History of Central Bank and currency

Introduction

When Sri Lanka or then known as Ceylon was under the reign of the Sinhalese Kings and even the Portuguese (1505-1656) and Dutch (1656-1796), banks and banking were still alien to the Sri Lankan culture. It was only during the British colony (1802-1948) that Banking was introduced to Sri Lanka with mainly branches of foreign banks being set up.

The CBSL was established in 1950 under the MLA No.58 of 1949 which was a major milestone in Sri Lanka’s economic history. Today, the Central Bank is the governing body of commercial banks.

Banks which come under the service sector in Sri Lanka play a crucial role in its economy contributing to about 60% of the GDP and employing about 40% of the total workforce. The banking sector also holds about 55% of financial sector assets while the others are held by Insurance and Real Estate companies.

The banking sector in Sri Lanka is monitored by the Bank Supervision Department of the Central Bank of Sri Lanka under the Banking Act, Monetary Law Act and the Exchange Control Act.

Three types of financial institutions are permitted under Banking Act and the Finance Companies Act to operate in Sri Lanka by the Central Bank Of Sri Lanka.They are

1. Licensed Commercial Banks
2. Registered Finance Companies
3. Licensed Specialized Banks

These institutions can accept deposits from the public. The number of licensed specialized banks reduced from 14 to 9 and the number of registered financial institutions increased from 31 to 36 during the period of 2007 to 2010.The current list of banks in Sri Lanka is published by Central Bank of Sri Lanka periodically.

 The objectives of the Central Bank as specified in the MLA in 1949 were;

     (a)  The stabilisation of domestic monetary values         (maintenance of price stability).

     (b)  The preservation of the par value or the stability of the exchange rate of the Sri Lankan Rupee (maintenance of exchange rate stability).

     (c)  The promotion and maintenance of a high level of production, employment and real income in Sri Lanka.

     (d)  The encouragement and promotion of the full development of the productive resources of Sri Lanka

However, in keeping with the worldwide trends in central banking and the rapid changes in international financial markets, consequent to the economic liberalisation and the significant advancement in information technology, the Central Bank embarked on a modernisation programme in 2000 and the objectives were adjusted accordingly, bringing them down to two core objectives:

•   The maintaining of economic and price stability
•   The maintaining of financial system stability 

Currency of Sri Lanka

What is the currency of Sri Lanka

The currency in Sri Lanka is the Sri Lankan Rupee which has a sign of Rs and a currency code LKR. One Sri Lankan Rupee is comprised of 100 cents. Sometimes, 'Rp' and 'SLR' are used as currency symbol and abbreviation.

Historical Currency

Sri Lanka is a country with a long history and a similarly long and rich economic history. A study of that history will doubtlessly prove fruitful not only for economists but for everyone in the society. Coins used through different time periods of a country play an important role when studying the history of that country

Some of the ancient coins and notes prevalent in Sri Lanka were Kahapana (punch marked coins), Lakshmi Plaques, Mane less Lion coins, Kahavanu or Lankeshvara coin, Swastika coins, and Massa coins. Foreign coins mostly of Greek, Roman, Chinese, Arabic, and Indian origin found presence in Sri Lanka during the ancient times. During the colonial period, Portuguese, Dutch, and British all brought their coins and currencies to Sri Lanka.

Sri Lanka’s currency-use can be divided into following periods.

1.    Anuradhapura Era

2.    Polonnaruwa to Kotte Era

3.    Kandy Era

4.  Colonial Era

5. Post-Independence Period since Establishment of the Central Bank of Ceylon

   

Coins used in Anuradhapura Era

• Kahapana
• Swasthika coins
• Maneless Lion coins
• Lakshmi Plaques
• Kahavanu or Lankeshvara coin
• Foreign coins 

   Kahapana

The earliest unit of currency known in the island is referred to as a Kahapana.They are called puranas in Sanskrit and eldings in English. They are commonly known as punch marked coins, due to the marks or symbols that had been struct either on one side or both sides of the coin. Kahapanas are reckoned to have been produced by cutting strips of metal from hammered sheets.

