Central Bank of Sri Lanka. Payments and Settlements Department. Second Quarter Volume 6: No.2

Transcription

1 Central Bank of Sri Lanka Payments and Settlements Department Second Quarter Volume 6: No.2

2 C O N T E N T S Payment System Highlights 2 Feature Article Cheque Imaging and Truncation System By R M M K Rathnayake Assistant Director/Payments and Settlements Department Central Bank of Sri Lanka Page 12 Table No Statistical Tables 1 Key Economic Indicators 15 2 Chronology of Events in the Payment and Settlement Systems 16 3 Monetary Aggregates 17 4 Currency in Circulation 18 5 ATMs and EFTPOS Terminals 19 6 Payment Cards 19 7 Payment Instructions handled through Electronic Systems 20 8 Cheque Clearing at LankaClear (Pvt.) Ltd 20 9 Cheque Clearing at LankaClear (Pvt.) Ltd by Size Sri Lanka Interbank Payment System (SLIPS) Transactions Sri Lanka Interbank Payment System (SLIPS) Transactions by Size Sri Lanka Interbank Payment System (SLIPS) Transactions by Type Cheque Clearing at Regional Offices of Central Bank Volume and Value of RTGS Transactions by Size Primary and Secondary Market Transactions in Government Debt 24 Securities 16 Transactions in LankaSecure System Value of Payments made through Money Orders and Postal Orders Settlement of Payments through Asian Clearing Union (ACU) Participation in SWIFT by Domestic Institutions SWIFT Message Flow to/from Domestic Users Institutional Framework 27 1

3 Cash Central Bank of Sri Lanka (CBSL) has the sole authority to issue notes and coins in Sri Lanka and also has the authority to withdraw damaged or unusable notes and coins to manage the quality of currency in circulation. The CBSL issued a new currency note of Rs.2, 000 for circulation on October 17, 2006 to meet the demand for high denomination currency notes coupled with changes in price levels and increase in per-capita GDP in recent times. The obverse of the note depicts the Sigiriya Rock in the middle and a Sesatha in the right. The reverse of the note depicts a Sigiriya Fresco. The note measures 164 mm x 82 mm and is predominantly lighter rose and brown in colour. The note contains several current and new advanced security features. The 4 mm wide STARCHROME TM with windows on the front of the bank note, while its colour changes from red to green when the note is tilted up and down with clear text showing Rs. 2,000, butterfly motif and SRI LANKA. A watermark representing the Heraldic Lion in the National Flag of Sri Lanka with highlighted sword, see through feature, fluorescent features, micro lettering and intaglio printing have been incorporated in the note. Cornerstone TM a specific watermark feature can be seen as diagonal bars at four corners of the bank note when the note is held up to the light. A vertical gold band is printed lengthwise on the back of the note. To assist the visually impaired, tactile bars have been incorporated in front left and right hand center edges of the note that can be rubbed for texture feel. The value of currency notes and coins in circulation increased by 15 per cent to Rs.146 billion at the end of September 2006 when compared with that of the corresponding period in Currency held by public was Rs.125 billion at the end of September 2006 and showed an increase of 14 per cent against that of the corresponding period in 2005.Currency notes in circulation comprised 97 per cent of the total currency notes and coins issued during the period under review. Chart 1 Currency in Circulation Rupees million Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Currency in Circulation Currency held by Public 2

4 Non-cash Payments Non-cash payment instruments could be generally categorized as paper based and electronic. With the on-going technology developments commercial banks have introduced electronic non-cash payment instruments with variety of facilities. Cheques Cheque Imaging and Truncation (CIT) System commenced operations on May 11, 2006 with the aim of reducing the time taken in clearing and settlement of cheques, avoiding physical transportation of cheques and enhancing reliability and security of the retail payment system. Eleven (11) regional centers have been established around the country to: accept outward cheques; capture digital images of the front and back of the cheques; and directly transmit such images or forward via a CD-Rom to the main processing center of the LankaClear (Pvt.) Ltd (LCPL) for clearing. Under the CIT System the LCPL sorts the cheques bank wise and forward the sorted images and data to the respective paying banks. Upon receipt of such electronic files, (cheque images and data) the paying banks decide as to whether to honour the cheques or not. During the first three quarters of 2006, the total value of cheques cleared through the main cheque clearing system amounted to Rs.2, 799 billion, showing an increase of 12 per cent when compared with the corresponding period in The total number of cheques cleared by LCPL increased by 10 per cent to 33 million. The total value of cheques cleared through the main cheque clearing system during the period from January to September 2006 represented 21 per cent of the total value of transactions settled through the RTGS System. Out of the total value of cheques cleared by LCPL, 54 per cent represented cheques drawn for value more than Rs. 1 million. But majority of cheques i.e. 99 per cent of the total number of cheques was consisted of cheques with value less than Rs.1 million. With the implementation of CIT System, the clearing operations conducted by the regional offices of CBSL ceased and all regional cheques are now cleared by LCPL through the CIT System. 3

