par and without charge, by the delivery in exchange of fit notes or coins.

(4) All currency notes and coins called in for replacement and not surrendered as provided in subsection (3) shall cease to be a liability of the Central Bank and the bearer of any such notes or coins shall not be entitled to any compensation.

(a) cuts, perforates, or in any other way whatsoever mutilates any currency note,

(b) prints, stamps, or draws anything upon any currency note, or affixes any seal or stamp to or upon any currency note,

(c) attaches or affixes to or upon any currency note anything in the nature or form of an advertisement, or

(d) reproduces in any form whatsoever, or makes a facsimile of, any currency note,

(1) Any person who, without the authority of the Monetary Board, melts, breaks up, perforates, mutilates or uses otherwise than as legal tender, any coin which is legal tender in Sri Lanka shall be guilty of an offence.

(2) Any person who knowingly uses, possesses or deals with any metal or article which he knows or has reasonable cause to believe, is derived from any coin which has been dealt with in contravention of subsection (1), shall be guilty of an offence.

(1) Where in any proceedings in any court it has to be determined whether a document purporting to be a currency note is an imitation of a currency note, a certificate under the hand of the Governor of the Central Bank or, if the Governor is temporarily absent from duty or temporarily unable to perform his functions and duties, a certificate under the hand of the Deputy Governor for the time being acting as the chief executive officer of the Central Bank, to the effect that such document is an imitation of a currency note and is not a currency note issued or deemed to be issued by the Central Bank of Sri Lanka shall be received in those proceedings as conclusive evidence of the fact that such document is an imitation of a currency note.

(2) The Governor or the Deputy Governor of the Central Bank who issues a certificate under this section shall not be examined or cross-examined with respect to that certificate.

(3) Every certificate issued under section shall be substantially in the following form:” I, Governor of the Central Bank of Sri Lanka, Deputy Governor for the time being acting as the chief executive officer of the Central Bank of Sri Lanka, do hereby certify that I have examined the document marked which purports to be a currency note of the denomination – bearing number and dated and that such document is an imitation of a currency note and is not a currency note issued or deemed to be issued by the Central Bank of Sri Lanka. Signature Date:. . (*Delete inapplicable words.) Application of section.

(4) This section shall apply”

(1) Where in any proceedings in any court it has to be determined whether an article purporting to be a corn or a current coin is an imitation of such coin or current coin, a certificate under the hand of the Governor of the Central Bank or, if the Governor of the Central Bank is temporarily absent from duty or temporarily unable to perform his functions and duties, a certificate under the hand of the Deputy Governor for the time being acting as the chief executive officer of the Central Bank, to the effect that such article is an imitation of a coin or a current coin, as the case may be, and is not a coin or a current coin issued or deemed to be issued by the Central Bank of Sri Lanka, shall be received in those proceedings as conclusive evidence of the fact that such article is an imitation of a coin or current coin.

(2) The Governor or the Deputy Governor of the Central Bank who issues a certificate under this section shall not be examined or cross-examined with respect to that certificate.

(3) Every certificate issued under this section shall be substantially in the following form :”

I, Governor of the Central Bank of Sri Lanka, */Deputy Governor for the lime being acting as the chief executive officer of the Central Bank of Sri Lanka, do hereby certify that I have examined the article delivered in a sealed packet by together with letter No in respect of Case No which purports to be a coin*/ current coin of the denomination, and that such article is an imitation of a coin*/ current coin issued or deemed to be issued by the Central Bank of Sri Lanka and is not a coin*/ current coin issued or deemed to be issued by the Central Bank of Sri Lanka. Signature Date:

(4) This section shall apply”

(5) In this section, the expression ” current coin ” shall have the same meaning as in the Penal Code.

(1) The Central Bank may establish and operate one or more systems-

(2) A system established under subsection (1) may be linked to another system in Sri Lanka or elsewhere for the clearing or settlement of payment obligations or securities.

(3) The Central Bank may enter into agreements with the participants of a system established under subsection (1) and issue in writing to the participants of the system rules for the operation of the system.

(4) Without prejudice to the generality of subsection (3), such rules may provide-

(5) A payment or transfer made through a system established under subsection (1), is final and irrevocable-

and notwithstanding anything to the contrary in any other law, such payment or transfer shall not be required to be reversed, repaid or set aside not shall any court, order such payment or transfer to be rectified or stayed.

(6) Scripless securities issued under this Act or the Local Treasury Bills Ordinance or the Registered stock and securities Ordinance shall be transferred, pledged, encumbered, lent borrowed or transacted in only as provided by or under the regulations made under this Act or the Local Treasury Bills Ordinance or the Registered Stock and securities Ordinance, as the case may be A transfer, pledge encumbrance, loan, borrowing or transaction effected accordingly shall be valid and effectual notwithstanding any other written law, and the claim of a participant of the system on any scripless securities posted as collateral in accordance with those regulations as may be applicable shall have priority over the claims on such scripless securities or a person who is not a participant of the system.

