Banking system of Sri Lanka

The Banking and financial sector in Sri Lanka has a very special and vital role to play for achievement of continuous economic growth of our country. Unlike the banking and financial sector of many other countries in the region, Sri Lanka and finance sector has growth from strength over the years and is now on a sound platform. 
The banking sector consist of 33 banks. Out of these 33 banks, 26 are Licensed Commercial Banks (LCBs) and other 7 are Licensed Specialized Banks (LSBs). 
 Banking sector of Sri Lanka can be categorized as follows. 
    Banking System in Sri Lanka (33) 

      1.      Licensed Commercial Banks (26) 
       1.1.   Private Banks (24)
         1.1.1        Foreign Banks (13)
         1.1.2        Local Bankers (11) 

 1.2    Public Banks (02) 

       2. Licensed Specialized Banks (07)


 Licensed Commercial Banks (LCBs)  
Licensed Commercial Bank is a banking institution issued with a license by the central bank of Sri Lanka to carry on business activities. Among their activities,
Ø  Maintain current accounts for customers.
Ø  Maintain saving accounts. 
-          Fixed savings
-          Normal savings
Ø  Provide loan facilities including overdraft facilities.
Ø  Maintain foreign currency banking unit.  

  To open a local commercial bank, required 20 million Rupees.  

List of LCBs in Sri Lanka
  •  Amana Bank PLC                                    
  • Axis Bank Ltd              
  •  Bank of Ceylon                                        
  •  Bank of China Ltd             
  • Cargills Bank Ltd                                      
  • Citibank, N.A       
  • Indian Overseas Bank                                
  •  MCB Bank Ltd        
  •  National Development Bank PLC           
  • Nation Trust Bank PLC      
  •  Pan Asia Banking Corporation PLC        
  • Commercial Bank of Ceylon PLC     
  • Deutsche Bank AG                                    
  • DFCC Bank PLC  
  •  Habib Bank Ltd                                        
  • Hatton National Bank PLC   
  •  ICICI Bank Ltd                                         
  •  Indian Bank   
  • Public Bank Berhad                                   
  •  Sampath Bank PLC 
  •  Seylan Bank PLC                                     
  •  Standard Charted Bank   
  •  State Bank of India                                   
  •  Union Bank of Colombo PLC                 
  • The Honkon & Shanghai Banking Corporation Ltd (HSBC)                                                                                 

                                                                                               
These 26 licensed commercial banks currently operate through more than 6180 branches and over 4655 ATMs throughout the country.   

Licensed Specialized Banks (SLBs) 

The Licensed Specialized Bank (LSBs) are the financial institutions which have obtained a licensed from the Central Bank to conduct specialized banking business under the banking Act.  Main facilities provide by SLBs are,  

Maintain saving and time deposits.
Can provide loan facilities without overdraft.
Cannot provide current account for customers.
As well as they are not authorized to deal in foreign currency.  

 To open specialized bank, required 7 Billion Rupees.   

List of SLBs in Sri Lanka


-          Housing Development Finance Corporation Bank of Sri Lanka
-          Sri Lanka Saving Bank  Ltd
-          Lankaputhra Development Bank Ltd
-          National Saving Bank “Savings House”
-          Sanasa Development Bank PLC
-          State Mortgage & Investment Bank
-          Pradeshiya Sanwardhana Bank
These 7 specialized Commercial Banks operating with 696 banking outlets and 376 ATMs throughout the country. 
  

Main Acts that affect for banking business

-          Banking Act No 30 of 1998
-          Monitory law Act No 58 of 1949
-          Companies Act No 7 of 2007 and their amendment and the direction
Apart from that Acts, regulations, direction and provisions of Central Bank of Sri Lanka are affected for banks.  

Business expansion of the banking sector

   Outreach: AS at 31st January 2019, the banking sector expanded by 33 bankers. 

  Assets: the assets base of the banking sector expanded by Rs.1.5 trillion during the year surpassing                   Rs.11 trillion at the end of 2018.  
Liabilities: Deposits continued to be the main source of funding representing 72% of total liabilities of the banking sector at the end of 2018.  

Off-balance sheet exposure: off-balance sheet exposure grew by 14.7% significantly during the 2018.

Risk in the banking sector 

Credit risk: Credit risk is the main risk of banking sector. Risk weighted assets considered for credit risk in the capital adequacy computation increased during the year due to the expansion of loan portfolio. In 2018 non-performing loans increase by the Rs.102.5 billion compared to the increase of Rs.18.3 billion of 2017.

Market risk:  The interest rate sensitivity ratio had marginally increased from 77.5% at the end of 2018 from 76.5% at the end of 2017. 



Liquidity risk: Despite the growth in credit during 2018, the banking sector operated with an adequate level of liquidity. The domestic bank units of Licensed Commercial Banks and Licensed Specialized Bank are required to maintain a minimum Statutory Liquidity Assets Ratio (SLAR) of 20%.  This risk also manage by the Central Bank of Sri Lanka.

Resources of the banking sector

Profitability: Interest income is the main resources that provide the profit of banking sector. Interest income of the banking sector grew at a higher rate compared to interest expenses (12.8%) during the 2018, resulting in the net interest margin of the banking sector increasing from 3.5% in 2017 to 3.6% in 2018.  

Capital: All bankers were in compliance with the Based 3 capital requirement.    























Comments

Post a Comment

Popular posts from this blog

Image
HISTORY OF THE CURRENCY OF SRI LANKA  Sri Lanka is a country that has long history. When studying these history, it is essential to study about the coins. In different eras people use different coins. Because in different period of time Sri Lanka is governed by different nations. Although small in size, a coin has the ability of giving information about the economic and cultural history of our country. We can take evidence about the coin from “ vansa katha ”, ancient texts and letters as well as in archeological evidence. Sri Lanka’s currency can be categorize based on following eras. Anuradhapura era Polonnaruwa to kotte era Kandy era Colonial era Post-independence period since establishment of the central bank of Ceylon.  0    01.   ANURADAPURA ERA Anuradhapura is the first kingdom of our country. In this era people use following coins. Kahapana – the earliest unit of currency known in the island is referred to as a kahapana. They are called puranas in
Read more
CHALLENGES AND OPPORTUNITIES IN THE BANKING SECTOR   CHALLENGERS IN THE BANKING SECTOR The banking industry is facing continuous challengers in nowadays. Main key challengers in banking sector are, Foreign bank competition (provide differential services to the customers) Slow down the economic growth.   Disruptive technological environment. Government un-stability. Then people do not take loans and do not invest money (Changing tax policies, new rules and regulations). Lack of skills and it is difficult to retain employees. Not capture in real areas. High transaction cost (relatively higher the interest rate of loans). It is difficult to retain customers with their product.  Higher the non-banking competitions.   OPPORTUNITIES IN THE BANKING SECTOR. Provide innovative product (with new features and facilities). Door to door product (go to customer and give awareness about their product). High professional approaches (have more skill and
Read more