5 Chart 2 Chart 3 Average Value of Cheques Cleared per Day Average Volume of Cheques Cleared per Day (Rs. billion) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec in 2005 in 2006 No. of cheques('000) Jan Fe Ma Ap Ma Ju Jul Au Se Oc No De in 2005 in 2006 US Dollar Cheque Clearing System US Dollar Cheque Clearing System, a semi computerized retail clearing system is operated by LCPL for cheques and drafts drawn in US dollars, issued by Licensed Commercial Banks (LCBs) in Sri Lanka and payable to Sri Lankan individuals/institutions and issued by banks/exchange houses abroad and drawn on LCBs in Sri Lanka. During the first three quarters of 2006, US Dollar Cheque Clearing System cleared US dollar cheques/drafts worth of Rs.16 billion recording 33 per cent increase when compared with the corresponding period in However the total number of cheques cleared recorded a marginal decrease of 0.4 per cent during the period under review. Sri Lanka Interbank Payment System (SLIPS) Sri Lanka Inter-bank Payment System (SLIPS) is an off-line payment system operated by the LCPL, which handles small value bulk payments. All LCBs and the CBSL are direct participants of SLIPS. The average number of SLIPS transactions cleared per day during the first threequarters of 2006 increased by 30 per cent to 16,114, when compared with the corresponding period in The average value of transactions cleared per day also showed a significant increase of 34 per cent to Rs.462 million. The total number of SLIPS transactions with values above Rs.1 million contributed to less than 1 per cent of the total number of transactions, during the period of January to September 2006, while the total value of transactions with values above Rs.1 million represented 22 per cent of the total value of SLIPS transactions. The total number of SLIPS transactions increased by 34 per cent and the total value of transactions increased by 38 per cent during the period from January to September 2006, when compared with those of the corresponding period of the previous year. 4

6 Chart 4 Chart 5 Volume of Transactions.('000) Average Volume Transactions Cleared through SLIPS per Day Jan Fe Ma Ap Ma Ju Jul Au Se Oc No De in 2005 in 2006 Value (Rs. billion) Average Value of Transactions Cleared through SLIPS per Day Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec in 2005 in 2006 Real Time Gross Settlement (RTGS) System During the period from January to September 2006, the total number of RTGS transactions increased by 16 per cent and the total value of transactions decreased marginally by 1.8 per cent, when compared with the corresponding period in The total value of Intraday Liquidity Facility (ILF), Repo and Reverse Repo transactions of CBSL with participating institutions settled through the RTGS System during the period of January to September 2006 recorded a decrease of 33 per cent when compared with the corresponding period in The drop in Repo transactions was mainly due to discontinuation of the facility provided by the CBSL for Primary Dealers (PDs) to enter into transactions under Open Market Operations with the CBSL, with effect from June 19, The share of customer transactions settled during the first three quarters of 2006 amounted to 8 per cent of the total number of transactions and recorded 4.8 per cent increase, when compared with that of the corresponding period in During the period from January to September 2006, 16 per cent of the total value of transactions settled in RTGS System consisted of the transactions with values less than Rs.100 million, while the share of transactions with values above Rs.100 million accounted for 84 per cent. Out of the total number of RTGS transactions, 70 per cent was effected by large (31 per cent) and medium size LCBs (39 per cent). The share of small LCBs was 15 per cent of the total number of transactions, while that of the Primary Dealers was 7 per cent. During the period from January to September 2006, majority of RTGS transactions i.e 66 per cent was settled after noon. Out of the total number of customer transactions 73 per cent was settled after noon. 5

7 Chart 6 Chart 7 Volume of RTGS Transactions Value of RTGS Transactions Volume of Transactions Jan Mar May Jul Sep Nov Value (Rs.billion) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec LankaSecure System The total number of transactions settled in the LankaSecure increased by 84 per cent, while the total value of transactions decreased marginally by 1 per cent during the period from January to September 2006, when compared with the corresponding period in Out of the total number of transactions settled in the LankaSecure System during the first three quarters of 2006, 77 per cent was relating to securities repositioning. The share of Repo transactions, which accounted for about 68 per cent of the total value of LankaSecure transactions during the period from January to September 2005, decreased to 51 per cent in the corresponding period of Chart 8 Chart 9 Volume of Transactions in LankaSecure Jan- September 2006 Value of Transaction in Lanka Secure Jan-September 2006 (DVP)/(RVP) (DVF)/(RvF) (IRE)/ (IRR) (IRT)/(IRX) (REP)/(RRE) (HUI)/(HUD) (RPG)/(RPG) (DDD)/(DDC) (DVP)/(RVP) (DVF)/(RVF) (IRE)/ (IRR) (IRT)/(IRX) (REP)/(RRE) (HUI)/(HUD) (RPG)/(RPG) (DDD)/(DDC) Credit Cards The total value of transactions settled through credit cards amounted to Rs.39 billion during the period from January to September 2006 recording a 31 per cent increase, when compared with the corresponding period of the previous year. 6

8 The total number of credit cards in use increased by 24 per cent to 750,289 at the end September 2006 when compared with 605,930 at end September There is a competition among card issuing LCBs for credit card promotion. Expanding the range of credit cards, one LCB has introduced a secured credit card facilitating customers who are not in a position to produce proofs relating to their income, when obtaining a credit card. Under the new credit card facility, a customer who wish to obtain a credit card should open a time deposit account with minimum balance of Rs.25,000 for a period of one year with instructions to renew the deposit on maturity at the LCB and the customer can obtain a secured credit card with a credit limit which is equivalent to 90 per cent of his time deposit. Chart 10 Chart 11 Total Number of Credit Cards (At end of Period) Total Volume and Value of Transactions effected through Credit Cards No. of Cards ('000) s t 2nd 3rd 4th 1s t 2nd 3rd No. of Transactions ('000) st 2nd 3rd 4th 1st 2nd 3rd Value of transactions ( Rs mn) Period Volume Value Debit Cards A debit card is a pay now product and the holder s account is immediately debited when a debit card is used at an EFTPOS. Debit cards allow the holder to spend only the funds available in his bank account. The total number of debit cards in use amounted to 2.7 million and the total value of transactions settled amounted to Rs.946 million during the period from January to September Pre-paid Cards The main pre-paid card issuers are telephone service providers and Internet service providers. Prepaid cards are commonly used for retail level payments. Prepaid phone cards are popular due to their availability at convenient places such as groceries, super markets and newspaper agencies. 7

