History of Sri Lankan Banking

To accommodate dynamic and financial system development upon gaining independence in 1948, the post-independence government of Ceylon established the central bank of Ceylon to maintain an active monetary policy regime and a dynamic financial sector to support and promote economic growth.

The Central Bank was given wide powers to administer and regulate the entire money, banking and credit system of the country. The Central Bank was also given the sole right and authority to issue currency and it also become the custodian of the international reserves of the country. The objective of the Central Bank as specified in the MLA in 1949 were,

1.      The stabilisation of domestic monetary values.

2.      The preservation of the par value of the stability of the exchange rate of Sri Lankan Rupee.

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

4.      The encouragement and promotion of the full development of the productive resources of Sri Lanka.

The Central Bank embarked on a modernization programme in 2000 and the objectives were adjusted accordingly, bringing them down to two core objectives:

1.      The maintaining of economic and price stability

2.      The maintaining of financial system stability

History of Currency in Sri Lanka

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. Although small in size, a coin has the ability of giving a wealth of information about the economic and cultural history of the country where it was used, through signs that remain on them.

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

Anuradhapura Era

·      Kahawanu

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 struck 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. The known coins have been of many shapes, such as round, square, rectangular or oblong. Their weight had been adjusted by clipping the corners. The metal of the Kahapana has been found mostly to be silver. 

·        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. ·        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.  ·        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. Polonnaruwa to Kotte Era ·        Massa Coins King Vijayabahu I who was responsible for toppling of the Chola dynasty, uniting the country and the inception of the Polonnaruwa Kingdom; also produced ‘Kahawanu’. He added his name to the face of the coin. Thus he is the first Sinhalese King to have had his name engraved on coins that were issued during his reign. This coin was known as ‘Massa’. ·        Dambadeni Coins / Coins of the Middle Ages The golden ‘Kahawanu’ was a product of the last stages of the Anuradhapura era. The ‘Kahawanu’ entered the Polonnaruwa era in the form of a Copper coin. Nonetheless, coins that were used from the beginning of the Polonnaruwa era to the Dambadeni era are identified as the ‘coins of middle ages’ or Dambadeni. The ‘Dambadeni Massa’ coin is in fact the same as the Massa minted in the Polonnaruwa era. It is also known as the ‘Sinhala Massa’. ·        Lion Coins A special feature can be observed on coins bearing the name of King Parakramabahu VI (1412 – 1467 AD). To specify, there is an image of a lion to the right of the human figure that appears on the face of the coin. These coins are known as ‘Lion coins’. This particular type of coin is the last of the ones bearing the names of the rulers. ·        Cetu Coins The Cetu was issued in the 13th century under the rule of king Aryachakravarthi who ruled in Jaffna. This coin is a close imitation of the Dambadeni Massa. There is an image of a cow on one side and a standing figure (similar to that on the Dambadeni Massa) on the other. This coin is made of Copper. Majority of these coins were discovered in areas such as Nalloor, Thinnaveli, Kopai, Sandilippai, Sunthoor, Nagarkovil and Maamkulam. During the British period, notes were issued by three authorities 1.  Notes Issued by the General Treasury (1827 – 1855) - Pound Notes       One pound       Two pounds       Five pounds 2.  Notes issued by the Private Banks, namely, (1844 – 1884)      The Oriental Bank Corporation      The Chartered Mercantile Bank of India, London and China.      Hong Kong and Shanghai Banking Corporation      Asiatic Banking Corporation      ·         Pound notes  ·         Rupee notes 3.  Notes issued by the Board of Commissioners of Currency (Under Government of Ceylon) (1884 – 1950)       The Board of Commissioners consisted of            The Treasurer            Colonial Secretary            Auditor General Subsidiary Currency Notes Under the provisions of the Emergency Powers Acts. 1939 and 1940 the Board of Currency was authorized to issue denominations below one rupee to meet the shortage of coins. The Board of Commissioners issued subsidiary notes for the values of 5 cents, 10 cents, 25 cents, 50 cents and 1 rupee. Of these notes, the 5 cents carried imprints of postage stamps of 2 cents and 3 cents.