MONETARY LAW

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

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

(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 Ceylon according to the Ceylon rupee.

(2) In any case where any such obligation which is by agreement expressed in any monetary unit other than the Ceylon rupee has, by reason that such agreement is rendered invalid or unlawful by any other written law, to be executed or liquidated in Ceylon 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) the stabilization of domestic monetary values ;

(b) the preservation of the par value of the Ceylon rupee and the free use of the rupee for current international transactions ;

(c) the promotion and maintenance of a high level of production, employment, and real income in Ceylon ; and

(d) the encouragement and promotion of the full development of the productive resources of Ceylon.

(1) The Monetary Board of the Central Bank shall, in addition to determining the policies or measures authorized 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.

(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 shaft 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 that 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 ;

(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.

(a) he is a Senator or a Member of Parliament or a member of any local authority ; or

(b) he is a public officer or a judicial officer within
the meaning of the Ceylon (Constitution) Order in Council, 1946, or holds any office or position (other than an academic position), either by election or appointment, for which salary or other remuneration is payable out of public funds or the funds of any local authority ; or

(c) he is a director, officer, employee, or shareholder of any banking institution (other than the Central Bank).

(1) The Governor of the Central Bank shall be a person appointed for the purpose by the Governor-General on the recommendation of the Prime Minister.

(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 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 Ceylon, 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 Governor-General on the recommendation of the Prime Minister.

(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 first appointed member holding office under this Act 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 the 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) The 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 Governor-General on the recommendation of the Prime Minister.

(1) Where the appointed member is, through illness, absence from Ceylon, or for any other reason, temporarily unable to perform the functions of his office, the Governor-General may, on the recommendation of the Prime Minister, appoint some other person to act in his place for such period as may be specified by the Governor-General.

(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 the 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 Prime Minister, 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 two 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 two members, or, in any case where any other provision of this Act requires a unanimous decision, the concurrence of all three 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 proctor or counsel.

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

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

(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 Ceylon, 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 Ceylon 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 the 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-

(5) It shall be the duty of every director, officer, or employee of any banking institution to afford to the Director of Bank Supervision or to any examiner of his department full opportunity to examine books and records and its cash, available assets, full liabilities and general condition, whenever so requested by the Director.

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

(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 Ceylon 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 (1) 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 thirty days 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 Supreme Court 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 (a) 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 Ceylon of the institution is maintained.

(9) Nothing in this section shall apply to or in relation to any banking institution unless it is an institution that is subject to or governed by any other written law which confers power to order winding up or liquidation.

(1) 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) Within three months after the end of each financial year, the Monetary Board shall submit to the Minister of Finance and shall publish an 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 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 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.

(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 Ceylon rupee or of changes in the parities or exchange rates of foreign currencies with respect to the Ceylon 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 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 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 a]l 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 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 or 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, that may come to his knowledge in the performance of his duties ; 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, 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.

(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 wilful 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 wilful 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 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 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 Ceylon.

(3) The Monetary Board shall, with the approval of the Minister 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.

Monetary Board-
(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, or

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

(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 Ceylon 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 this section shall be in the following form:-

I,…………, Governor of the Central Bank of Ceylon,* (* Delete inapplicable words.)/Deputy Governor for the time being acting as the chief executive officer of the Central Bank of Ceylon, 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 Ceylon.

Signature : …………….

Date: ………………

(4) This section shall apply-

(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 Ceylon’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 Ceylon 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 Ceylon 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 Ceylon 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 estimates of the prospective receipts and payments of foreign exchange by Ceylon ; 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 Ceylon. So long as any part of the foreign currency assets of Ceylon are held in currencies which are not freely convertible by the Central Bank, whether directly or indirectly, into gold, or are frozen, the Monetary Board shall also take this factor into account in judging the adequacy of the Central Bank’s International Reserve.

(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 Ceylon 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 of Finance until the threat to the international stability of the rupee has disappeared.

(1) The Monetary Board may by unanimous decision recommend to the Minister of Finance the alteration of the par value of the Ceylon rupee, if the board is of opinion that such alteration is rendered necessary in any of the following circumstances, that is to say : –

(2) Subject as hereinafter provided, no alteration of the par value of the Ceylon rupee shall be made except by Act of Parliament:

Provided, however, that, in the event of an emergency so grave or of circumstances so urgent as to require immediate action, the Governor-General may, if the Minister of Finance so advises after consultation with the Monetary Board, by Order published in the Gazette modify the par value of the rupee.

(3) An Order made by the Governor-General under subsection (2) shall have effect for a period of ten days from the date of the publication thereof in the Gazette and shall then expire :

Provided, however, that if Parliament has been dissolved prior to the date of the publication of the Order, the Order shall have effect until the expiration of a period of ten days after the first meeting of the new Parliament, and shall then expire.

(4) Forthwith upon the expiration of an Order made under subsection (2), the par value of the Ceylon rupee shall revert to the value obtaining immediately prior to the date of the publication of the Order in the Gazette, unless provision to the contrary is made by Act of Parliament.

(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) In order to ensure the free use of the Ceylon rupee for current international transactions, the Central Bank shall buy any quantity of foreign exchange offered, or sell any quantity of foreign exchange demanded, by any commercial bank in Ceylon :

Provided that nothing in the preceding provisions of this subsection shall require the Central Bank to purchase foreign exchange in any currency which is not freely convertible by the bank, whether directly or indirectly, into gold, unless, in the opinion of the Monetary Board, there is an adequate demand, actual or anticipated, for such currency for the purpose of making payments for current international transactions, or unless the Monetary Board, with the concurrence of the Minister of Finance, makes a determination that the acquisition of such currency is in the national interest.

