Ceylon was a South Asian island nation situated in the Indian Ocean, to the southwest of the Bay of Bengal. It was separated from the Indian peninsula by the Palk Strait and the Gulf of Mannar. It shared a maritime boundary with the Maldives to the southwest and with India to the northwest. The entire island of Ceylon was under British rule until it became the nation of Sri Lanka.

From 1796 until 4 February 1948, Ceylon was a British Crown colony. Prior to Dutch governance, the island of Ceylon was divided between the Portuguese Empire and the Kingdom of Kandy, who were engaged in a war for control of the entire island. In the late 18th century, weakened by their conflicts against Great Britain, the Dutch were conquered by Napoleonic France. Unable to govern their part of the island effectively, the Dutch transferred control of it to the British, despite objections from the Dutch residents there.

The British abolished state monopolies and compulsory labor service, freeing up Ceylon's economy and encouraging new enterprises. They sold crown land at low prices to encourage plantation agriculture, with coffee being particularly profitable. However, coffee production was decimated by a leaf disease in the 1870s, leading to a successful shift to tea and rubber as plantation crops. These industries attracted capital investment and created a demand for permanent workers, leading to the settlement of Indian labor and the growth of ancillary services. Increased trade, aided by improved infrastructure, gradually integrated rural areas into the monetary economy, but traditional farming methods persisted in some regions. 

Ceylon introduced its first paper money in 1894 with 5 rupee notes, followed by other denominations until 1926. Emergency issues of 5, 10, 25, and 50 cents were introduced in 1942. The Central Bank of Ceylon took over in 1951, issuing notes until 1977 when the Central Bank of Sri Lanka took over. New denominations and a polymer 200-rupee note were introduced in 1998, printed by Note Printing Australia.

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