9 Phone /Mobile/Tele-banking/Internet banking Phone/Mobile/Tele-banking/Internet banking facilitates bank customers to manage their personal bank accounts anytime in the day or night. The facilities available are: - Check balances and view recent account activities; - Transfer funds from one account to another account in the same bank; - Arrange direct debits; - Pay bills; and - Check loan limits etc. The total number of Tele/Internet/Mobile banking transactions and value increased by two fold to 1.2 million and Rs.92 billion respectively during the period from January to September 2006 when compared with the corresponding period in 2005 due to the increased transactions of corporate customers of some LCBs. Money Orders Sri Lanka Post issues money orders (Ordinary Money Orders, Telegraph Money Orders, Fax Money Orders, International Money Orders, E Money Orders, and British Postal Orders) The total value of payments made through such money orders amounted to Rs.7.8 billion in the first three quarters of 2006 and showed a marginal increase, when compared with the corresponding period in There were 4,705 post offices operated through out the island at the end of September Payment Card Infrastructure Automated Teller Machines (ATMs) The total volume and value of transactions effected through ATMs during January to September 2006 amounted to 40 million and Rs.179 billion respectively. Both the volume (25 per cent) and value (34 per cent) of ATM transactions showed significant increases when compared with the corresponding period of the previous year Chart 12 Chart 13 Total Number of ATMs (At end period) Volume and Value of Transactions effected through ATMs No. of ATMs No. of Transactions('000) st 2nd 3rd 4th 1st 2nd 3rd Value of Transactions (Rs.mn) 0 1st 2nd 3rd 4th 1st 2nd 3rd No. of Transactions value of Transactions 8

10 A local LCB has installed a bulk note acceptor, an Envelop-Less Cash accepting Automated Teller Machine. As reported, Sri Lanka is the first in the Asian region and the eleventh in the world that installed a bulk note accepting ATM, which is capable of accepting bulk cash deposit in large denominations that are instantly credited to accounts. This ATM takes up to 100 notes in one thousand rupee denominations at a time and can store up to six million rupees at a time. Customer can repeat this activity any number of times to deposit large amount of currency notes. The ATM machine is also equipped to accept, envelop-less cheque deposits and cheques can be deposited directly through the automated deposit acceptor for clearing. Electronic Fund Transfer at Point of Sale (EFTPOS) Electronic Fund Transfer at Point of Sale (EFTPOS) is a device to capture payment information either by paper vender or by electronic terminals. They may also be designed to transmit information. At the end of September 2006, there were 8,278 on line EFTPOS terminals installed at merchant outlets in the country. The total number and value of transactions settled through these terminals during the first three quarters of 2006 was 11.7 million and Rs.40 billion respectively. Chart 14 Chart 15 Total Number of EFTPOS Machines (At end period) Total Volume and Value of Transactions effected through EFTPOS No. of Machines st 2nd 3rd 4th 1st 2nd rd No. of Transactions ('000) st 2nd 3rd 4th 1st 2nd rd No. of Transactions Value of Transactions(Rs.mn) Value of Transactions (Rs.mn) SWIFT SWIFT is the industry-owned co-operative supplying secure, standardized messaging services and interface software to nearly 8,000 financial institutions in 206 countries and territories. SWIFT members include banks, broker-dealers and investment managers. The broader SWIFT community also encompasses corporates as well as market infrastructure in payments, securities, treasury and trade. Over the past ten year period, SWIFT message charges have been reduced by around 80 per cent, and system availability approaches 5x9 reliability per cent of uptime. It works in partnership with its members to provide low-cost, financial processing and communication services with high security and reliability. It has contributed to the commercial success of its members through greater automation of the end-to-end financial transaction process. 9

11 The SWIFT is planning to reduce the Bank Identifier Code (BIC) publication time from a quarterly to a monthly cycle from January This will shorten the publication cycles reducing the registration and activation times for BIC requests and, processing costs. Delivering updates through SWIFTNet is far more secured than through CD-ROMs. The paper based BIC directory will continue to be published on a quarterly basis. The SWIFT user community will be benefited from this new move to publish and activate a new user much faster. Although SWIFT is neither a payment nor a settlement system, the central banks of the group of ten countries (G-10) have agreed that SWIFT should be subject to cooperative oversight by central banks. Accordingly, a protocol signed between the National Bank of Belgium (act as the lead overseer) and SWIFT laying down the common understanding of overseers and SWIFT about the oversight objectives and activities that will be carried out to achieve these objectives. During the first three quarters of 2006, the total SWIFT messages transmitted from and received by domestic SWIFT users recorded increases of 10 per cent and 14 per cent respectively. The number of domestic SWIFT users stood at 34 as at end September Chart 16 Chart 17 SWIFT Messages (in'000) SWIFT Message-Sri Lanka(in'000) 800,000 1, ,350 All Countries 700, , , , , , ,000 1,300 1,250 1,200 1,150 1,100 1,050 Sri Lanka Domestic ,300 1,250 1,200 1,150 1,100 1,050 Total Messages 0 1st 2nd 3rd 4th 1st 2nd 3rd All Countries Sri Lanka 1, st 2nd 3rd 4th 1st 2nd 3rd Domestic All Traffic 1,000 Securities Trading and Settlement at the Colombo Stock Exchange (CSE) Colombo Stock Exchange (CSE) is one of the most modern exchanges in South Asia, which provides a fully automated trading platform. At the end of September 2006, there were 35 participants and 236 listed companies, involved in equity/debt securities transactions. The total number of transactions, effected through Automated Trading System (ATS) within the period from January to September 2006 was 1.4 million and per cent of the total transactions consisted of equity transactions. The stockbroker clients for equity transactions accounted for 95 per cent of the total number of ATS transactions 10

