Treasury Bonds issued by the Government of Sri Lanka to Foreign Investors
(These Guidelines/Procedures shall replace the Guidelines/Procedures issued to Foreign Investors dated 30/11/2007 and shall be effective from 23/05/2008)
- Eligible Investors
Only the following categories of foreign investors are eligible to invest in Treasury bonds issued by the Government of Sri Lanka:
- Foreign country funds, mutual funds and regional funds;
- Corporate bodies incorporated outside Sri Lanka;
- Citizens of foreign states.
- Investment
Eligible investors could buy Sri Lanka Government Treasury bonds:
- In the case of Primary Market purchases - from the Primary Delaers (PDs) appointed by the Central Bank of Sri Lanka (CBSL);
- In the case of Secondary Market purchases - from PDs or Licensed Commercial Banks (LCBs)
(The list of such institutions is given at the end of this circular)
- Registration
Participating agents (LCBs and PDs) shall be responsible for registering details of their foreign investors at the Central Depository System (CDS) maintained by the Public Debt Department (PDD) of the CBSL.
CDS will issue statements containing the following to foreign investors in the foreign account category.
- A monthly statement confirming the transactions that have taken place during the month.
- A statement confirming the outstanding balance held by each investor semi annually.
- A statement indicating the maturity proceeds and/or interest payments whenever such payments fall due.
These statements will be issued directly to the name and address of the investor, as registered in the CDS.
- Status
The Treasury bond principal and interest due thereon are direct, unconditional, general, unsecured obligations of the Government of Sri Lanka and rank and shall rank pari passu without any preference among themselves with all other outstanding unsecured and un-subordinated obligations of the Government of Sri Lanka present and future.
- Tenure
Foreign investors are permitted to purchase, sell or transfer Treasury bonds with any maturity period.
- Payments for Treasury Bonds
Eligible investors under Clause 1 above shall open a special Rupee account named "Treasury Bond Investment External Rupee Account (TIERA)" in a LCB (hereinafter called as 'custodian bank' for functions relating to transfer of funds/money) and make payment for purchase of Treasury bonds in Rupees by crediting that account. The custodian bank has to make necessary arrangements to transfer respective Rupee amounts to the relevant party. However, funds available at NRFC accounts in Sri Lanka are not permitted to transfer to TIERA.
- Issue and Delivery of Treasury Bonds
The Treasury bond shall be issued in scripless form to foreign investors who have duly made payments as specified in Clause 6 and by registering in the CDS as specified in Clause 3.
- Repo Market Transactions
Eligible foreign investors are permitted to engage in repo transaction using Treasury bonds purchased under this scheme as collateral.
- Interest on Treasury Bonds
- Interest Payments: Interest shall be payable in Rupees semi-annually through Real Time Gross Settlement System (RTGS) by the PDD of the CBSL on behalf of the Government on respective payment dates of particular Treasury bond series to the respective participating agents registered with the CDS and such participating agents are responsible to transfer such amounts to TIERA of foreign investors with value benefits on the same day. If any interest payment date falls on a day which is not a business day for the banks in Sri Lanka, payment shall be made on the next business day.
- Interest Period: The "Interest Period" is the period from and including the date of issue to but excluding the first interest payment date and each successive period from and including an interest payment date to but excluding the next succeeding interest payment date.
- Rate of Interest: The rate of interest payable on Treasury bonds shall be the coupon rate of the specific Treasury bond series.
- Repayment of the Principal
- The principal repayable on Treasury bonds shall be payable in Rupees by the PDD of the CBSL on behalf of the Government to respective participating agents of the CBSL and such participating agents are responsible to transfer the respective payments to the TIERA of foreign investors with value benefits of the same day.
- The principal sum of a Treasury bond shall be repayable on the maturity date. If the maturity date falls on a day which is not a business day for the banks in Sri Lanka, repayment of principal shall be made on the next business day.
- Repatriation
All proceeds received by sale or transfer or maturing of Treasury bonds and interest income of Treasury bonds shall be fully repatriable. However, such repatriation should be routed through the custodian bank who maintains the TIERA.
- Joint Holdings
Treasury bonds may be held jointly by holders. Repayment of principal and payment of interest shall be based on the agreement between custodian bank and joint holders.
- Tax Treatment
Eligible foreign investors who invest in Treasury bond market pay no further tax on earnings on such bonds apart from the 10% withholding tax imposed at the primary issue of such bonds.
- Stamp Duty
All documents used on the issue, transfer or redemption of Treasury bonds are free from stamp duty.
- Jurisdiction
The courts in Sri Lanka shall have exclusive jurisdiction in respect of all matters relating to Treasury bonds issued by the Government of Sri Lanka.
- Governing Law
The terms and conditions of Treasury bonds shall be governed by and construed in accordance with the laws of Sri Lanka.
Further operating instructions in this regard will be issued by the Controller of Exchange or the Superintendent of Public Debt as the case may be.
Available Bond Series