(7) Nothing in subsections (5) and (6) shall affect any other legal right or remedy available to a person who has suffered any loss or damage by a payment, transfer or settlement effected through a system established under subsection (1).

(8) Notwithstanding the provisions of any written law relating to the winding up of companies, if proceedings for the winding up of a participant of a system have commenced–

(9) If proceedings for the winding up of a participant is commenced and a payment or settlement owed by such participant has been made as referred to in subsection (5) or (8), and if a payment or settlement of such funds or securities would have been void or voidable under any other written law if made outside the system, the liquidator of such participant may recover from the person to whose benefit such payment or settlement was made such amount as would have been recoverable if such payment or settlement had been made outside the system.

(10) Without prejudice to the generality of the provisions of section 47, the Monetary Board, any member of the Monetary Board, any officer or employee of the central Bank or any person acting under the direction of the monetary Board shall not be liable for any loss or damage suffered by any person or participant, arising directly or indirectly, from the use of the system by any participant, unless such loss or damage results from gross negligence or willful misconduct of the Monetary Board or any member of the Monetary Board or any officer of employee of the Central Bank or any person acting under the direction of the Monetary Board.

(11) Where any transaction effected through a system established under subsection (1) is carried out electronically, such transaction shall not be denied legal effect, validity or enforceability solely on the ground that such transaction is carried out electronically or that the information relating to such transaction is maintained in the form of an electronic record, and such record may be tendered in evidence in proceedings before any court or tribunal in accordance with the provisions of Parts II and III of the evidence (Special provisions) Act, No. 14 of 1995 or any other law for the time being in force relating to the tendering of computer evidence, before any court or tribunal.

(12) Any or all of the functions referred to in subsection (1) may, be carried out by a body corporate authorised for the purpose by the Monetary Board, subject to such terms and conditions as may be imposed by the Monetary Board.

(13) For the purposes of this section-

“direct participant” and “scripless securities” shall have the same meaning as in section 112A ;

“rules” means any rule issued by the central Bank under subsection (3) of this section ;

“securities” shall have the same meaning as in section 112a except that for the purposes of paragraph (a) of subsection (4), securities shall not include securities of the Central Bank issued in scripless form or otherwise ;

“settlement account” means an account maintained by a participant with the Central Bank under this Act and used for the purposes of the system with the approval of the Central Bank ;

“securities account” means an account maintained by a participant with the Central Bank in terms of paragraph (b) of section 112A,”.

(1) The Monetary Board shall endeavour so to regulate the supply, availability, and cost of money as to secure, so far as possible by action authorized by this Act, the objects mentioned in section 5 ; and shall for such purpose have regard to the monetary needs of particular sectors of the economy as well as of the economy as a whole.

(2) In determining its domestic monetary policies the Monetary Board shall especially consider their effects on Sri Lanka’s international financial position as evidenced by the relation of domestic to world prices and costs, by the level and composition of exports and imports, by the international balance of payments, and, ultimately, by the ability of the Central Bank to maintain the international stability of the Sri Lanka rupee and its free convertibility for current international transactions.

(1) Whenever the Monetary Board anticipates economic disturbances that are likely to threaten domestic monetary stability in Sri Lanka or whenever abnormal movements in the money supply or in the price level are actually endangering such stability, it shall be the duty of the board”

(2) Without prejudice to the generality of the provisions of subsection (1), it shall be the duty of the Monetary Board to submit a report in terms of paragraph (b) of that subsection if at the end of any month the board finds that the amount of the money supply has increased or decreased by more than fifteen per centum, or the cost of living index has increased by more than ten per centum, of its level at the end of the corresponding month in the preceding year.

(3) The Monetary Board shall continue to submit further reports periodically so long as the circumstances which occasioned the submission of the first report constitute a threat to domestic monetary stability.

(1) In order to maintain the international stability of the Sri Lanka rupee and to assure the greatest possible freedom of its use for current international transactions, the Monetary Board shall endeavour to maintain among the assets of the Central Bank an international reserve adequate to meet any foreseeable deficits in the international balance of payments.

(2) In judging the adequacy of the International Reserve, the Monetary Board shall be guided by the estimates of prospective receipts and payments of foreign exchange by Sri Lanka; by the volume and maturity of the Central Bank’s own liabilities in foreign currencies; and, in so far as they are known or can be estimated, by the volume and maturity of the foreign exchange assets and liabilities of the Government and of banking institutions and other persons in Sri Lanka. So long as any part of the foreign currency assets of Sri Lanka are held in currencies which are not freely convertible by the Central Bank, whether directly or indirectly, into special drawing rights or such other common denominator prescribed by the International Monetary Fund or into foreign currencies freely usable in international transactions, or are frozen, the Monetary Board shall also take this factor into account in judging the adequacy of the International Reserve of the Central Bank.

(1) The International Reserve of the Central Bank may include the following assets;

(2) The Monetary Board shall endeavour to hold at least a nuclear reserve in gold or currencies freely convertible by the Central Bank, whether directly or indirectly, into gold. The board shall particularly consider the prospects of stability and convertibility of all of the currencies in the International Reserve as well as the anticipated demand for such currencies.

