Sri Lankan banks too risk-averse, regulator says

ECONOMYNEXT – Sri Lankan banks and private sector are still too cautious and not changed attitudes to reflect modern trends even 10 years after the end of the island’s ethnic war, central bank governor Indrajith Coomaraswamy has said.

Coomaraswamy has stressed on the importance of shifting away from the preoccupation with collateral-based lending to building capacity to facilitate lending against cash flows, in an interview for the audit firm KPMG’s banking survey.

Although it is a decade since the end of the civil war, the banks as well as the overall private sector have not fully realigned their risk appetite with the business models based on emerging trends, he said.

Presently, most of the investments are made on low risk short term industries and projects, Coomaraswamy noted.

He also commented on the need to recalibrate the risk appetite to be able to invest on long
term industries with a long payback period such as manufacturing and construction.

“This would aid in the overall improvement of the exports of the country,” KPMG’s third banking sector report, covering sector performance up to June 2018, said.
 (COLOMBO, 20 JUNE, 2019)