A refreshing change | Daily News


A refreshing change

The views expressed by President Gotabaya Rajapaksa the other day on the country’s banking system and also State banks deserve applause. Addressing the top brass and officials of the Bank of Ceylon at the Presidential Secretariat on Monday to review the performance of the institution President Rajapaksa was far from satisfied with the role played by State banks in serving the larger masses or with their enterprise in stimulating business and investment.

He called on the top officials of the Bank to effect a departure from their traditional way of thinking and come out with innovative measures to rejuvenate the economy in this moment of crisis. In essence, he enjoined them to think out of the box, if their institution were to make its contribution for the revival of the country’s economy.

”identifying the strategies and continuing them to maintain a vibrant economy is a prime responsibility of State banks,” he said.

The President took pains to underline the reality that lending rates at double digit levels is not the ideal recipe for stimulating growth. He stressed the need to lower the interest rates on loans to single digits. Businessmen and entrepreneurs who spoke to him had complained about the lack of support by State banks to help them out, sticking to their rigid fiscal regulations.

The President’s thinking in this respect cannot be faulted. How could business thrive and investors attracted if there is no scope for expansion with state banks sitting on their moribund and outdated policies. Like the President noted, no country has ever experienced a crisis of this nature before and economic revival could not be achieved by traditional methods.

Besides, there is a crying need for fresh thinking and new ideas in the banking and financial sectors in order to cope with the emerging challenges given the state of the economies across the world in the wake of the Coronavirus pandemic. Some of the Western countries which are badly affected have made radical changes in their economic structures to throw the reeling masses a lifeline to survive amidst the collapse of their economies.

But what do we see here? Like the President noted, even the concessionary four percent interest rate ordered by the Government from banks to make the Small and Medium Scale industries tide over their difficulties had largely been ignored by the Banks. What would the plight be of the poor, seeking a small loan from the banks.

No wonder they are being thrown into the clutches of the micro finance outfits that have been mushrooming in the country in recent times. The tragedy we witnessed the other day where a trishaw trade union leader was set upon and assaulted by thugs acting on behalf of a leasing company, resulting in his death, is perhaps a result of the traditional banking sector giving the cold shoulder to the poorer sections of society.

The President’s plea to the banking community, no doubt, was clearly made on behalf of the poor and the small businesses striving to survive. His assertion that he was not making any request for loans and other privileges to be granted to his political backers or kith and kin, no doubt, would have won him many plaudits. The President by this massage has also sent a clear signal to the State banks against entertaining requests of a similar nature from other high ranking members of the Government and politicians. This is a timely message.

We saw how in the not too distant past businessmen with political backing obtained gigantic loans from State banks only to default and get the loans written off the books. Government Departments and corporations which are in perennial debt to banks should be made to settle their outstanding loans running into billions of rupees. Now that the State banks have been given the greenlight to come out with revolutionary thinking and not to entertain any political interference it is hoped that they will be run professionally and without any restraints.

True, our state banks have come a long way from the earlier days and now operate on par with private commercial banks and give a run for their money in competitiveness.

On the question of interest rates there is also the danger of the pensioners and others depending on their retirement and lump sum benefits for survival losing on their deposits whenever the interest rates are lowered on borrowings. A solution should be found to rectify this anomaly, for an erosion of the deposit earnings could gravely affect the old and feeble who rely on the interest for their medication and other special needs.

Of course, banks cannot overstep the regulatory regime of the Central Bank. Perhaps the President who has now called for action from State banks to benefit the poor could champion the cause of those depending on their retirement benefits and make changes where possible.

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