Financial Times

A Sri Lankan banking expert said last week that the worsening security situation, higher inflation and high tax levels on the banking sector by an increase of five percent are major challenges to maintain the growth momentum in the future.

“The effective tax rate in some banks is going up as high as 60 percent which cannot be sustained while making the high level of investment needed to maintain satisfactory service standards and the high capital adequacy requirements imposed,” Amitha Gunaratne, Managing Director, Commercial Bank said in an interview with The Sunday Times FT.

He said that some of the other challenges would be increased competition, changing consumer habits and customers becoming very demanding and financially sophisticated.

“At least the challenges posed by competitors and changing customer needs could be overcome through better training and reorientation of staff, investing more on IT system upgrading, improving branch layouts, extending network and offering new methods of delivering financial services,” he explained. “But there are things that we cannot do without the co-operation of the regulators and the tax authorities. Therefore it is necessary that authorities recognise the important role played by the financial sector, especially with regard to creation of employment and the collection of taxes on behalf of the government and refrain from imposing burdensome taxes and focus on simplifying the tax structure to broaden the tax base,” he added.

He said that this year too the bank has been able to maintain the same growth rates and to meet the budgetary targets.

“Our branch expansion programme has also continued with the opening of three new branches so far this year and we propose to open some more during the year further extending our net work. Our Corporate Banking, Retail Banking and Trade Finance Divisions have also continued to perform well,” he added.

However he said that the high tax regime targeting the banking sector inhibits the ability to maintain the necessary minimum capital, Capital Adequacy Ratios as required by BASEL II while carrying out the heavy investments necessary to maintain the standards of service now commonly expected by customers.

Commercial Bank was adjudged as the Best Bank for the 8th successive year mainly based on the financial and operational performance of the bank, taking into account criteria such as profits and profitability, increase in net interest and fee based income and the growth in total deposits, while keeping costs relatively stable.

“If we have been able to repeat this performance continuously, it has been mainly due to good team work, understanding and co-operation extended by the staff, commitment to achieving goals and objectives. Our ability to maintain the required Capital Adequacy Ratios, one of the most important indicators of the strength of a bank, also played an important part in our nomination,” Gunaratne said.

By Lashica Abeywickrama

Recent amendments to banking laws relaxing Parate Executive rules will help small and medium scale companies but on the other hand it could also delay loans as banks bring in cumbersome loan processes, Nirmalee Samaratunga, President of the National Chamber of Commerce said.

With banks likely to face difficulties in ensuring loan recoveries, a slight reluctance in the provision of loans would be experienced. “Banks will have lengthy legal procedures (to minimize default rate) in terms of providing the loans,” Ms. Samaratunga said, adding that she hoped state banks would make things easier.

Commenting about the role of the chambers she said that they will provide support to the SMEs in creating awareness and developing solid business plans and there were ongoing programmes for this.

“We would make use of the corporate resources we have within the chamber to support the SMEs” she said.

Recently the government said SME loans of Rs 5 million and below will not be affected any more by Parate Execution under recent amendments to the recovery of loans by Banks Special Provisions.

Parate Execution has been used to seize companies and their properties, and often the private assets of company directors pledged as collateral, when these companies fail to settle their loans.

Many small firms have collapsed and have been seized by banks under this process.

Navas Rajabdeen, President of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL), said that they have been trying for the past 10 years to scrap this highly unfair law where an average of two companies closed down per day due to Parate Execution rights to banks.

Entrepreneurship is meant to be the back bone of the economic growth but despite encouraging them, Parate Execution has resulted in less development in the SME sector, he said.

According to Rajabdeen the banks should also be conscious of their social responsibilities towardss this sector.

“The banks should reschedule and restructure themselves in provision of the loans to the SME sector,” he said.

Suntel recently signed the first-ever local private sector partnership with the United Nations Development Programme [UNDP] in Sri Lanka where funds from the Suntel Relief Trust Fund will be channelled through the UNDP's Micro-Enterprise Development project (MED) in nine tsunami affected districts to rehabilitate affected livelihoods.

The MED project is reconstructing lost infrastructure related to livelihoods, providing capacity development training and has established a revolving loan fund through the Central Bank at very low interest rates for disadvantaged tsunami-affected people, Suntel said in a statement.

The initial contribution of Rs 813,000 from the Suntel Relief Trust Fund will be utilized in Noonnawella in the Matara district. The agreement was finalized at the UNDP country office by the UNDP Country Director, Abu Selim, and the Managing Director of Suntel, Jeremy Huxtable in the presence of a representative of the External Resources Department of the Ministry of Finance and Planning.

Abu Selim, Country Director, UNDP Sri Lanka, said this is the first local private sector partnership for tsunami-recovery agreed to by the UNDP in Sri Lanka. “I would like to personally commend Suntel and its management for its contribution towards tsunami rehabilitation in the past year.

The UNDP is glad to partner with a socially responsible and committed Corporate like Suntel and we hope to continue to seek and encourage many more such private sector engagements for development in Sri Lanka,” he said.

Jeremy Huxtable, Managing Director Suntel Limited, said Suntel has been the pioneer of latest technology in the fixed line telecommunications industry in Sri Lanka and as a socially concerned and responsible Corporate it has endeavoured to also lead in promoting the welfare and development of the country.

The project in Noonnawella focuses principally on women members among the affected fishing community. UNDP plans to work with 60 women in crafts such as crochet, knitting and embroidery.

They will be assisted to turn out table linen, soft toys and other products. All resource persons will be from the community. The programme will also assist them to establish local and overseas markets for their finished products, especially through linkages to the National Crafts Council and MED project partners.

HSBC has launched an SMS-based service to all credit card customers, which enables them to check their credit card balances anytime from anywhere in the world, the Bank said.

Known as ‘HSBC CC’, the service eliminates the hassle of having to visit the bank or call HSBC to check their credit card balances.

This service is available to all HSBC credit cardholders free of charge.

HSBC CC can be accessed via SMS from any mobile service provider or through any CDMA phone.

“Registering for HSBC CC is a simple process. All a customer needs to do is complete the form attached to the ‘HSBC CC’ brochure (available at all HSBC branches) and hand it over to a branch or mail it to the HSBC Card Centre. Upon registration HSBC will send a confirmation SMS to the customer. Once a message is received, all the customer needs to do is type “HSBC CC” send it to 0772 472 222 or 0772 HSBCCC to receive the following information: Card type and the last four digits of the credit card; previous day credit card balance; available credit; minimum repayment and due date.