History of banking

To accommodate dynamic economic and financial system developments upon gaining independence in 1948, the post-independence Government of Ceylon (as Sri Lanka was then known) established the Central Bank of Ceylon to maintain an active monetary policy regime and a dynamic financial sector to support and promote economic growth.

Prior to the establishment of the Central Bank, the Currency Board System set up under the Paper Currency Ordinance No.32 of 1884 functioned as the country’s Monetary Authority, though very narrow in its capacity.

The Central Bank was given wide powers to administer and regulate the entire money, banking and credit system of the country.

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

The stabilization of domestic monetary values (maintenance of price stability).
The preservation of the par value or the stability of the exchange rate of the Lankan Rupee (maintenance of exchange rate stability).
The promotion and maintenance of a high level of production, employment and real income in Sr Lanka.
The encouragement and promotion of the full development of the productive resources

However, in keeping with the worldwide trends in central banking and the rapid changes in international financial markets, therefore 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.
under section is description of the historical currency

Kahapana Plaques

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.Accordingly, the coins authorized by the King carried the Royal stamp. When these coins passed from one to another, various unique markings were added by each owner. As a result, these coins bear a multitude of different symbols.

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

On the coin face, the goddess Lakshmi is standing on a lotus flower grasping two lotus stems that are protruding from either side of the flower. The stems, which reach her shoulders, each carry a blossomed lotus flower upon which stands a tusker holding a clay water vase

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’.

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.

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.The main difference between these two types of coins is that the locally produced coins are missing an English character that can be seen on the coins minted in Rome.

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 square shaped hole in the center.

Arabic Coins

These coins are minted using metals such as copper and silver. On the face, there are devotional phrases in Arabic. The year of issue is inscribed on the flip side.

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.

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.

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.

Colonial Era

Even though we divided Sri Lanka’s past into eras such as Anuradhapura, Polonnaruwa and Kandy; in all those eras, the entirety of Sri Lanka was never governed by one King. In different instances, the island was invaded by foreign powers.

profits through international trade (via the Silk Road), win praise and maintain our splendid international reputation.

Malacca

The Portugal Coat of Arms appears on one side of the Malacca coin. On either side of the seal the letters AM, MA or DM can be seen.

Gini Massa

The coin ‘Gini Maessa’ is commonly known as ‘Gini Massa’. There is an inscription of a gridiron on its flip-side.

Coins of Saints

This series of coins bear the Portuguese Coat of Arms on one side (with GA imprinted on either side) and an image of a Saint on the flip-side

Dutch Period (1658–1796)

Duits

The coin that was most commonly used in transactions of this period is the Duit. This is a type of very small Copper coin. Due to its size, it was very inconvenient to count large numbers of Duits during transactions.

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.

British Period (1796–1948)

There are two types of coins the English used for transactions in Sri Lanka. The first was a gold coin minted in Madras known as ‘Tharaka Pagodi’ or the Star Pagodi. One Star Pagodi was the equivalent of 45 Panam or 180 Thuttu.They also issued ½ Thuttu and ¼ Thuttu coins in 1801. On one side of these coins there was an image of a tusker and the year it was issued. On the flipside, Ceylon Government is engraved along the edge while the value of the coin can be seen at the center.

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

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