Local banks disburse Rs.46 bln from Investment Fund Accounts on road projects
View(s):Sri Lanka’s commercial banks have been compelled to contribute to the country’s development process through long term lending from an investment fund created with savings made from tax cuts under a proposal made in the government’s 2011 budget, official sources said.
The creation of the Investment Fund Account by these banks has promoted domestic contractors to various project financing to undertake construction work.
Eighteen road construction projects totaling 575.62 km were developed with financial assistance of Rs. 46 billion provided by the Commercial Bank, National Savings Bank, Bank of Ceylon, HNB, DFCC and Peoples Bank through their Investment Fund Accounts, a senior official revealed. Under the government’s 2011 budget, all banking and financial institutions have been required to create separate Investment Fund Accounts to transfer savings arising from tax cuts proposed in the budget.
The government reduced Value-Added Tax on financial services to 12 per cent from 20 per cent and reduced tax on profits of banking and financial institutions to 28 per cent from 35 per cent.
The Finance Ministry has directed the banks to disburse the money accumulated in Investment Fund Accounts to ensure that tax savings are used efficiently and productively in the national economy at a stage of accelerated development.
State institutions can now borrow direct from local banks instead of being dependent on Treasury borrowings from foreign institutions, leading to benefits such as savings of foreign currency, faster disbursements and the active participation of the lending banks in monitoring progress of projects.