(1) Whenever the Monetary Board anticipates that there may develop a deficit in the international balance of payments of such magnitude as to cause a serious decline in the International Reserve, or whenever there is an imminent threat of a serious decline in the International Reserve, or whenever the International Reserve actually falls to a level which the board considers to be a threat to the international stability of the Sri Lanka rupee, or whenever international payments or remittances are being made which in the opinion of the board constitute an actual or a potential threat to such stability or are prejudicial to the national welfare, it shall be the duty of the board”

(2) The Monetary Board shall submit further periodical reports to the Minister in charge of the subject of Finance until the threat to the international stability of the rupee has disappeared.

(1) The Central Bank may engage in spot or other foreign exchange operations, that is to say, it may effect transfers of funds by telegram, letter, or other method of communication, and may buy and sell foreign notes and coins and any documents or instruments of types customarily employed for the international transfer of funds.

(2) Foreign exchange operations may be transacted by the Central Bank only with”

(1) The Governor shall determine and certify the parities with respect to the Sri Lanka rupee of foreign currencies ordinarily required for the international transactions of Sri Lanka. Parities so determined and certified shall be published in the Gazette, and shall be recognized as the legal parities for all purposes. The Governor may in addition certify the parity of any foreign currency not included in the published list of parities.

(2) The Governor may at any time desist from certifying or publishing the parity of any foreign currency if the exchange rates for that currency in international markets are unstable or widely divergent.

(3) The legal parities of foreign currencies with respect to the Sri Lanka rupee shall be determined by the Governor, in accordance with the following provisions:”

(1) The Monetary Board shall from time to time determine the rates at which the Central Bank will buy and sell foreign exchange.

(2) The rates determined under subsection (1) for spot transactions shall not differ by more than four and one-half per centum from the legal parities determined under section 73, except in the case of the rates for purchases and sales of foreign notes and coins, in which case the Board may have regard to the additional costs of, or incidental to, such transactions.

(3) The rates determined under subsection (1) for transactions other than spot transactions shall not differ from the corresponding rates for spot transactions, except in so far as is necessary to reimburse the bank for the additional costs, expenses, or risks of each type of transaction.

(4) The Central Bank shall not accept any commission or impose any charge of any description in respect of the purchase or sale of foreign exchange, except telegraphic or other costs actually incurred in connexion with such purchase or sale.

(1) The Central Bank may grant loans to, or take loans from, any institution of any description referred to in paragraphs (c), (d) and (e) of subsection (2) of section 71 and may engage in such other transactions with such institutions as are expedient or desirable in the public interest and are appropriate having regard to the character of the bank as a Central Bank. The Central Bank may act as agent or correspondent of any such institution other than a foreign commercial bank.

(2) Any loan taken as provided in subsection (I) may be secured by gold or other assets held by the Central Bank.

(1) The Monetary Board shall determine the minimum rate at which commercial banks may buy spot exchange and the maximum rate at which they may sell spot exchange. Where the Governor has certified the legal parity of a currency in accordance with section 73, the maximum and minimum exchange rates established for such currency shall not differ from such parity by more than four and one-half per centum.

(2) No commercial bank shall buy spot exchange at any rate below the minimum rate determined under subsection (1) or sell spot exchange at any rate exceeding the maximum rate so determined; and no commercial bank shall in respect of any purchase or sale of such exchange accept any commission or impose any charge of any description except telegraphic or other costs actually incurred in connexion with such purchase or sale.

(3) No commercial bank shall carry out any transaction in exchange, not being a spot transaction, at any rate which differs from the rate determined under subsection (1) for a spot transaction”

(4) Subsection 4 Repealed by [§17, 32 of 2002]

(1) Where the Governor is of opinion that it is inexpedient to determine and certify, in accordance with the provisions of section 73, the parities with respect to the Sri Lanka Rupee of foreign currencies ordinarily required for the international transactions of Sri Lanka, the Governor-

(2) Where the Governor acts in terms of subsection (1), the provisions of sections 73, 74 and 76 shall cease to have any force or effect in law.

(3) Where the Governor determines, under paragraph (b) or subsection (1) the rates at which the Central Bank may buy and sell foreign exchange in spot or other transactions, the following provisions shall apply determination-

(4) where the Governor desists from determining and certifying parties under subsection (1) (a) and does not determine the rates at which the Central Bank may buy and sell foreign exchange in spot or other transactions under paragraph (b) of subsection (1) the Central Bank may buy and sell foreign exchange at such rates as the Governor or an officer authorised by the Governor for the purpose may deem appropriate.

(5)

(1) In order more effectively to control the use and disposition of the foreign exchange resources of Sri Lanka or in order to promote the domestic investment of the resources of commercial banks, the Monetary Board may from time to time fix, or prescribe the manner of determination of, the maximum amount of the working balances which commercial banks may hold in foreign currencies generally or in any specified foreign currency or currencies, and may from time to time require such banks to sell to the Central Bank all or any specified part of the surpluses in excess of such maximum amount.

(2) The Monetary Board may, having regard to the special needs of any particular commercial bank, permit that bank to hold working balances in any specified foreign currency in excess of the maximum amount fixed or determined for such currency under subsection (1).

(3) In ascertaining whether the working balances of any commercial bank in any foreign currency are in excess of the maximum amount fixed or determined as hereinbefore provided, there may be deducted from such balances the net liabilities of that bank in currencies into which the first-mentioned currency is freely convertible.

(1) The Monetary Board may direct that the proportion which the assets in Sri Lanka rupees to commercial banks in Sri Lanka bear to the liabilities in Sri Lanka rupees of such banks shall not be less than such proportion as the Monetary Board may prescribe, or may direct such banks to maintain a balanced position between their assets and liabilities in any currency or currencies in which they operate. The board shall allow to such banks a reasonable period of time in which to comply with any such direction.

(2) Any direction under subsection (1) shall be made applicable to all commercial banks without discrimination:

Provided, however, that the Monetary Board may give such a direction to any particular commercial bank in any case where, in the opinion of the board, such action is necessary in order to protect against possible loss, depositors and other creditors of the bank who are citizens of Sri Lanka or companies or associations controlled by citizens of Sri Lanka.

(1) Any revaluation profits realized or any revaluation losses incurred by banking institutions on their net assets and liabilities in foreign currencies freely convertible by the Central Bank, whether directly or indirectly, into special drawing rights or such other common denominator prescribed by the International Monetary Fund or into foreign currencies freely usable in foreign transactions and arising from changes in the par value of the Sri Lanka rupee or in the legal parities or in the Central Bank’s exchange rates, of such currencies with respect to the Sri Lanka rupee, shall be assumed in their entirety by the Central Bank and shall be debited or credited accordingly.

(2)

(3) Where in consequence of a determination made under subsection (1) of section 76A, the provisions of sections 73, 74 and 76 cease to be of any force or effect, the provisions of subsections (1) and (2) of this section shall also cease to be of any force or effect, and accordingly, the Central Bank shall not assume any revaluation profits realized or revaluation losses incurred by any banking institution.

(1) Every commercial bank shall, as soon as may be after the close of business at the end of such period as may be prescribed by the Monetary Board, make a report to the Central Bank setting out the volume and composition of its purchases and sales of foreign exchange during that period, and shall furnish such additional information as the Central Bank may require with reference to such purchases and sales and to the movements of its accounts in foreign currencies.

(2) The Monetary Board may also require any other person to make reports to the Central Bank at specified times or intervals as to all transactions or operations in gold, in any shape or form, and in foreign exchange.

(3) Every report under this section shall be in such of the appropriate forms as the Monetary Board may prescribe for the purpose.

(4) The Director of Bank Supervision may make such inspection or examination of the books and accounts kept by any commercial bank or other person as he may deem necessary for the purpose of verifying the accuracy of any statement set out in any report made by such commercial bank or person.

(1) The Central Bank shall exercise the authority conferred by this Part of this Act to carry out the national monetary policy by regulating the supply, availability, cost, and character of credit and by providing the banking system with liquid funds in times of need.

(2) If the Monetary Board determines that it is necessary so to do by reason that, in the opinion of the board, there is in progress, or has occurred, an expansion of the money supply that represents a threat to the domestic or international monetary stability of Sri Lanka, the board shall direct the suspension of the grant of credit by the Central Bank to banking institutions, except when the board, having regard to the special circumstances, by unanimous decision approves the grant of credit.

(1) Subject to the principles stated in section 82 of this Act, the Central Bank may ordinarily transact with commercial banks and the National Savings Bank, credit operations of any description set out hereunder:-

(2) Except in such circumstances and subject to such conditions as the Monetary Board may determine, the Central Bank shall not grant to any commercial bank or to the National Savings Bank, any loan or advance upon the security of the pledge of any instrument referred to in paragraph (c) of subsection (1) in any case where such instrument is held by such commercial bank or the National Savings Bank as security for the repayment to it of the amount due upon any overdraft account.

(1) In special circumstances in which the Monetary Board considers it necessary to promote or facilitate lending operations or particular classes of such operations by banking institutions which make loans upon mortgages, whether of movable or of immovable property, the Central Bank may grant loans or advances to any such institution against promissory notes given by such institution subject to and in accordance with the following conditions:”

(2) The Central Bank may make advances to any institution referred to in subsection (1) upon the terms and conditions mentioned in section 83 (1).

(3) Loans or advances shall not be made under subsection (1) by the Central Bank at any time when the board is of opinion that the grant thereof would cause or aggravate inflationary tendencies.

(1) In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability, the Central Bank may grant to banking institutions, and may renew, extraordinary loans or advances secured by any assets which are defined as acceptable for the purpose by the Monetary Board by unanimous decision.

(2) A banking institution to which an extraordinary loan or advance is granted under subsection (1) shall not, while the loan or advance is outstanding, expand the total volume of its loans and investments except with the prior approval of the Monetary Board.

(1) With the object of granting financial accommodation to any credit institution in respect of lending operations carried out by such institution for any productive purpose, the Central Bank may, from time to time, grant, out of the Fund, any loan or advance to such institution against a promissory note given by such institution subject to and in accordance with the following conditions :-

(2) The Monetary Board may prescribe the conditions subject to which loans or advances will be available out of the Fund to credit institutions, including conditions relating to the rates of interest charged by such institutions, to the purposes for which their loans in general are destined, and to any other matters affecting or connected with the credit policy of such institutions.

(3) An assignment by way of pledge to the Central Bank under this Part of this Act shall be effected by an instrument which shall be substantially in the following form;”

Form of Assignment by way of pledge to the Central Bank of Sri Lanka under section 88A of the Monetary Law Act We, in terms of section 88A of the Monetary Law Act, do hereby assign to the Central Bank of Sri Lanka by way of pledge, toe debts owing to us, particulars whereof are set forth in the Schedule hereto, as security or further security for the repayment to the Central Bank of Sri Lanka of a loan/advance of Rs granted to us by the Bank repayable with interest at % per annum. • Date whichever u inapplicable. Amount of debt SCHEDULE Notary Date Borrower’s name and address

(4) The Central Bank shall, on the execution of an assignment by way of pledge under this Part of this Act, have a first charge on the debts assigned.

(5) The provisions of this Part of this Act shall have effect notwithstanding anything to the contrary in any other provisions of this Act.

(1) The Central Bank may establish, maintain, manage, and control at the bank, a Fund to be called the Medium and Long Term Credit Fund (in this Part of this Act referred to as the ” Fund “).

(2)

(3) The Central Bank shall pay out of the Fund”

(4) The Central Bank shall, in addition to the sums of money referred to in subsection (2), pay into the Fund all sums of money paid to or recovered by the bank in repayment of the loan or advances granted by the bank to credit institutions under this Part of this Act.

(a) ‘ credit institution” means any banking institution as defined in subsection (1) of section 127 of this Act and includes the Development Finance Corporation of Ceylon established under the Development Finance Corporation of Ceylon Act; and

(b) “productive purpose” means any such purpose connected with or relating to the promotion or development of agriculture, industry, trade, commerce or business, as may be determined, from time to time, by the Monetary Board.

(1) The Central Bank shall so exercise the authority conferred by this Part of this Act to conduct open-market operations as to secure any of the following purposes, that is to say:”

(2) In conducting open-market operations in Government securities, the Central Bank shall have regard to the need for maintaining adequate holdings of short- term securities in order to enable the bank more readily to contract its credit if such contraction becomes necessary.

(3) If the Monetary Board determines that it is necessary so to do by reason that, in the opinion of the board, there is in progress, or has occurred, an expansion of the money supply or of bank reserves that represents a threat to the domestic or international monetary stability of Sri Lanka, the board shall take action to secure”

(1) In order to carry out the purposes of this Part the Central Bank is hereby authorized-

(2) The power conferred on the Central Bank by the preceding provisions of this section shall be deemed to include the power to purchase and sell Government securities which are denominated in foreign currencies.

(1) Securities issued by the Central Bank shall be on such terms and conditions and in such form as may be determined by the Monetary Board.

(2) Any security issued by the Central Bank which is purchased or redeemed by the bank shall not be included among its assets and shall be immediately retired and cancelled.

(1) The Monetary Board shall, in order to limit the volume of money created by the credit operation of the financial system, require commercial banks and such other financial institutions operating in Sri Lanka as may be prescribed by the Monetary Board (in this part referred to as the “prescribed financial institutions”) to maintain reserves against their deposit liabilities and such of their other financial liabilities as the Monetary Board may consider necessary and shall, for that purpose, prescribe the classes of deposit liabilities and the categories of other financial liabilities against which reserves are required to be maintained.

(2) The reserves required to be maintained by a commercial bank, or a prescribed financial institution under subsection (1), shall be proportionate to the volumes respectively, of each class of its deposit liabilities and each class of its deposit liabilities and each shall, subject to subsection (4), take the form of rupee deposits in the Central Bank.

(3) The accounts maintained at the Central Bank by prescribed financial institutions under subsection (2), shall be maintained only for the purpose of keeping the rupee deposits required to be maintained as reserves by such financial institutions.

(4) The Monetary Board may in the interest of the national economy and the banking and financial systems of the country, permit the maintenance of any part of the reserves required to be maintained under subsection (1), in the form of assets other than rupee deposits in the Central Bank.

