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Wednesday July 6th, 2022

BOC: The Banking Giant with Steady Hands

Nilantha Meneripitiyage Deputy General Manager – Corporate & Offshore Banking Bank of Ceylon

Bank of Ceylon, Sri Lanka’s largest bank, has contributed to transforming the economy since its founding in 1939. It is continuing in that journey, empowering communities, and businesses, providing relief and stability amidst an economic crisis

Nilantha Meneripitiyage discusses Bank of Ceylon’s indelible contribution to the economy, growing exports, empowering SMEs, investing in digital technology to improve financial inclusiveness, and the bank’s stabilizing impact in times of crisis. Meneripitiyage is the Deputy General Manager – Corporate & Offshore Banking at Bank of Ceylon, Sri Lanka’s single-largest corporate entity. His previous roles at BOC include the Deputy General Manager – Banking Operations and Development Banking and the Chief Executive Officer/Executive Director of Bank of Ceylon (UK) Ltd., a fully-owned subsidiary of Bank of Ceylon. He was the Operations Manager at the bank’s Maldives branch, Assistant General Manager – Risk Management, and oversaw some of Sri Lanka’s large corporate clients and state-led infrastructure projects. Excerpts of the interview are as follows:

As the largest bank in the country, the Bank of Ceylon has considerable influence over the economy and socio-economic development. Can you briefly tell us about the bank’s impact on the economy and lives of the people since its founding in 1939?

We have come a long way since the bank’s founding a little more than eight decades ago. We have firmly established the government-owned Bank of Ceylon as the largest bank in Sri Lanka that continues to fulfil its obligations to people from all walks of life, especially those in isolated rural communities. BOC has a presence in remote areas in the country where no other financial institution would take the risk to maintain banking operations, simply because we are committed to our national responsibility as a state institution to uplift the lives of the people while remaining a sustainable, well-managed business that creates financial value for the country.

We are present in every part of the island with 649 branches and 1,415 digital banking touchpoints with a customer base of 14.4 million and a Rs4 trillion balance sheet to date, demonstrating why Bank of Ceylon is the largest single entity in the country by far. We have reported the best bottom line in the country in the past, including the challenging recent year.

BOC has been at the forefront of economic development in good times and challenging ones, uplifting the standard of living of the people of Sri Lanka. If you take the vaccination programme of the past one and a half years, where every citizen of this country was given free vaccinations against Covid-19 which was pioneered by BOC, considering the national interest. We also enabled the importation of essentials including fuel, pharmaceuticals and vaccinations for Covid during this period. We enable and empower businesses and livelihoods from microfinance to SMEs, large-scale corporations, and multinationals.

We have dedicated export and import teams at head office and specialized centres throughout the country at the branch level to encourage and provide financial support to local exporters and traders. The objective of our dedicated export circle is not only to cater to existing exporters but also to encourage other businesses to explore export markets. We provide them with financial support and advice beneficial to their business and consult with various other export-oriented organizations in the country like the Export Development Board to give them access to and growth their global markets share. The bank facilitates the opening of LCs from the doorsteps of exporters or the comfort of their offices or homes with an online portal we introduced.

Concerning the infrastructure development in this country, people think that only external funding agencies and countries funded the very conducive road network that has made transportation amazingly easy, but this is not entirely correct. As a government bank, we have extended a large amount of money towards funding the infrastructure development of this country. We have also contributed to developing water supply and drainage and renewable energy infrastructure like wind and solar.

How does the bank see the debt crisis unfolding?

There is a challenging economic situation in the country with rising inflation, high food prices, medicine and fuel shortage related to a foreign exchange crisis. We are optimistic that we will be able to get out of this situation soon with the World Bank, IMF, and various other donor agencies and countries coming forward to assist Sri Lanka. Of course, debt restructuring may entail other painful measures, but Sri Lanka can get the economy back on track if we can further enhance good governance and sound macro-economic management with accountability, devising appropriate and actionable strategies, and work toward a long term plan for sustainable growth.

As citizens of this country, people have to shoulder responsibility by being conscious of saving, minimising wastage and caring about the environment and social governance. As banks, we look forward to ensuring that funds do get mobilized to where it is needed and that those funds are utilized at the optimal level possible. We should use the limited foreign exchange coming into the country to stabilize the supply of essentials like fuel which has a bearing on the rest of the economy, from the transportation sector to electricity generation. In the long run, with the assistance of the World Bank and donor agencies, the debt restructuring and the prudential macro-economic guidelines of the Central Bank and the Treasury, I hope that the country will be back on a firmer footing.

If there is a silver lining in all this, what is it? Where does the bank see opportunities over the next year or beyond?

The country depends on three foreign exchange sources: worker remittances, exports, and tourism. Worker remittances calculated a considerable amount of foreign currency earnings annually before falling off a cliff, along with tourism earnings, after Covid-19. The export sector is also facing pressures from global economic challenges. The Central Bank has taken measures to ensure workers send their foreign exchange earnings through formal channels to recover the drop in remittances. The government is also encouraging more young people to seek employment opportunities overseas. We should see remittances improve as the economic reforms gather momentum. The bank has also taken measures to increase remittance inflows in the country.

