Sri Lanka to revisit budget moves that harm banks amid strike threat

ECONOMYNEXT – Sri Lanka’s Prime Minister Ranil Wickramasinghe said the administration is willing to consider alternatives to interventionist’s budget proposals that critics say will harm banks and their customers, as a powerful bank union threatened industrial action on December 15.

Out of the blue, a budget for 2016 proposed to ban commercial banks from engaging in leasing, a way of giving credit to the assetless, and allow only non-bank lenders to do it.

There were also proposals to charge taxes on 1 to 3 percent from bank cash withdrawals.

"It has to be said that will not do any act to harm the banks," Prime Minister Ranil Wickremesinghe said.

"It is not our intention to reduce the revenue of banks."

He said Ronald Perera, Chairman of Bank of Ceylon had given a report to the administration.

Prime Minister Wickremesinghe said bank trade unions can discuss with their chairmen and come up with a joint proposal.

The budget also proposed other measures to direct credit, going beyond a rule requiring 10 percent of credit to be given to agriculture imposed by the ousted Rajapaksa regime.

The interventions which came out of the blue without any evidenced based policy making.

Directed lending made to accommodate the whims and fancies of the elected ruling class and bureaucrats disrupting markets, can increase bad loans, de-stabilize banks, deny credit to fastest growing innovative sectors and reduce long-term growth. (Colombo/Dec14/2015)
 

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