(5) In this part-

“Financial business” in relation to a financial institution means the accepting of money in any form from the public, in the ordinary course of business, by way of deposit or by the issue of bills of exchange, promissory notes, bonds, certificates, notes, commercial paper of other similar instruments by means of which money is raised from the public, and the use of that money, in whole or in part, for the grant of loans or making that money available to third parties or for the benefit of third parties, as a business ;

“Financial institution” means a licensed specialised bank as defined in the Banking Act, No. 30 of 1988 or a finance company as defined in the finance Companies Act. No. 78 of 1988, and includes any person or body of persons carrying on financial business ;

“Other financial liabilities” in relation to a licensed commercial bank or a prescribed financial institution, means liabilities (other than deposit liabilities) incurred by any such bank or financial institution by the acceptance of money in any form from the public, in the course of its business, by the issue of bills of exchange, promissory notes, bonds , certificates, notes, commercial paper or other similar instruments by means of which money is raised from the public,’.

(1) The Monetary Board shall prescribe, and may, from time to time, vary, the reserve ratios applicable to each class of deposit liabilities and each category or other financial liabilities against which reserves are required to be maintained under section 93.

(2) Any increase in a reserve ratio which is to be applicable in respect of any liability that existed on the date of the increase shall be made by the Monetary Board in a gradual manner and shall not exceed four percentage points in any one period of thirty days.

(3) The Monetary Board shall other than in exceptional circumstances, endeavour to give commercial banks and other prescribed financial institutions not less than fourteen days notice of the date on which any increase in a reserve ratio is to become effective.

(1) The reserves required to be maintained by a commercial bank or a prescribed financial institution shall be calculated on such basis as may be prescribed by the Monetary Board.

(2) For the purposes of subsection (1) the principal office in sri Lanka of a commercial bank or a prescribed financial institution and the respective branches and agencies of such bank or financial institution shall be deemed to be one unit.

(1) Where the reserves maintained by a commercial bank or a prescribed financial institution are below the reserves required to be maintained by such bank or financial institution calculated on the basis prescribed under section 96 the commercial bank or the prescribed financial institution as the case may be, shall pay to the central Bank, interest on the amount of the deficiency at such rate as may be determined by the Monetary Board.

(2) Where a commercial bank or a prescribed financial institution regularly fails to maintain the reserves required to be maintained by such bank or financial institution calculated on the basis prescribed under section 96, the Monetary Board may, in the interests of the national economy make order-

(1) The Central Bank shall provide facilities for clearance transactions among commercial banks operating in Sri Lanka.

(2) The deposit reserves maintained by commercial banks in the Central Bank under this part shall serve as a basis for the clearance of cheques and the settlement of balances among such banks in accordance with such rules as may be made in that behalf by the Monetary Board.

(1) The Director of Bank Supervision may examine of cause an examiner of his department to examine the books, accounts and records of a prescribed financial institution and may require any such financial institution or its directors or officers to furnish from time to time or within such periods as may be specified such books, accounts, records or information as may be required for the purpose of ascertaining whether such institution is complying with the provisions of this part.

(2) Any person who resists or obstructs the director of Bank supervision or an examiner of his department, in the exercise by such Director or examiner of the powers conferred on him by subsection (1) shall be guilty of an offence.

(1) The Monetary Board may from time to time by order-

(2) An order under subsection (1) may be made applicable to all the loans and investments of each commercial bank or licensed specialized bank or any specified class or classes of such loans and investments so, however, that every such order shall be applicable to all banks uniformly and without discrimination.

(1) The Monetary Board may from-time to time make order

(2) Subject as hereinafter provided, the maximum rate of interest fixed by order under subsection (1) shall apply in relation to any deposit, or to any loan or credit operation, as the case may be, completed before the date on which the order comes into force: Provided, however, that nothing in any such order”

(3) For the purposes of preventing evasion of any order made under subsection (1), the Monetary Board may from time to time prescribe the maximum rates which may be paid to or charged by commercial banks and licensed specialized banks in the form of commissions, discounts, fees or other payments whatsoever.

(1) The Central Bank shall act as the fiscal agent and banker of the Government and of agencies or institutions acting on behalf of the Government, whether established by any written law or otherwise.

(2) The Central Bank may, in addition to exercising the functions mentioned in subsection (1),as agent of the Government for the purposes of any matter or transaction if it is authorized so to do by the Minister in charge of the subject of Finance after consultation with the Monetary Board.

(1) The Central Bank shall be the official depository of the Government and of agencies or institutions referred to in subsection (I) of section 106 :

Provided, however, that the Monetary Board may authorize one or more commercial banks operating in Sri Lanka to accept Government deposits, subject to such rules and regulations as the board may prescribe.

(2) The Monetary Board shall advise the Government regarding the distribution of official deposits between the Central Bank and commercial banks and the effects of such distribution on monetary conditions in Sri Lanka.

(3) The bank shall not pay interest on deposits of the Government or of agencies or institutions referred to in subsection (1).

(1) The Central Bank may act as agent, or for the account, of the Government or of any of the agencies or institutions referred to in subsection (1) of section 106, in guaranteeing, insuring, or participating in the loans, or any category thereof, of banking institutions operating in Sri Lanka.

(2) The Central Bank may give guarantees in favour of the Government or of any of the agencies or institutions referred to in subsection (1) of section 106.