In terms of exports, we have to focus more on value-added products and encourage more export-related businesses to increase the export income to the country. As the largest bank in the country with a peerless network of international banking partners and the most overseas branches for a domestic bank, we are extending every assistance to large and small exporters to reach and grow their export market, being a trustworthy financial partner.

Despite the dismal period experienced by the tourism sector in recent years, the industry holds a lot of promise. Resplendent natural wonders and culture ensure that Sri Lanka remains conducive to tourism. We are exploring ways to assist the tourism industry even as the government-led debt moratorium expires this year. We are creating opportunities for SMEs to enter the export market with loans ranging from Rs50,000 to Rs1 billion.

Another area that could unlock opportunities is sustainability. There are many funding lines for green business initiatives and renewable energy. Recently, the Central Bank declared its policies on taxonomy related to green financing to encourage investments in sustainability, and BOC leads in attracting funds to these areas, receiving various funding from donor agencies like the ADB and AIIB for wind power and hydropower projects. The bank is also pursuing a green banking initiative by converting our branches to renewable energy sources like solar.

How are the bank mitigating risks associated with the unfolding crisis? How will you ensure that the bank remains sustainable? What can the bank do for its customers to help them through the challenging times ahead?

The bank has been resilient throughout its history, withstanding several economic crises only to emerge stronger. We have prudential guidelines and proactively monitor risks. For instance, there could be pressure on the balance sheet due to rising non-performing loans like when the Covid-19 pandemic broke. We talked to our customers struggling to service their loans to see how best the bank can help them. We restructured some of their loans and made adequate provisions in keeping with the requirements of international accounting practices to satisfy appropriate returns to depositors.

We extended the Central Bank’s debt moratorium scheme to our customers moreover Rs550 billion, the highest contribution by any bank. We are now exploring options to extend further assistance to the tourism sector once the moratoriums expire.

Public faith in the bank is unshakable, as evidenced by our growing deposit base year after year, even during the Covid-19 outbreak and the ongoing economic crisis. Bank of Ceylon, as the premier bank in Sri Lanka, backed by the government and managed prudently, has received various awards such as the Most Valuable Banking Brand award from Brand Finance Lanka and The Best Bank in Sri Lanka from The Banker, UK Magazine.

We will continue to extend credit facilities to small and medium businesses, a segment the first and worst affected by any crisis. We are ready to step in with advice and technical assistance whenever their businesses show signs of stress. We have deployed over 62 development assistants who maintain open relationships with our clients, visit their businesses and understand what they do to ensure the growth and sustainability of their ventures. I mentioned our contribution to the Central Bank moratorium scheme. However, we also dispensed our funds to revive struggling businesses during the pandemic, and we will continue to do so going forward.

We have also started a novel concept called Business Rehabilitation and Revival Centres that focuses on reviving the most affected business customers. We have established 15 such units around the country, one in every province, headed by a Deputy General Manager and revived around 30 businesses with credit facilities totalling Rs.50 billion.

On the deposit side of the business, people are concerned about the banking sector outlook, but we are addressing those concerns. In March, we introduced a deposit product called 100-day Investment, offering a return of 17.5%, up from 9.5% in line with the rise in monetary policy rates, since attracting deposits worth more than Rs.50 billion, demonstrating the public faith in the strength of Bank of Ceylon.

On the deposit side of the business, people are concerned about the banking sector outlook, but we are addressing those concerns. In March, we introduced a deposit product called 100-day Investment, offering a return of 17.5%, up from 9.5% in line with the rise in monetary policy rates, since attracting deposits worth more than Rs.50 billion, demonstrating the public faith in the strength of Bank of Ceylon.

Tell us about the digital transformation at the bank and its impact?

Digital transformation is an integral part of our banking strategy. It has been so for the last few years because we need to respond to the evolving needs of customers who are looking for convenience and superior banking experiences. It is also part of our strategy to improve financial inclusion in the country by introducing more digital banking products and services.

Bank of Ceylon has been the pioneer in introducing ATMs to this country, and we were the pioneers in introducing card payments almost 30 years ago. We have introduced several innovative digital products to our customers like web-based banking, mobile banking, QR codes, and Smart Pay. We have a strategy to encourage people to adopt our digital banking facilities and deployed a team to familiarise people and show them how easy our online digital platforms are to operate.

The bank recently introduced a concept called BOC Connect to enhance financial inclusiveness. BOC Connect is an agent banking platform where we give licenses to vendors or boutique operators at the grassroots enabling them to function as agents for Bank of Ceylon for a limited number of transactions. People in remote areas can now make deposits and withdrawals and pay utility bills without travelling long distances to cities or townships to visit the branch or use the ATM. We aim to introduce 5,000 BOC Connect agencies around the country over three years