12 and 68 per cent of the total value of ATS transactions during the period from January to September The total number of new accounts opened during the third quarter 2006 was 2,868, and accordingly, the total number of accounts increased to 446,922 at the end of September The total number of equity shares lodged in the Central Depository Systems (Pvt.) Ltd (CDS) increased by 20 per cent to 8.3 billion in third quarter 2006 from 6.9 billion for the corresponding period in The total value of equity share at the end of third quarter 2006 stood at Rs.314 billion recording a marginal decrease against Rs.317 billion for the corresponding period of The total value of corporate debt securities lodged in the CDS at the end of third quarter of 2006 was Rs.4.4 billion. The total value of government securities in the CDS amounted to Rs. 313 million at the end September

13 By R M M K Rathnayake Assistant Director/ Payments and Settlements Department Central Bank of Sri Lanka Cheque Imaging and Truncation System Cheque is the most popular non-cash retail payment instrument in Sri Lanka. More than 68 per cent of the total retail non-cash payments are made using cheques. Having realised the need for improving efficiency of cheque payments, Central Bank of Sri Lanka (CBSL) initiated a project to launch a new cheque clearing system, which has been designed with the advanced technology. The project was handled by LankaClear (Pvt.) Ltd (LankaClear), the national clearinghouse under the guidance of CBSL. Accordingly, making another milestone in the evolution of the payment system in Sri Lanka Cheque Imaging and Truncation (CIT) System was launched on May 11, Before the introduction of the CIT System, commercial banks handed over physical cheques to LankaClear for clearing. The former clearing process of LankaClear can be briefly described as follows: - Customers deposit cheques at their bank branches; - At the end of each business day, each bank branch schedules and totals the cheques received and send them to centralised cheque sorting centre of that particular bank, for sorting cheques; - At each bank, the amount of each cheque is encoded on the cheque using magnetic ink to facilitate automatic cheque clearing process at LankaClear; - Such encoded physical cheques are couriered to LankaClear for clearing; - At LankaClear, cheques are read and sorted bank-wise using the reader, sorter machines; - After sorting cheques bank-wise, the total number and the value of the cheques are confirmed and scheduled again; - Finally the physical cheques are transported to paying banks; - The paying banks transport cheques to their branches through their own internal arrangements. Accordingly, from the date on which a customer deposited a cheque at his bank branch, two to seven days were taken to clear the cheque and realise funds through the former clearing system. The main objective of introducing the CIT System is to establish a uniform clearing system which provides optimum efficiency in cheque clearing i.e. crediting the proceeds of a cheque to the relevant customer s account on the next business day after the day when the customer deposits the cheque at his bank branch i.e. T+1(today + one business day) across the entire country eliminating the regional disparities in the process of cheque clearing. LankaClear established 11 regional centres to facilitate new clearing process under the CIT System. The participants of the CIT System are all licensed commercial banks and CBSL. According to the mode of participation in the system, currently there are two categories of participants. One category includes the participants who submit physical cheques to the regional centres. The other category consists of the participants who submit CD ROMs, which includes User Identification (UI) numbers, MICR, amounts and images of the cheques, to the regional centres. However, in the practical situation there is another category of participants of which their branches currier the physical cheques collected by them to the Central Clearing Departments (CCDs) of those participants, instead of handing over cheques/cds to LankaClear regional centers. The CCDs encode the cheques. Encoded 12

14 cheques are scanned and prepare CD ROMs with images and other required data. Finally the CD ROMs are couriered to the main processing centre (MPC) of LankaClear, which is located at the head office of LankaClear. The clearing process of participants that use regional centres of LankaClear under the new CIT System in brief is as follows: (1) Customers deposit their cheques at their bank branches as usual. The amount of each cheque is encoded on the MICR code line of the cheque by the respective bank branch. Then the physical cheques or CD ROMs with images of the cheques and other necessary data and information are couriered to the nearest regional centre. At the regional centre, CD ROMs are prepared, if physical cheques are submitted by any bank branch. (2) The data and information in CD ROMs of all bank branches are transmitted to the MPC by all regional centres. (3) Having received the required data and information from all LCBs through the regional centres and sometimes directly from LCBs located close by, the MPC sorts the cheques bank-wise using the images and electronic data and generates reports for paying banks and transmit such data and reports to the respective regional centres online. (4) Representatives of paying bank branches collect the CD ROMs from the relevant regional centres. Using the special image viewing software, the paying bank branches download the images and data in CD ROMs, check the accuracy and make arrangement to credit the payees accounts, if sufficient funds are available in payers accounts. (5) If paying bank branches decide not to pay for any cheque by perusing the image of the cheque or any other reason specified in CIT System Rules, the paying bank branches have to select and activate the appropriate cheque return remark code number and such outward return CD ROMs are burnt and delivered to the relevant regional centers. (6) The regional centres upload the information of the CD ROMs onto their systems and transmitted to the MPC. (7) MPC transmits return information of cheques to the relevant regional centre of the presenting bank whose cheques have been returned. The regional centre downloads image and other return information from the MPC and prints cheque return notifications (CRNs) and reports. (8) Presenting bank collects CRNs and reports from the regional centre and CRNs are retuned to the relevant customers instead of returning physical cheques. Cheque Return Notification (CRN) Legal basis for electronic cheque presentment is provided by the Payment and Settlement Systems Act No.28 of 2005(PSSA). Under the CIT System, circulation of the physical cheques (presenting banks that use regional centres) over the clearing cycle is limited only to the regional centres. At the regional centres, digital images of the cheques are captured and transmitted to the MPC. Therefore the physical cheques are archived in regional centres. In a situation where presenting banks have to return cheques, they issue a document, which is called cheque return notification to the customers, instead of the physical cheques. Legal validity for a CRN is provided by the PSSA and it states that a CRN shall be deemed to the cheque, which it relates. There are two types of CRNs that depend on the reason for return: CRNs, which allow re presentment; and CRNs, which do not allow re presentment. 13