(1) The Central Bank may, subject to such directions as may from time to time be made by the Monetary Board, guarantee loans, advances or other accommodation granted to small-scale enterprises by credit institutions operating in Sri Lanka.

(2) Where the Central Bank has prior to the date of coming into operation of this section and acting as agent, or for the account, of the Government, guaranteed under section 108 any loans, advances or other accommodation granted by credit institutions to small-scale industrial enterprises, such guarantee shall, with effect from such date, be deemed to be a guarantee given by the Central Bank on its own account.

(3) In this section ” credit institution ” means any banking institution as defined in subsection (1) of section 127 of this Act, and includes”

(a) for non-commercial bank primary dealers to maintain accounts at the Central Bank for the purpose of settling securities transactions;

(b) for direct participants including any direct participants which are not commercial banks, to maintain accounts at the Central Bank for the purpose of holding scripless securities, clearing and settling transactions in scripless securities among direct participants; and

(c) for the maintenance of a depository for recording of title to scripless securities of the Central Bank, of direct participants and, in the case of dealer direct participants, of their customers, The Central Bank may make such rules and regulations as it may consider necessary in relation to the depository.

(i) treasury bills Issued to accordance with the provisions of the Local Treasury Bills Ordinance, whether issued is scripless form or otherwise;

(ii) registered stock or securities issued in accordance with the provisions of the Registered Stock and Securities Ordinance whether issued in scripless form or otherwise;

(iii) any securities of the Central Bank whether issued in scripless form or otherwise.

(1) Any or all of the functions referred to in subsection (1) of section 98 and section 112A may, notwithstanding the provisions of such section, be carried out by a body corporate authorised for the purpose by the Monetary Board subject to such terms and conditions as may be imposed by the Monetary Board.

(2) A body corporate referred to in subsection (1) may hold an account with the Central Bank for the purpose of carrying out such functions.

(1) On or before the fifteenth day of September in each year the Monetary Board shall submit to the Minister in charge of the subject of Finance for use in preparation of the budget speech a confidential report describing and analysing the monetary situation in Sri Lanka and the current monetary policy of the board, and examining the effect of the current fiscal policy of the Government upon the ability of the Central Bank to achieve the objects specified in section 5.

(2) In the event of any difference of opinion between the Minister in charge of the subject of Finance and the Monetary Board as to whether the monetary policy of the board is directed to the greatest advantage of the people of Sri Lanka, the Minster in charge of the subject of Finance and the board shall endeavour to reach agreement. If the Minister in charge of the subject of Finance and the board are unable to reach agreement, the Minister in charge of the subject of Finance may inform the board that the Government accepts responsibility for the adoption by the board of a policy in accordance with the opinion of the Government and direct that such a policy be adopted by the board. Where a direction is so given by the Minister in charge of the subject of Finance, the board shall carry out that direction.

(1) Where an account with any commercial bank has lain dormant, that is to say, there has been no withdrawal from, or deposit into, such account, or the pass book relating to such account has not been presented for examination and insertion of interest, or there has been no confirmation in writing of the balance amount lying to the credit of such account, as the case may be, for a period exceeding ten years, the moneys lying to the credit of such account together with interest accrued, if any, shall, if the Monetary Board so directs, be transferred, notwithstanding anything in any other law, by such commercial bank to a special account in the Central Bank. For the purposes of this subsection”

(2) Any person who furnishes proof to the satisfaction of the Central, Bank that moneys lying to the credit of an account which was in his name or in the name of a person from whom he derives title, have been transferred to a special account in the Central Bank under subsection (1) shall, subject to such terms, conditions or restrictions as are imposed in respect of such moneys by or under any written law, be entitled to the repayment of such moneys by the Central Bank together with the interest payable on such moneys up to the date of such repayment in accordance with such rates and conditions as are applicable to the account to the credit of which such moneys were lying before they were transferred to the special account in the Central Bank.

(3) Any moneys transferred to a special account under subsection (1) may be utilized for such purposes as may be determined by the Monetary Board after consultation with the Minister in charge of the subject of Finance.

(a) engage in trade or otherwise have a direct interest in any commercial, industrial, or other undertaking except such interest as it may in any way acquire in the course of the satisfaction of any of its claims: Provided that all such interests shall be disposed of at the earliest possible opportunity; or

(b) purchase the shares of any other banking institution or of any company, or grant loans or advances upon the security of any such shares; or

(c) grant loans or advances on the mortgage of, or otherwise on the security of, immovable property or documents of title relating thereto.

(a) the Monetary Board shall be exempt from the payment of income tax and profits tax upon the income or profits of the Central Bank;

(b) all goods of any description imported or purchased out of bond by the board for the purposes of the Central Bank shall be exempt from customs duty; and

(c) the Monetary Board shall be exempt from the payment of stamp duty on any instrument executed by, or on behalf of, or in favour of the Monetary Board or the Central Bank in cases where, but for this exemption, the Monetary Board would be liable to pay the duty chargeable in respect of such instrument.

