ECONOMYNEXT – Sri Lanka banks are financing Indian business through syndicated loans, using their excess US dollar balances, Prins Perera, Head of Treasury and Investment Banking at DFCC Bank said.
Sri Lankan banks, have participated in syndicated loans and financing through the Gujarat International Financial Tec-City (GIFT City) he said.
Investing through the GIFT City has some tax advantages, involving withholding tax.
“So our message to the local companies who are planning to have their business expansion in India, we are looking to support those businesses,” Perera told a forum on Indian credit in Colombo.
“And also the Indian companies, those who are borrowing from the international markets in foreign currency.
“And in the last three months or six months, we have done a substantial number of transactions in India and we are planning to expand those activities in India because we see the potential for Sri Lankan corporates operating in India as well as the Indian companies in India.”
India’s Satin Creditcare Network Limited, a micro-finance and non-bank lender, raised 100 million dollars through the GIFT City, in loan supported by Standard Chartered Bank in March.
Hatton National Bank, National Development Bank, Seylan Bank, Pan Asia Banking Corporation, Commercial Bank of Ceylon and DFCC Bank, participated.
Sri Lankan banks built up dollar positions since the default, to cover their deposits from provisions made for defaulted sovereign bonds and also dollar loans repaid in rupees.
Dollar deposits in the past was mostly loaned to the government through Sri Lanka Development Bonds, loans to the Road Development Authority and eligible private borrowers who had dollar revenues like exporters who wanted to borrow in dollars.
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Sri Lanka has a high private savings rate around 30 percent of GDP, but when rates are cut with inflationary open market operations when private credit and the economy recovers to target high levels of inflation or ‘potential output’ the country runs into forex shortages and external crises. (Colombo/June07/2025)