Sri Lanka to scrap specialized banking license

The National Savings Bank (NSB) is one of six licensed specialized banks operating in Sri Lanka. Source: NSB Photo.

ECONOMYNEXT- Sri Lanka will scrap the specialized banking license in 2021 under a new law, converting all banks to a commercial license, Central Bank Governor W D Lakshman said.

Licensed specialized banks cannot provide customers current accounts. They have limited foreign exchange transaction capacities, and are not able to deposit excess liquidity or borrow through the central bank overnight window.

The new Banking Act is converting licensed specialized banks into licensed commercial banks in order to increase financial system stability, as specialized banks currently adhere to lower risk capital adequacy requirements.

Currently, Sri Lanka has six licensed specialized banks and 26 licensed commercial banks.

Two of the licensed specialized banks are savings banks, while two are housing banks and the other two are development banks.

The Licensed specialized banks are National Savings Bank, Sri Lanka Savings Bank, Housing Development Finance Corporation Bank, State Mortgage and Investment Bank, Regional Development Bank and Sanasa Development Bank.