(1) no commercial bank shall be established in Sri Lanka;

(2) no commercial bank shall open any branch, agency or office thereof, in any part of Sri Lanka; and

(3) no commercial bank shall acquire the business of another commercial bank or of any branch of another commercial bank.

(1) Any person who contravenes or fails to comply with any provisions of this Act or any rule, regulation, order, direction or requirement made or given thereunder shall be guilty of an offence under this Act.

(2) Every person who is guilty of an offence by reason of the contravention of, or failure to comply with, section 30 or section 32 (2) or section 45 or section 46 or section 50 or section 98A (2) or any rule, regulation, order, direction or requirement made or given under section 30 or section 79 (2) (c) or section 98A (1) or section 101 or section 102 shall be liable-

(2A) Every person who is guilty of an offence by reason of the contravention of subsection (1) or subsection (2) of section 58A shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding five hundred thousand rupees or to imprisonment of either description for a term not exceeding two years or to both such fine and imprisonment. A Magistrate may, on conviction of any person for an offence under subsection (1) or subsection (2) of section 58A, make order that any coin in respect of which the offence was committed or any metal or other article derived therefrom be forfeited to the State.

(3) Every person who is guilty of an offence for which no punishment is prescribed by subsection (2) or subsection (2A) shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding one hundred thousand rupees or to imprisonment of either description for a term not exceeding one month, or to both such fine and imprisonment.

(4) Any person who attempts to commit, or does any act preparatory to the commission of, any offence under this Act shall be deemed to be guilty of such offence.

(1) In this Act, unless the context otherwise requires” ” appointed date ” means the 28th day of August, 1950; ” banking institution ” means”

(2) For the purposes of this Act, any question which may arise as to whether any agency or institution is an agency or institution acting on behalf of the Government shall be referred to the President for decision; and such decision shall be final.

(1) The Central Bank is hereby empowered to issue any currency notes or Ceylon coins printed or minted under the authority of the Board of Commissioners of Currency and remaining unissued on the appointed date.

(2) All currency notes and Ceylon coins issued or deemed to have been issued under the Currency Ordinance, No. 21 of 1941*, prior to the appointed date and in circulation on that date (including any such notes or coins which have ceased to be legal tender and have not been surrendered to the Board of Commissioners of Currency), and all currency notes and coins issued by the Central Bank under subsection (1) shall be deemed for all purposes to be currency notes and coins issued by the Central Bank under this Act and to be liabilities of the Central Bank; and the provisions of this Act shall apply accordingly to and in relation to such currency notes and coins in like manner as they apply to and in relation to currency notes and coins issued under this Act.

(1) Where any person in the service of the Government of Sri Lanka and holding a post declared to be pensionable under the Minutes on Pensions (hereinafter referred to as a ” pensionable public officer “) is appointed to be a temporary officer of the Central Bank, he shall be deemed to have been seconded to an office to which pension rights are not attached and accordingly section 24 of those Minutes shall apply to him.

(2) Where a pensionable public officer is appointed to be a permanent officer of the Central Bank on or before the appointed date, he shall be deemed, for the purposes of the Minutes on Pensions, to continue to hold a post declared to be pensionable under those Minutes so long as he is in the employ of the bank, and shall be eligible for the grant of a pension as though his service under the bank were service under the Government, and the Minister in charge of the subject of Public Administration may grant such pension in accordance with those Minutes.

(3) Where a pensionable public officer, whether or not he is an officer to whom subsection (1) applies, is appointed to be a permanent officer of the Central Bank after the appointed date, the Minister in charge of the subject of Public Administration may, by Notification published in the Gazette, declare that the post in the service of the bank to which such officer is appointed shall, while it is held by such officer, be deemed, for the purposes of the Minutes on Pensions, to be a pensionable post in the service of the Government; and upon the publication of any such Notification, the officer referred to therein shall be eligible for the grant of a pension as though his service under the bank were service under the Government, and the Minister in charge of the subject of Public Administration may grant such pension in accordance with the Minutes on Pensions.

(4) Where a person in the employ of the Central Bank is eligible, under the preceding provisions of this section, for the grant of a pension in accordance with the Minutes on Pensions, he shall, notwithstanding anything in the Widows’ and Orphans’ Pension Fund Ordinance, be deemed, so long as he remains in such employ, to be a public officer within the meaning, and for the purposes of the application, of that Ordinance.

(1) In respect of every such officer in the employ of the Central Bank as is eligible, under subsection (2) or subsection (3) of section 129, for the grant of a pension in accordance with the Minutes on Pensions and is deemed, under subsection (4) of that section, to be a public officer within the meaning, and for the purposes of the application, of the Widows’ and Orphans’ Pension Fund Ordinance, the bank shall contribute out of the funds of the bank to the Consolidated Fund, in respect of every complete month during which that officer is in the employ of the bank”

(2) In subsection (1) ” salary ” means the emoluments of the pensionable appointment held by the officer exclusive of allowances other than personal allowances.

(3) The Central Bank shall pay the contributions under subsection (1) annually to the Treasury on or before such date as may be fixed by the Deputy Secretary to the Treasury.