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Friday June 2nd, 2023

Sri Lanka’s Commercial Bank says ready to help customers worst hit by COVID-19

DESERTED: Colombo’s usually crowded Galle Face beach front is deserted as Sri Lanka is on non-essential Coronavirus holiday.

ECONOMYNEXT- Commercial Bank of Ceylon, Sri Lanka’s largest private lender is ready to support borrowers whose cashflows would be hit in a worse than average disruption from the COVID-19 Coronavirus pandemic, a top official said.

President Gotabaya Rajapaksa had called on banks to halt collections of working capital loans for six months in response to the disruptions from the coronavirus.

“Commercial Bank welcomes the relief measures outlined by the President,” Managing Director Sivakrishnarajah Renganathan told EconomyNext.

“However, if there is a requirement for further support for a customer, we are willing to accommodate it.

“We as a bank have a duty to collect our loans, but we gave those loans based on assumptions, and now those assumptions have changed in the new environment.”

“We understand that cash flows of our borrowers have been affected under the coronavirus outbreak. Some have had their businesses disrupted over a month ago, while others won’t see the impact until six months later.”

“So, we ask our customers to write to us, clearly stating all of their problems in servicing loans, and we will look at even 8 or 12 month moratoriums if they are required.”

The bank would look at the exact requirements of each borrower based on their unique situations, Renganathan said.

By Monday evening, President Rajapaksa had extended the moratorium to credit cards, apparel and tourism industries and to small and medium-sized businesses.

Commercial Bank had stopped collection calls for overdue loans a week earlier, Renganathan said.
Sri Lanka has been under an island wide curfew since Friday to stop the spread of the coronavirus, which has also hindered loan collections and denying services to customers who depend on brick and mortar banking branches.

Commercial Bank and its peers have encouraged customers to switch to digital transactions through call centres, or ATMs when the curfew lifts for 8 hours on Monday and Tuesday, while practicing government-recommended social distancing and hygiene if visiting branches.

The tourism industry, currently at a standstill, had been under a loan moratorium until March 31 to recover from the April 2019 Easter bombings, and large number of small and medium-sized enterprises were just starting off a moratorium to help the economy recover when the pandemic hit.

Renganathan said Commercial Bank would look at giving relief to such borrowers as well.

While automated systems would transfer performing loans to non-performing loans if three instalments are in arrears, which would hit bank profitability, Renganathan said Commercial Bank is hoping to have talks with the Central Bank on whether the system could be changed for the duration of the crisis.

Banking sector non-performing loans had risen to 4.7 percent at end- 2019 from 3.4 percent a year earlier and 2.5 percent at end-2018 due to a lengthy period of low growth coming from two currency collapse, as the central bank targeted interest rates with liquidity injections.

Meanwhile, Banks are also discussing the possibility of charging lower commissions on services such as cheques, and delaying penalties on credit card arrears to help the nation overcome the crisis, Renganathan said.

So far, banks’ liquidity is sufficient to meet interest on deposits, which are being fulfilled on time, Renganathan said.

“Banks maintain a liquid asset ratio of 20 percent, and some banks like Commercial have 30 percent. So there are no liquidity shortages yet.”

“There is some concern on how fast the country bounces back to normalcy. The government and the team of experts working on the crisis are doing a marvellous job, so there is no issue yet.”

The government has promised to give 46 billion rupees in interest arrears to banks over senior citizens scheme, which would help liquidity.

If there are signs of the nation bouncing back from the pandemic by end-April, Commercial Bank could see an 8 percent growth in credit for 2020, Renganathan said.

“There are still a lot of people looking to grow their businesses and there are some infrastructure projects as well which we would like to finance,” he said.

Sri Lanka’s credit growth had slowed to 4.5 percent in 2019 from 15.4 percent a year earlier.

Before the latest crisis, the central bank had hoped for private credit to grow 12-13 percent in 2020, with both a fiscal and monetary stimulus package to jump-start the economy, which was growing at just over 2 percent.

Renganathan said the government has helped facilitate the smooth operation of banks’ internal processes during the crisis, and Commercial Bank has allocated more of its staff into call centres and clearing transactions, especially at a time when monthly salaries are usually remitted.

Meanwhile, the banking working group which is working with the government to ensure the operation of essential banking services during the pandemic has also additionally forwarded a set of proposals to the central bank to help reduce the burden on banks during the crisis, he said. (Colombo/Mar23/2020)

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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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