Indian punch-marked silver coins probably first reached Sri Lanka during the first century BC. Some copper coins were also locally produced in the first century BC. Roman coins were also imported into Sri Lanka during the fourth century AD. Some coins were produced locally during the ninth and tenth centuries, and in the eleventh century some gold coins were produced. All these coins imitated southern Indian coins.
In 1505 a Portuguese fleet landed on Ceylon. The ruling Sinhalese allowed the Portuguese to build a fort. The Portuguese brought their own coins rather than use locally produced ones. The Portuguese produced some coins in Colombo between 1640 and 1649, but after that Portuguese coins for Sri Lanka were produced in Goa. Under Portuguese rule between 1505 and 1658, Indian coins and Portuguese coins minted in Goa were used, though the Real was the unit of account.
By 1612, the Portuguese controlled most of the island. However, the Kandyan kingdom enlisted the Dutch to oust the Portuguese, and Ceylon by 1658 Sri Lanka had come came under the control of the Dutch East India Company (VOC). Initially, the Dutch did not issue any coins locally, but countermarked the coins in circulation and imported copper coins from Indonesia as well as silver and gold coins from the Netherlands. The VOC began issuing copper coins in 1660 and silver rupees in 1784. The Dutch government issued creditbrieven between 1785 and 1794 and Kasnooten between 1794 and 1800 which were denominated in Rijksdaalder. Indian Rupees (INR) and Dutch Rijksdaalder (XNLR) circulated in Ceylon before it became a British Crown Colony.
In 1796 the British defeated the Dutch. In 1802 Ceylon became a crown colony.
Ceylon achieved its independence on February 4, 1948 and was renamed the Republic of Sri Lanka on May 22, 1972. The British called all Dutch notes in and issued British notes in their place. Silver was coined into rix-dollars locally at the silver content of 1 pound (English weight) = 50 Ceylonese rix dollars (= Spanish $17) in 1803 and 1 pound = 60 Ceylonese rix dollars in 1808. The British continued to mint Rix Dollars until 1821, but Indian Rupees eventually became the principal medium of exchange in Ceylon.
On March 10, 1812, the Ceylonese Rix Dollar was set at 1 Ceylonese Rix Dollar = 21 Pence. By the end of 1813 the exchange rate had fallen to 1 Ceylonese rix dollar = UK 1 shilling 1-1/3 pence. Ceylon, proclamation of 22 March 1823 made the Madras silver rupee legal tender at 1-1/3 Ceylonese rix dollars = 1 Madras rupee. The rate was fixed at 1 Ceylonese Rix Dollar = 18 Pence on April 4, 1825, putting at par with the Indian Rupee.
Ceylon adopted the Rupee on January 1, 1872, and divided the Ceylon Rupee into 100 cents, rather than 16 Annas as in India. British gold Sovereigns were legal tender. A currency board began issuing banknotes on January 1, 1885. The Government of Ceylon issued coins and banknotes while it was a British Crown Colony, but the Ceylonese monetary system was subsidiary to the Indian monetary system through a currency board. The Ceylon Rupee (LNR) became an separate currency on May 27, 1941, though it was still at par with the Indian Rupee.
A Central Bank replaced the currency board on August 28, 1950 and began issuing the Ceylon Rupee. On December 8, 1950, the anchor for the Ceylon Rupee was switched to the US Dollar. After Ceylon became Sri Lanka, the Ceylon Central Bank replaced the Ceylong Rupee with the Sri Lanka Rupee (LKR) at par on May 22, 1978.