15 Cheque Clearing Process under CIT System Physical Cheques/ CD ROMs (UI, MICR, Amount + Image) couriered to 1 Presenting Bank 8 Presenting bank collects CRNs + Reports Transmit (UI, MICR, Amount + Image) 2 Regional Centre (RC) 1 7 Download (UI, MICR, Amount + Image UI, Amount, Return Codes/Reason) Download (UI, MICR, Amount + Image) + Reports) 3 MPC 6 RC Transmits (UI, Amount, Return Codes/Reason Paying bank collects CD-ROMs (UI, MICR, Amount + Image) + Reports from RC) RC2 4 5 Paying bank delivers CD- ROMs (UI, Amount, Return Codes/Reason ) relating to returning cheques Paying Bank 14

16 1. Demography 1.1 Mid year population ( 000 persons) (b) 1.2 Unemployment rate (per cent of labour force) 2. GDP 2.1 GDP at current market prices (Rs. Billion) 2.2 GNP at current market prices (Rs. Billion) 2.3 Per capita GNP at market prices (Rs.) (b) Table 1 Key Economic Indicators , ,761 1,742 90,472 19, ,029 2, ,570 19, ,366 2, , Real GDP Growth rate (percentage) (f) n.a 7.2 (f) n.a n.a n.a 4. Price Indices Twelve month Average Change (per cent) 4.1 Colombo Consumers Price Index (1952 = 100) 4.2 Sri Lanka Consumers Price Index ( =100) 4.3 Wholesale Price Index (1974 = 100) 4.4 Annual percentage change of GDP deflator (j) 7.3 (i) 8.5 (h) 6.4 c) 5. Government Finance (per cent of GDP) 5.1 Current Account deficit (-)/surplus (+) 5.2 Budget deficit (before grants) 6. External Finance (US$ million) 6.1 Exports 6.2 Imports 6.3 Trade balance 6.4 Current account balance 6.5 Overall balance 6.6 External assets (months of same year imports) (without ACU) 7. Monetary Aggregates 7.1 Narrow money supply (M 1 ) Rs. bn. 7.2 Broad money supply (M 2 ) Rs. bn. 7.3 Consolidated broad money supply (M 2 b) ,133 6,672-1, ,757 8,000-2, ,347 8,863-2, , (c) -4.4 (c) 5,557 (i) 8,511 (i) -2,955 (i) -668 (c) 146 (c) 4.8 (c) (h) (h) 1,116.2 (h) 8. Interest rates (per cent per annum at end year) 8.1 Bank rate 8.2 Treasury bill yield Primary days days days 8.3 Repo (overnight) 8.4 Reverse repo (overnight) 8.5 Commercial banks average weighted deposit rate 8.6 Commercial banks average weighted prime lending rate 9. Exchange rate 9.1 Period average (Rs./US$) 9.2 End- Period (Rs./US$) (c) (c) (c) (c) 9.00 (c) (c) 6.61 (c) (c) (e) (e) (a) (c) (e) (f) (h) (j) Provisional End June 2006 End July 2006 End March 2006 September 2006 November 2006 (b) (d) (g) (i) Source: Central Bank of Sri Lanka Revised on the basis of provisional estimates from the Census of Population and Housing 2001 End May 2006 August 2006 October

17 Year August 1950 December 1974 September 1981 June 1986 March 1988 February 1989 August 1992 June 1994 August 1994 March 1997 March 1999 February 2002 April 2002 September 2003 February 2004 March 2004 June 2004 October 2004 December 2004 January 2005 February 2005 May 2005 September 2005 November 2005 March 2006 May 2006 Table 2 Chronology of events in the Payment and Settlement Systems Event Functions of the Colombo Clearing House were taken over by the Central Bank of Sri Lanka (CBSL). The CBSL joined the ACU (Intra Regional Clearing Arrangement) Introduction of Proprietary Credit Card by non-bank financial institutions Introduction of ATMs Establishment of Sri Lanka Automated Clearing House (SLACH) Introduction of Credit Cards by commercial banks The CBSL joined the Euroclear System CBSL joined the S.W.I.F.T. Introduction of SLIPS off-line Electronic Fund Transfer System Introduction of Debit Cards Introduced Internet Banking Formation of LankaClear ( Pvt.) Ltd. LankaClear (Pvt.) Ltd commenced clearing operations RTGS System went live LankaSecure, the securities settlement components of LankaSettle went live. The Debt Securities Trading System (DEX) of the Colombo Stocks Exchange (CSE) was officially launched. Bids for the procurement of the application software for the implementation of cheque imaging and truncation system were opened. Cheque Imaging and Truncation (CIT) project planning discussions with BCS Information Systems (Pvt.) Ltd. were commenced. Red Book Payment Systems in Sri Lanka was published by the Bank for International Settlements (BIS) Tender awarded to BCS Information Systems (Pvt.) Ltd. to purchase hardware for the CIT project. The National Savings Bank (NSB) received direct access status in SLIPS Installation of hardware for the CIT at the regional sites Payment and Settlement Systems Act No.28 of 2005 was passed in the Parliament. Conducted an Evaluation of Business Contingency Plan of participants for RTGS/SSSS Issued Guidelines on Business Continuity Planning to Participating Institutions of RTGS/SSSS The Cheque Imaging and Truncation (CITS) System was launched CBSL issued a general direction on CITS System to LankaClear(Pvt) Ltd and participants of the CITS System 16

