Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post

Latest topics

» ##FUN TOONS###
by ruwan326 Today at 9:14 am

» Financial Reports Q-3 2018
by ruwan326 Today at 9:09 am

» FOREIGN NEWS
by ruwan326 Today at 8:30 am

» CROSSINGS TODAY
by ruwan326 Today at 8:24 am

» Daily Foreign Transactions
by ruwan326 Today at 8:22 am

» JINS - BFN DELAS 100% SURE මතකද . ජනශක්ති GENERAL සමාගම වික්ක හැටි - එක පාරටම
by ruwan326 Today at 8:21 am

» BFN ගනු දෙනුව වෙනවා ..
by ruwan326 Today at 8:10 am

» රැවටෙන්න එපා ..විකුන්නන එපා ..ණයට ගන්න එපා .BFN - JINS එකතු කරන්නා හෙට දිනනනවා
by sanjulanka Today at 8:09 am

» News Behind CTCE.N0000 Running?
by crs Yesterday at 6:08 pm

» SRI LANKA @ 2020
by ruwan326 Yesterday at 9:36 am

» NDB declared ‘Bank of the Year’ by The Banker, UK
by ruwan326 Yesterday at 8:41 am

» NDB wins Banking Sector National Business Excellence Award 2018
by MarketWch Mon Dec 10, 2018 5:33 pm

» Market will RISE expecting a MR Led new government
by samaritan Mon Dec 10, 2018 1:52 pm

» CSE THIS WEEK
by ruwan326 Mon Dec 10, 2018 11:37 am

» Summary of Key Announcements during the week
by ruwan326 Mon Dec 10, 2018 11:25 am

» No worries about BFN Deal .i
by ruwan326 Mon Dec 10, 2018 11:21 am

» CSE WEEKLY
by ruwan326 Mon Dec 10, 2018 11:13 am

» Dealing by directors
by ruwan326 Mon Dec 10, 2018 10:55 am

» ALHP WILL MOVE UP from next MONDAY
by aklt Mon Dec 10, 2018 10:47 am

» ඔරියන්ට් ෆ්යිනැන්ස් -විකිනීම ස්තිරයි - අද ද අයිලන්ඩ් පුවත් පත බලන්න 2020 වෙනකම් පුලුවන් නම් තියා ගන්න - අදහා ගන්න බැරි ආදායමක් ලබන්න
by ruwan326 Mon Dec 10, 2018 10:33 am

» @RANFERDI, YAhapalan, In which list are you? Puravesi Lithro List, or Kiriella List or other list
by ranferdi Mon Dec 10, 2018 9:06 am

» #PM Crisis#
by ranferdi Mon Dec 10, 2018 9:05 am

» Stocks don’t go up and stay up because of stories, tips, or people’s opinions
by ruwan326 Mon Dec 10, 2018 9:00 am

» FINANCIAL INSTITUTIONS IMPAIRMENT COST
by Yahapalanaya Sat Dec 08, 2018 11:10 pm

» MONTH PEACE & HAPPINESS
by Ryan Hudson Sat Dec 08, 2018 6:40 pm

» JINS NO DEAL YET - BFN IS ON AND POSITIVE -CHECK THE COMPNAY ANNOUNCEMENT CAREFULLY - NO NOTHING ABOUT BFN
by kalu351 Fri Dec 07, 2018 10:03 pm

» Will ALHP be eliminated from the CSE?
by wisdom79 Fri Dec 07, 2018 8:41 pm

» Is TKYO.N0000 a Sleeping Giant
by aklt Fri Dec 07, 2018 7:52 pm

» FINALY – BFN – TAKE OVER NEWS IS OUT OFFICIALY -DONT SELL BELOW 20 TRY TO BUY AT CURRENT 15-17 LEVELS
by Equity Suda Fri Dec 07, 2018 12:57 pm

» PLAYERS PICK OF THE DAY
by ruwan326 Fri Dec 07, 2018 7:39 am

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market News » Treasury slams banks for ignoring real economy

Treasury slams banks for ignoring real economy

Go down  Message [Page 1 of 1]

Malika1990

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
The Ministry of Finance and Planning has criticised the domestic banking sector for ignoring the real economy over imports, calling on the sector’s regulator, the Central Bank, to bring about a change in attitude.

New loans to the private sector generated from the domestic banking sector amounted to Rs. 487.7 billion in 2011, a huge increase from new loans amounting to Rs. 290 billion created in 2010 but the Treasury said the bulk of those loans were for imports.

Of the new loans created in 2011, the domestic banking sector had approved 1 percent to the agriculture sector, 3 percent to the plantations sector, 0.35 percent to the livestock and dairy sector, 0.29 to the fisheries sector, 7.89 percent for trade, 15.16 percent to the service sector and 13.36 percent to the construction sector, the 2011 Annual Report of the Ministry of Finance and Planning noted.

Around 28.4 percent of new loans created in 2011 were for consumption and 30.58 percent were classified as ‘other’. Treasury Secretary Dr. P. B. Jayasundera said the ‘other’ category were loans given for unspecified purposes. "Banks have not given a reason for these loans," he told journalists last week.

Despite banks expanding rapidly since the end of the decades-long conflict, he said the SME sector and the real economic sector were virtually untouched by the banking sector.

"Banks need to change from being trade biased financiers to real economy biased financiers. We have asked the Central Bank Governor as the regulator to bring about a change where local producers and manufacturers will get a 10 to 18 percent share of total bank lending," Dr. Jayasundera said.

He accused banks of favouring the opening of letters of credit (LCs) whereby loans were granted to importers. "We also know that many banks have the practice of opening back-dated LCs when policy adjustments take place, we know this is happening although we cannot prove it."

The Treasury’s annual report highlights the ‘unsatisfactory’ role played by the country’s banking sector.

"The allocation of resources by banking and financial institutions often seems to have favoured financing the importation of commodities and motor vehicles. Lending to value added real economic activities have been constrained by the conventional approach to banking and collateral based lending. The project financing approach has not received adequate attention by these agencies by way of promoting new financial instruments.

"In the context of the possibilities of replacing imports of a wide range of products in the interest of the national economy, the country’s banking sector has a special responsibility to divert enhanced resources, while professional development and investment bankers should promote investment in the real economy in place of imports," the Treasury said.

Dr. Jayasundera’s criticism of the banking sector became more pronounced in 2010 when he on two occasions berated the banking system. Since the conflict ended in May 2009, the Central Bank has been reducing policy interest rates in a bid to stimulate credit flows to the private sector. But while credit to the government and public institutions grew at 19 and 119 percent as at June 2010, credit to the private sector had been sluggish, growing at 6.2 percent. Commercial banks had meanwhile invested heavily in government securities and this had irked the government to some extent.

"The government is concerned as to why our commercial banks charge a high spread for their lending and making enormous profits without being sensitive to the development needs of the country. We in the Treasury often hear from the private sector about the difficulties in borrowing," Treasury Secretary Dr. P. B. Jayasundera said delivering the 60th Anniversary Oration of the Central Bank in September 2010.

"Access to finance as well as high cost of interest despite a well distributed branch network across the country, are two main concerns that the entire private sector keeps raising with one voice. There is concern over the rigidity towards downward adjustment in lending rates as well as over the long lag involved in such adjustments," he said.

Many of the country’s banks have also increased their loans to deposits ratios in recent months, in some instances nearing 100 percent or more, and Fitch Ratings has pointed out that director boards of these banks would be challenged to bring down the ratio to ensure sustainability.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=52952

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum