"There was high demand for currency due to the holiday season and the recently concluded election," the bank's Senior Deputy Governor W A Wijewardene said.
The bank's currency department usually caters for about a 10-15 percent growth in cash demand during the festive seasons of December and April.
But the local government elections in March put extra pressure on money circulation this time.
"There is usually heavy demand for cash during any election period and it takes about three weeks to come back into the system. This time it coincided with the New Year holidays, and we issued more cash into the system," he said.
There was also a scarcity of 1000 rupee notes on the supply side with commercial banks reporting few customers returning them to banks.
Central Bank's currency department, however, denies there are any shortages of 1,000 rupee notes.
The bank was expected to replace old 1000 rupee notes with the new 2,000 rupee note, this year.
-LBO Newsdesk