Synergies between state banks

Sri Lanka’s state banks are hoping to adopt initiatives in order to be a major competitive force in the banking sector.

They are in discussion to unlock their potential by looking at synergy initiatives, the first time ever in Sri Lanka’s history that state banks have worked together. This is also the first demonstration of synergy between SEMA (Strategic Enterprises Management Agency) enterprises where all institutions will benefit by working together to leverage infrastructure and business models.

Banks are in talks about shared services under a common structure, such as common applications, ATM networks, call centres and even pension management fund expertise. In addition, they have also drawn up initiatives to collaborate on technical and service partnerships such as common training facilities, communication linkages, shared security forces and cash and carry armoured vehicles.

The aim of these synergies is to streamline the state banks and improve the efficiency of the state sector so they will be as good as or better than the private banks. One of the biggest problems faced by state banks is that the foreign and private banks have been aggressive on the retail banking and financial services side. There is very strong competitive activity in the banking industry where private banks are securing the best corporate accounts.

Furthermore, state banks have a large distribution infrastructure and have a social service obligation in providing banking services to the entire country. From a geographic perspective, state banks are spread far too widely, resulting in a high overhead. On the other hand, private banks have an exposure only in principal locations which allows them to maintain a low overhead at the same time secure the most profitable corporate clients.

The proposed synergies have been designed to combat the key issues by bringing the private sector and holding company work ethic and best practices to the state banks. “Next year, SEMA is hoping to have a leaner and meaner team of banks. This will be proven by the bottom line,” said Chris Dharmakirti, Chief Operating Officer of SEMA. The performance of the banks is transparently monitored by certain benchmarks. “We are confident that we will be able to see improvement on all Key Performance Indicators (KPI),” Dharmakirti added. In addition, through collaboration, certain banks may have specific best practices or strategies in use that other banks might adopt.

He says banks have done an excellent job in reducing these problems. “They (banks) are excellent in terms of their focus but they have to increase their lending and increase their efficiency and productivity.” Through synergizing, banks will link their infrastructure together so they have a wider and bigger reach on using other strategies. The heads of the state banks along with SEMA are due to meet President Mahinda Rajapaksa later this month to discuss these developments.

(CD) (NG)