18 Table 3 Monetary Aggregates (End of Period) (Rs. million) st Quarter 2 nd Quarter 3 rd Quarter 1. Currency (b) 132, , ,411.3 of which held by: 1.1 Government (c) Banks 18, , , , Public 114, , , , Demand deposits 308, , , ,439.6 of which held by: 2.1 Government ( d) 24, , , , Banks (e ) 166, , , , Public 116, , , , Narrow Money Supply M 1 (1.3) + (2.3) 230, , , , Broad Money Supply (f) M 2 822, , , , Broad Money Supply (g) (M 2b ) 1,022,278 1,069, ,084,834 1,116,228.7 Source: Central Bank of Sri Lanka (b) Consisting of subsidiary notes and coins issued by the Central Bank (c) Currency held by the Treasury and the Kachcheries (d) Government demand deposits with the commercial banks and the Central Bank (e) Inter-bank deposits of both local and foreign including deposits of international organizations and commercial banks with the Central Bank (f) M2 is defined as M 1 plus time and savings deposits of the private sector held with commercial banks (g) Based on consolidated monetary survey, which covers aggregated data pertaining to both Domestic Banking Units (DBUs) and Foreign Currency deposits held by residents. M 2b is the sum of M 1 and adjusted quasi money. M 1 is the same in both cases: i.e., DBU monetary survey and consolidated monetary survey. 17

19 Table 4 Currency in Circulation Item 2005 (End of period) (Rs.million) 1 st Quarter 2 nd Quarter 3 rd Quarter 1. Total value of currency notes and coins 132, , , ,411.0 issued (b) 2. Notes and coins per capita (in Rs) 6,733.6 n.a n.a n.a 3. Notes and coins as a % of GDP 5.6 n.a n.a n.a 4. Notes and coins as a % of M Notes and coins as a % of M Total value of currency notes 128, , , , Denomination of currency notes: Rs , , , ,521.0 Rs , ,863 16, ,521.0 Rs Rs , ,252 9, ,997.0 Rs. 50 2, ,621 2, ,549.0 Rs. 20 1, ,589 1, ,624.0 Rs. 10 1, ,523 1, ,597.0 Less than Rs. 10 (c) Total value of Coins (d) 3, ,025 4, , Denomination of coins Rs Rs. 5 1, ,854 1, ,966 Rs Rs cts cts cts Less than cts. 10 (e) Source: Central Bank of Sri Lanka (b) Pursuant to Sect. 51 of the Monetary Law Act, the Central Bank s holding of notes and coins are not considered as part of its currency issues. Includes currency notes of Rs.1, cts. 50, cts. 25 and cts.10. The value of these notes remained unchanged at Rs.3.5 mn., Rs.0.4 mn. Rs.0.5 mn. and Rs.0.5 mn. respectively from (c) Includes currency notes of Rs. 5, Rs. 2 and Re.1 (d) Includes coins of the denomination of Rs.100, Rs.500, Rs.1,000 and Rs.5,000 and other coins. As at end Septembere 2006, the value of Rs. 100 coins, Rs. 500 coins, Rs coins and Rs coins stand at Rs. 1.9 million, Rs.20.1 million Rs.37.0 million, and Rs million respectively. The total value of other coins as at end September 2006, stands as Rs million (e) Includes coins of cts.5, cts. 2 and ct

20 Table 5 ATMs and EFTPOS Terminals st Quarter 2 nd Quarter 3rd Quarter 1.ATMs 1.1 No. of machines (end period) , Volume of financial transactions (during the period in 000) 1.3 Value of transactions (during the period in Rs. mn.) 2. EFTPOS 43,460 12, ,965 14, , , , , No. of machines (end period) 7,013 7,517 7,993 8, Volume of financial transactions (during the period in 000) 2.3 Value of transactions (during the period in Rs. mn.) 10, , , , , , ,020.7 Source: Commercial Banks National Savings Bank Table 6 Payment Cards Item 1 No of Credit Cards 1.2 Domestic & International (end period) 1.3 Domestic Only (end period) Total Number of Cards ,166 77, ,989 1 st Quarter 2 nd Quarter 3 rd 581,437 80, , ,304 85, ,747 Quarter 662,499 87, ,289 2 Total Number of Transactions (in 000) 3 Total Value of Transactions (in Rs. mn) 12, , , , , , , , Source: Commercial Banks 19

21 Table 7 Payment Instructions Handled through Electronic Systems Item st Quarter 2 nd Quarter 3 rd Quarter 1.Telebanking Mobile banking/internet Banking 1.1 No. of financial transactions 1.2 Value of transactions (Rs. mn.) 766,687 56, ,112 28, ,550 28, ,256 34, Source: Commercial Banks Table 8 Cheque Clearing at LankaClear (Pvt) Ltd st 2 nd 3rd 1.Total items ( 000) 37,689 40,068 10,418 10,847 11, No of working days Average items/per day 155, , , , , Average/amount cleared per day (Rs.mn) 12,203 14,222 14,718 15,351 15,565 5.Item processing charges (Rs. 000) 75,380 80,136 20,836 25,559 28,899 Source: LankaClear(Pvt.)Ltd 20

