Seylan Bank: influencing a post-covid revival

Ramesh Jayasekara, Senior Deputy General Manager of Seylan Bank

The bank is going beyond credit relief schemes mandated by the government to support small business through a challenging post-lockdown economic environment

The two-month lockdown, global travel restrictions, and fickle international markets in COVID-19’s wake pose unprecedented challenges, pushing the economy towards a contraction in 2020.

Seylan Bank’s Senior Deputy General Manager Ramesh Jayasekara outlines the bank’s COVID-19 response and measures to support businesses through the economic downturn and influence faster growth.

There were concerns that in addition to the health crisis and the economic impact of COVID, that Sri Lanka might also face a banking crisis. Do you think that probability is now firmly behind the country?

Jayasekara: I would say yes. Banks have emerged out of the crisis stronger. In March and April, economic predictions were looking quite negative, but things have changed for the better.

Economic activity has rebounded to about 90% of pre-covid levels with the country getting back to normal after the lockdowns.

The economy seems to be following a V-shaped trajectory with strong recovery. If Sri Lanka avoids a second wave COVID outbreak, I believe economic activity will fully recover by the end of the year. Most retail and corporate loans have come out of moratorium, and borrowers have recommenced interest and capital repayments.

The loan moratoriums for small & medium businesses will expire end September. Only then will we have a complete picture of COVID’s impact on banking. However, unlike in March or April, there is a strong optimism about an economic recovery.

Seylan Bank did exceptionally well during the most challenging period. During the six months to end June 2020, we were able to grow PAT by 8% to Rs1.6 billion.

The deposit base increased by Rs10 billion from end December 2019 to Rs411 billion by end June 2020 and we maintained our loan book at Rs378 billion as at end June 2020.

What do you anticipate will happen with credit demand during the rest of 2020?

Jayasekara: I expect private sector credit growth to be relatively subdued at around 5% for 2020.

The banking sector non-performing loans ratio is around 5% and may deteriorate further by year end. But this is by no means alarming.

NPLs are still low coming out of an unprecedented crisis.

Over a few years leading up to COVID-19, banks had built adequate capital buffers conforming to Basel III regulatory requirements by way of right issues and debentures. As a result, banks were resilient to absorb the 2019 Easter attacks shock and COVID-19.

Seylan Bank serves a large number of SME customers, a sector that is severely affected by COVID. How is the bank supporting this segment whilst mitigating credit risk?

Jayasekara: We have already registered loans over Rs12 billion to SMEs from the Central Bank’s refinance scheme.

Central Bank said it would allocate Rs150 billion among banks based on a first-come-first-served basis, and we worked fast to pass this benefit to our customers resulting in the value of registered refinance loans, significantly exceeding our allocation based on market share.

We identified borrowers who may find it difficult to pay their capital instalments and interest once the moratoriums lapse end of September and have extend capital grace for such clients after a diligent evaluation of their requirements.

We do understand that some businesses need more time to bounce back and we are keen to demonstrate to them that Seylan Bank is there for them in the long run.

The bank also launched a Rs2 billion programme out of its own internal funds to support SME exporters.

Under this scheme, we provide three year loans at discounted rates, and this fits nicely with the national effort to revive the export sector amidst a global pandemic.

How did Seylan Bank approach the covid related challenges?

Jayasekara: At first, health and safety of our staff, and serving our customers were the main priorities when the pandemic hit, and the lockdown ensued. The level of commitment, dedication, and drive demonstrated by our staff was truly inspiring.

They put themselves at risk to serve our customers. We had more branches open during the lockdown period, than most other banks.

Our digital strategy too received a significant boost because customers had to do things they would not have otherwise done.

When the lockdown ended, we launched a campaign, to build on the positive energy that was evident during the worst period of the pandemic, to reward staff and inspire them.

This campaign, we called ‘Heroes of the Heart’, also encouraged everyone to bring in new deposits, cross-sell, onboard customers to our digital products and acquire new customers.

It was a successful campaign energizing and aligning us all with a common purpose. Interest rates have declined dramatically over the last six months, and this could be the catalyst to spur credit growth going forward and influence an economic resurgence.