(2) Notwithstanding anything in subsection (1), the Monetary Board may by unanimous decision and with the approval of the Minister of Finance temporarily suspend or restrict sales of foreign exchange by the Central Bank in any case where such action is considered necessary in order to conserve the International Reserve of the Central Bank during any period of crisis affecting exchange.

(1) The Governor shall determine and certify the parities with respect to the Ceylon rupee of foreign currencies ordinarily required for the international transactions of Ceylon. 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 Ceylon 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 one-half of one 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.

(5) The provisions of subsections (2) and (3) shall not apply at any time during which the sales of foreign exchange by the Central Bank are restricted under section 72.

(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 (1) 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 Monetary Board 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 one 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) The preceding provisions of this section shall not apply at any time during which the sales of foreign exchange by the Central Bank are suspended or restricted under section 72.

(1) In order more effectively to control the use and disposition of the foreign exchange resources of Ceylon 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 herein before 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 Ceylon rupees of commercial banks in Ceylon bear to the liabilities in Ceylon 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 Ceylon or companies or associations controlled by citizens of Ceylon.

(1) Any revaluation profits realized or any revaluation losses incurred by banking institutions on their net assets or liabilities in gold or in foreign currencies freely convertible by the Central Bank, whether directly or indirectly, into gold, and arising from changes in the par value of the Ceylon rupee or in the legal parities, or in the Central Bank’s exchange rates, of such currencies with respect to the Ceylon rupee, shall be assumed in their entirety by the Central Bank and shall be debited or credited accordingly.

(2)

(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 Ceylon, 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 oil this Act, the Central Bank may ordinarily transact with commercial banks and the Co-operative Federal Bank of Ceylon, Limited, 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 Co-operative Federal Bank of Ceylon, Limited, 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 Co-operative Federal Bank of Ceylon, Limited, 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) 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 Ceylon, 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 operations of the banking system, require commercial banks operating in Ceylon to maintain reserves against their deposit liabilities, and shall for such purpose define the classes of deposit liabilities against which reserves shall be held.

(2) The reserves required to be held by any commercial bank shall be proportional to the volume of its deposit liabilities and shall ordinarily take the form of rupee deposits in the Central Bank:

Provided that the Monetary Board may in its discretion permit the maintenance of any part of the required reserves in the form of assets other than rupee deposits in the Central Bank.

(1) The Monetary Board shall prescribe, and may from time to time modify, the reserve ratios applicable to each class of deposit liabilities. The ratios so prescribed shall not be less than five per centum or more than twenty per centum in the case of time and savings deposits, and shall not be less than ten per centum or more than forty per centum in the case of demand deposits and unused balances of overdrafts allowed.

(2) Any increase of the reserve ratio which is to be applicable in respect of any existing liability shall be made by the board in a gradual manner and shall not exceed four percentage points in any one period of thirty days. The board shall, except in extraordinary circumstances, endeavour to give the commercial banks at least fourteen days’ notice of the date on which any such increase is to become effective.

(1) Notwithstanding anything in section 94, the Monetary Board may, during periods of inflation or when inflation is anticipated, prescribe reserve ratios not exceeding one hundred per centum in respect of the amount by which any commercial bank’s deposit liabilities of any class may, after the date on which notice is given to that bank of the fixing of the new reserve ratio, exceed the amount of such deposit liabilities of that bank on that date.

(2) In any case where any commercial bank is required, by reason of the exercise of the powers conferred on the Monetary Board by subsection (1), to maintain a minimum reserve against any class of deposit liabilities of an amount exceeding the maximum amount specified in section 94 (1) for that class of deposit liabilities, the Central Bank shall pay to that bank interest on the amount in excess at a rate not higher than the Central Bank’s lowest discount rate for the time being in operation.

(1) Whenever the reserves of any commercial bank are below the required reserves computed in the manner provided in section 96, the bank shall, within such time as may be prescribed by the Monetary Board, pay to the Central Bank interest on the amount of the deficiency at such rate not exceeding one-thirtieth of one per centum per day as may be so prescribed.

(2) In any case where any bank fails more or less continuously to maintain the required reserves, the Monetary Board may make order-

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

(2) The deposit reserves maintained by commercial banks in the Central Bank under the preceding provisions of 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 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 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 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), act as agent of the Government for the purposes of any matter or transaction if it is authorized so to do by the Minister 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 (1) of section 106 :

Provided, however, that the Monetary Board may authorize one or more commercial banks operating in Ceylon 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 Ceylon.

(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 Ceylon.

(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) On or before the fifteenth day of May in each year the Monetary Board shall submit to the Minister of Finance for use in preparation of the budget speech a confidential report describing and analysing the monetary situation in Ceylon 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 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 Ceylon, the Minister of Finance and the board shall endeavour to reach agreement. If the Minister of Finance and the board are unable to reach agreement, the Minister 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 of Finance, the board shall carry out that direction.

(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) 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 any rule, regulation, order, direction, or requirement made or given under section 30, or section 79 (2) (c), or section 101 or section 102 shall be liable-

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

” commercial bank ” means any person or body of persons, corporate or unincorporate, which carries on in Ceylon the business of accepting from the public, or of creating, demand deposits, but does not include the Central Bank;

” current international transactions” means transactions which are not for the purpose of transferring capital, and includes, without limitation-

“currency”, “demand deposits” and “money supply ” have the meanings assigned to those expressions by sections 48, 60 and 62 respectively-

(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 Prime Minister 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, *[* Repealed by Act No. 58 of 1949.] 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 Ceylon 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 of Finance 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 of Finance 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 of Finance 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.