22 Table 9 Cheque Clearing at LankaClear (Pvt) Ltd. by Size Description No. of Items Total Value (Rs. million) st 2 nd 3 rd 1 st 2 nd 3 rd Above Rs. 100 mn , , , , Rs. 51 mn. - Rs.100 mn 2, , , , , Rs. 26 mn. - Rs. 50 mn 5,934 1,412 1,289 1, , , , , Rs. 21 mn. - Rs. 25 mn. 2, , , , , Rs. 16 mn.- Rs. 20 mn. 4,544 1,312 1,171 1,164 84, , , , Rs. 11 mn. - Rs. 15 mn. 8,910 2,321 2,358 2, , , , , Rs. 6 mn. - Rs. 10 mn. 29,053 7,351 7,348 7, , , , , Rs. 1 mn. - Rs. 5 mn. 374, , , , , , , , Rs.0. 9 mn. - Rs. 1 mn. 45,746 12,479 12,713 13,163 43, , , , Rs.0. 8 mn. - Rs mn. 58,440 16,829 16,919 20,599 49, , , , Rs.0. 7 mn. - Rs mn. 72,007 19,240 23,006 22,327 53, , , , Rs.0. 6 mn. - Rs mn. 102,727 29,652 29,364 44,927 65, , , , Rs.0. 5 mn. - Rs.0. 6 mn. 210,665 63,739 63,708 52, , , , , Rs. 0.4 mn. - Rs.0. 5 mn. 229,102 55,795 55,776 79, , , , , Rs.0. 3 mn. - Rs.0. 4 mn. 397, , , , , , , , Rs. 0.2 mn. - Rs mn. 702, , , , , , , , Rs. 0.1 mn. - Rs.0. 2 mn. 1,811, , , , , , , , Below Rs. 0.1 mn. 36,009,328 9,348,671 9,760,883 10,413, , , , , Total 40,067,934 10,417,881 10,846,600 11,559,940 3,384, , , , Source: LankaClear (Pvt) Ltd Table 10 Sri Lanka Inter-bank Payment System (SLIPS) Transactions Description st 2 nd 3rd 1. Total number of items 2,411, , , ,175 1,045, No. of working days Average items/per day 9,924 13,013 14,944 16,553 16, Average/Amount cleared per day (in Rs.mn) Source: LankaClear (Pvt) Ltd 21

23 Description 2005 Table 11 SLIPS Transactions by Size No. of Items Total Value (Rs.mn) st 2 nd 3 rd 1 st 2 nd 3 rd Above Rs.100 mn Rs. 51 mn Rs. 100 mn Rs. 26 mn.- Rs. 50 mn , Rs. 21 mn.- Rs. 25 mn , Rs. 16 mn- Rs. 20 mn Rs. 11 mn -Rs. 15 mn Rs. 6 mn - Rs. 10 mn , Rs. 1 mn - Rs.5 mn. 6, ,917 2,234 12, , , Less than Rs.1 mn. 3,090, , ,114 1,042,855 66, , , ,147.6 Total 3,097, , ,175 1,045,254 86, , , ,917.4 Source: LankaClear (Pvt) Ltd. Table 12 SLIPS Transactions by Type Description No. of Items Total Value (Rs.mn) st 2 nd 3 rd 1 st 2 nd 3 rd 1. Call money lending Foreign exchange settlement 3. Call money settlement 4. Credit transactions 3,070, , ,957 1,036,257 86, , , , Debit transactions 26,947 10,336 9,218 8, Total transactions 3,097, , ,175 1,045,254 86, , , ,917.4 Source: LankaClear (Pvt) Ltd. 22

24 Table 13 Cheque Clearing at Regional Offices of Central Bank Item st Quarter 2nd Quarter (c) Regional Office 1. Anuradhapura 1.1 No. of cheques cleared 224, ,483 62,440 24, Value of cheques cleared (Rs. mn.) 8, , , Matale (b) 2.1 Matale No. of cheques cleared 117, ,660 31,462 13, Value of cheques cleared (Rs. mn.) 2, , Kandy No. of cheques cleared 826, , ,044 84, Value of cheques cleared (Rs. mn.) 36, , , , Matara 3.1 No. of cheques cleared 134, ,817 55,809 22, Value of cheques cleared (Rs. mn.) 5, , , Total no. of cheques cleared at all regional offices 1,301,830 1,376, , , Total value of cheques cleared at all regional offices (Rs. mn.) 52, , , , (b) Matale Regional Office conducts cheque clearing at Matale and Kandy (c) Data up to 10 th May Clearing oprations at Regional Offices of CBSL ceased with the introduction of CIT System on 11 th May 2006 Description Table 14 Volume and Value of RTGS Transactions by Size No. of Transactions Total Value (Rs.mn) st 2 nd 3 rd 1 st 2 nd 3 rd Rs. 1,000 mn and above. 3, ,078, ,193, ,045, , Rs. 900 mn. Rs.1,000 mn. 1, ,107, , , , Rs. 800 mn. - Rs. 900 mn , , , , Rs. 700 mn. - Rs. 800 mn , , , , Rs. 600 mn.- Rs. 700 mn , , , , Rs. 500 mn - Rs. 600 mn. 1, , , , , Rs. 400 mn. - Rs. 500 mn. 2, ,151, , , , Rs. 300 mn. - Rs 400 mn. 3, , ,138, , , , Rs. 200 mn. - Rs. 300 mn. 6,401 2,124 2,321 1,976 1,610, , , , Rs. 100 mn. - Rs. 200 mn. 11,666 4,222 3,958 3,832 1,749, , , , Rs.50 mn - Rs100. mn. 17,028 5,195 4,691 5,084 1,327, , , , Rs.1 mn. - Rs. 50 mn. 80,148 21,650 21,529 22,575 1,174, , , , Below Rs. 1 mn. 21,198 5,687 6,452 6,958 6, ,708,56 1, , Total 149,627 42,348 42,400 43,977 17,542, ,620, ,418, ,271, Source: Central Bank of Sri Lanka 23

