Bonus interest in rupees on RFC, NRFC accounts

The Central Bank has initiated several measures to promote inward remittances and build foreign exchange reserves to a higher level, as announced in the “Road Map: Monetary and Financial Sector Policies for 2009 and beyond”.

Accordingly, to promote inward remittances, the Government has made arrangements to pay a bonus interest in Sri Lanka rupees on the interest paid by the licensed commercial banks, National Savings Bank and Lankaputhra Development Bank on Resident Foreign Currency (RFC) and Non-Resident Foreign Currency (NRFC) accounts, from February 1.

This aims to promote the inflows of foreign remittances into Sri Lanka through the banking channels as well as to promote the public to deposit any foreign currencies held by themselves with these banks.

Such inflows of foreign exchange into the banking system will make available more resources for the banks for their lending operations, thereby effectively utilising such resources to promote investments.

The bonus so paid will be the rupee equivalent of 20 per cent of the foreign currency interest that accrues on deposits from February 1.

For example, if an account holder receives an interest income of US dollars 100 on his RFC or NRFC account deposit, the relevant bank will pay a rupee equivalent of US dollars 20 in rupees as a bonus.

The bonus interest will be credited to a rupee account opened in the name of the account holder or to any other account nominated by the account holder.

The bonus interest will not be credited to the RFC nor NRFC accounts.

The bonus interest calculated using the monthly average exchange rate of the previous month published in the Central Bank of Sri Lanka website, will be paid to the account holder on the same day on which the foreign currency interest is paid.

The interest bonus will be exempt from any income tax deductions. The interest paid on RFC and NRFC accounts are already exempt from taxation.