History of Central Bank
Central Bank of Ceylon was established by the monetary law Act (MLA) No. 58 of 1949 and commenced operation on 28th August 1950.
It was renamed the Central Bank of Sri Lanka (CBSL) in 1985.
The first Governor of Central Bank of Ceylon was Mr. John Exter, an American economist from the Federal Reserve of USA.
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 became the custodian of the international reserves of the country.
The main four objectives of the Central Bank as specified in the MLA in 1949 were;
- The stabilisation of domestic monetary values (maintenance of price stability).
- The preservation of the par value or the stability of the exchange rate of the Sri Lankan Rupee (maintenance of exchange rate stability).
- The promotion and maintenance of a high level of production, employment and real income in Sri Lanka.
- The encouragement and promotion of the full development of the productive resources of Sri Lanka
In 2000 its narrow it down to two core objectives;
- The maintaining of economic and price stability
- The maintaining of financial system stability
Vision and Mission of Central Bank
Vision
“A credible and dynamic central bank contributing to the prosperity of Sri Lanka.”Mission
"Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence.”
Functions of Central Bank of Sri Lanka (CBSL)
Core Functions
Conduct of Monetary Policy
- Conduct of Exchange Rate Policy
- Management of the Official International Reserves
- Oversight of the Financial System
- Licensing, Regulating and Supervising of Banks and Selected Non-Bank Financial Institutions
- Provision of Settlement Facilities and the Regulation of the Payment System
- Issue and Distribution of the National Currency
- Compilation, Dissemination and Analysis of Economic Data and Statistics
- Banker to the Government and its agencies, and provision of current account facilities to LCBs and non-commercial bank Primary Dealers for Government Securities
Agency Functions
- Management of the Public Debt
- Foreign Exchange Management
- Fund Management and Custodian of the Employees’ Provident Fund
- Facilitating Financial Inclusion
- Financial Intelligence services to prevent, detect, investigate and prosecute Money Laundering and Terrorist Financing
Objectives of Central Bank of Sri Lanka (CBSL)
"Maintaining economic and price stability"
Price stability or stable prices means low inflation. Experience has shown that the economy performs well when inflation is low and is expected to be low. Interest rates are also low in these conditions.
"Maintaining financial system stability"
Financial system stability means the effective functioning of the financial system (financial institutions and markets) and the absence of banking, currency and balance of payments crisis.