25 Table 15 Primary and Secondary Market Transactions in Government Debt Securities Item st 2 nd 3 rd 1. Primary Market 1.1 Treasury Bills Total issues -Auctions/Placements (Rs. mn.) 485, , , , No. of auctions Total bids received from the mkt (Rs. mn.) 731, , , , Total bids accepted from the mkt (Rs. mn.) 343, , ,430 88, Treasury Bonds Total issues Auctions/Placements (Rs. mn.) 229, ,142 78,934 61, No. of auctions Total bids received from the mkt (Rs. mn.) 171,442 47,312 52,407 45, Total bids accepted from the mkt (Rs. mn.) 52,200 13,996 12,025 15, Secondary Market 2.1 Treasury Bills Outright purchases (Rs. mn.) 70,679 25,709 20,008 27, Outright sales (Rs. mn.) 371, ,848 93,493 78, Repo transactions (Rs. mn.) 392,851 96, , , Reverse Repo transactions (Rs. mn.) 258,125 26,093 63,229 81, Treasury Bonds Outright purchases (Rs. mn.) 127,903 58,165 33,997 26, Outright sales (Rs. mn.) 64,176 66,835 48,213 38, Repo transactions (Rs. mn.) 1,066, , , , Reverse Repo transactions (Rs. mn.) 1,070, , , ,936 Source: Primary auctions and issues by Public Debt Dept. and weekly reporting system, Central Bank of Sri Lanka 24

26 Table 16 Transactions in LankaSecure System Item 3 rd Quarter 2006 Primary Market Treasury Bills Total Issues-Auctions/Placements (Rs. mn.) Total maturities (Rs. mn.) Treasury Bonds Total Issues-Auctions/ Placements (Rs. mn.) Total maturities (Rs. mn.) Secondary Market Treasury Bills Outright Purchases (b) (Rs. mn.) Outright Sales (c) (Rs. mn.) Repo Transactions (Rs. mn.) Rev. Repo Transactions CBSL Other Total CBSL Other Total 47,755 30, ,755 50, , , , ,274 61,031 54, , , , , , ,608 61,031 54, , , , , , , , ,745 1,152, , , , ,813 1,176,307 1,141,426 2,327,122 2,303, , , , ,813 1,342,170 1,342,172 3,479,277 3,469,277 Treasury Bonds Outright Purchases(b) (Rs.mn) Outright Sales (c) ) (Rsmn) Repo Transactions (Rs.mn) Re-repo Trans. (Rs.mn) 1, , , , , , , , , , ,516-2, , ,624 1,951,995 1,949,961 1,893,785 1,893,994 1,951,995 1,951,995 2,327,619 2,327,619 (b) Includes RvP and RPG Transactions (c) Includes DvP and RPG transactions Source: Central Bank of Sri Lanka Table 17 Value of Payments made through Money Orders and Postal Orders 1. Money orders Item 2005 (In Rs. 000) 1 st 2 nd 3rd 1.1 Ordinary money orders 10,102,743 2,115,412 2,028,554 2,410, Telegraph money orders 393,914 96,123 89, , Fax money orders 1,337, , , , International money orders 59,776 16,320 12,283 13, E Money orders British postal orders 31,917 9,635 8,896 6, No. of Post offices(end period) (b) 4,704 4,705 4,705 4,705 (b) Including post offices, sub-post offices and agency post offices Source: Department of Posts 25

27 Table 18 Settlement of Payments through Asian Clearing Union (ACU) Item (In Rs. million) 1 st Quarter 2 nd Quarter 3 rd Quarter 1. Total receipts 8, , , , , Total payments 152, , , , , Net settlement 143, , , , , Source: Central Bank of Sri Lanka Table 19 Participation in SWIFT by Domestic Institutions Item End September Total domestic SWIFT users: Of which live Members: Of which live Sub-members: Of which live Participants: Of which live Total SWIFT users: Of which live 7,601 7,465 7,654 7,527 7,813 7,667 8,085 7,845 8,216 8,046 Members: Of which live 2,217 2,203 2,327 2,312 2,292 2,280 2,344 2,334 2,305 2,302 Sub-members: Of which live 3,130 3,079 3,083 3,051 3,058 3,019 3,113 3,051 3,165 3,107 Participants: Of which live 2,254 2,183 2,244 2,164 2,463 2,368 2,628 2,460 2,746 2,637 Source: Society for Worldwide Interbank Financial Telecommunication (SWIFT) 26

28 Table 20 SWIFT Message Flow to/from Domestic Users Item st Quarter 2 nd Quarter 3rd Quarter Total messages sent 2,251,033 2,227, , , ,083 of which : Category I 339, , ,771 95, ,251 Category II 356, ,337 96,172 92,440 94,180 Total messages received 1,985,150 2,344, , , ,881 of which : Category I 718, , , , ,898 Category II 89,111 84,071 22,910 22,462 24,045 Domestic Traffic 763, , , , ,517 Memorandum Item: Global SWIFT Traffic 2,299,074,199 2,518,285, ,119, ,417, ,577,140 Source: Society for Worldwide Interbank Financial Telecommunication (SWIFT) Category I - Customer (Funds) Transfers Category II - Bank (Funds) Transfers Table 21 Institutional Framework Item Central Bank 1.1 Number of institutions Total number of branches including Head Office 2. Commercial Banks 2.1 Total number of commercial banks Total number of commercial bank 1,163 1,319 1, branches (includes head offices, excludes Pawning Centers) 3. Licensed Specialized Banks (a) 3.1 Total number of Licensed Specialized Banks 3.2 Total number of Licensed Specialized Bank branches 4. Total number of Primary Dealers Post Offices Total number of Institutions Total number of Branches (b) 4,599 4,670 4,647 4,704 Source: Central Bank of Sri Lanka Department of Posts (a) Includes financial institutions, which have been issued with license under the Banking Act to operate as licensed specialized banks (b) Includes post offices, sub-post offices and agency post offices 27