COLOMBO Jan 6 (Reuters) - Sri Lankan shares fell for a third straight session on Wednesday and closed at their lowest level in more than three weeks as an expected rise in yields of government securities eroded investors' appetite for risky assets.

The yield on 91-day t-bill rose 14 basis points to a more than two-month high of 6.59 percent at a weekly auction on Wednesday, after the central bank increased statutory reserve ratio by 150 basis points with effect from Jan. 16.

The main stock index fell 0.4 percent, or 27.65 points, to close at 6,817.65, its lowest close since Dec. 14.

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"We are advising investors to cash out 30 percent of their portfolio with expectation of one-year t-bill yield to move up to 10 percent by end of the first half given tight global funding for Sri Lanka," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

Analysts expect more investors to shift from risky assets to fixed assets with increasing interest rates.

One-year t-bill yield was at 7.30 percent on Wednesday.

"Foreign fund is going to get difficult and the local borrowing cost is going to be high as the government will have to mainly depend on local funds," Mathew said.

The central bank on Wednesday raised the SRR by 150 basis points to 7.50 percent, to curb the excess credit growth and to stabilise the rupee hovering near record lows and slow private sector credit growth.

Foreign investors sold a net 131.9 million rupees ($916,609) worth of equities on Wednesday. They have sold a net 1.3 billion rupees worth of equities so far this year compared to 4.43 billion rupees in 2015.

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Foreign selling accounted for 87.5 percent of the day's turnover of 1.4 billion rupees.

Shares in Tal Lanka Hotels Plc, which edged up 2.8 percent, accounted for around 62 percent of the day's turnover.

A 3.2 percent loss in Lion Brewery and a 2.3 percent fall in Ceylinco Insurance dragged the overall index. ($1 = 143.9000 Sri Lankan rupees) (Reporting by Shihar Aneez; Editing by Anand Basu)