Swasthika coins

Apart from the ‘Kahapana’ coin with its many markings, other types of coins were also used during the Anuradhapura era. The tusker and swastika coin is one such type. It is a small Copper coin. A chosen few markings that occasionally appeared on the ‘Kahapana’ were added in the making of this particular coin. 

Maneless Lion Coins

This is a Copper coin. On one side, there is an image of a lion. On the other side, there are three or sometimes four dots. It is likely that these dots indicate the value of the coin. The diameter of this coin is between ½ - ¾ inches and it weighs between 15-40 grains.

Lakshmi Plaques

Coins with a female figure carved into the face were first circulated in Sri Lanka as early as 3 B.C - 8 A.D. It is believed that the woman on the coin is the goddess Lakshmi. Because of this, the coin is known as the ‘Lakshmi Thahadu (metal sheet)’.

Kahavanu or Lankeshvara coins

A Sinhalese gold coinage known as the 'Kahavanu" had been in circulation in the island from about the 7th to 8th centuries AD. These coins were either gold or gold-plated. They were distinguishable in terms of value as ‘Kahawanu’, ‘Ada Kahawanu’, ‘De Aka’ and ‘Aka’. On the face of the coin there is a human figure standing on a lotus stem. There is a conch and Lotus flower on the flipside of the coin.

Foreign coins to Anuradhapura

Clear proof that Sri Lanka was a functioning naval base in the past comes from the foreign coins used during the Anuradhapura era. A great number of Greek, Roman, Chinese, Arabic and Indian coins used in international trade were found in Anuradhapura, Mihintale, Sigiriya, Kurunegala, Matara, Akurugoda and Badulla.

• Roman Coins

Several types of Copper Roman coins were used in Sri Lanka. These coins were minted in Rome. The fact that these coins were found all over Sri Lanka indicates that they were widely in use at the time. Majority of these coins belong to the 4th and 5th centuries A.D. This implies that a great deal of trading occurred between the Roman Empire and Sri Lanka. Additionally, due to high circulation and consequent ware and tare, these coins havea tattered appearance.

•  Chinese coins

These coins are made of Copper or Copper-rich alloys. Coins minted in different eras are different in size as well. The coins are circular with a squareshaped hole in the center. The Chinese Emperor’s name is engraved in Chinese calligraphy along the four sides of the square. There are no markings or images on the flipside of the coin.

The First Bank Note

Up until the last half of Dutch Sri Lanka, only coins were used in transactions. But in the final years of the 1700s, Dutch security expenditure increased exponentially. The expenditure vastly surpassed income and almost emptied the treasury. The birth of the banknote took place against this backdrop.

So on March 19, 1785 banknotes equivalent to 25,000 Pathaga were authorized for printing. Accordingly, Sri Lanka’s first series of banknotes was issued on the 10th of May, 1785. The first notes had values equivalent to 50, 100, 500 and 1000 Pathaga. Afterwards, notes of 1,2,3,4,5,10 Pathaga were also printed. These notes contained the signatures of three government officials.

Eleven series of currency notes issued by the Central Bank of Sri Lanka since 1950 are as follows;

Theme		Denomination (Rs)	Year
1	King George VI series	1 and 10	1951
2	Queen Elizabeth II series	1, 2, 5, 10, 50 and 100	1952
3	Armorial Ensign of Ceylon series	1, 2, 5, 10, 50 and 100	1956
4	S W R D Bandaranaike Portrait series	2, 5, 10 ,50 and 100	1962
5	King Parakramabahu the Great series	2, 5, 10 ,50 and 100	1965
6	Armorial Ensign of Sri Lanka series	50 and 100	1975
7	Fauna and Flora Series	2, 5, 10, 20 ,50 and 100	1979
8	Historical and Archaeological series	5, 10, 20, 50, 100, 500 and 1000	1981
9	Historical and Development series	500 and 1000	1987
10	Sri Lanka Heritage series	10, 20, 50, 100, 500, 1000	1991
		2000	2005
11	Development , prosperity and Sri Lankan Dancers series	20, 50, 100, 500, 1000, and 5000	2011