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| Sunday, 2 November 2003 |
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| News Business Features Editorial
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Commercial banks big blow to private pawnbrokers by S. Selvakumar Lucrative pawnbroking businesses dominated by individuals and small time private sector establishments with a turnover of several millions of rupees per day have plummeted to a new 'low' on commercial banks taking the plunge. After 'Naattukottai' chettiars from South India and Afghan money lenders left this country over four decades ago, Sri Lankans re-started the business in a big way charging interests of nearly 50 per cent per annum and pawners were unable to meet with the enormous interest rates sow that the items pledged often got forfeited. "We have definitely lost business but still we have our customer bank and we service them with a lot of flexibility, so they remain with us": Mr. Nalaka Edirisinghe, Director Swarnamahal Jewellers (Pvt) Ltd., a member of the E.A.P. Edirisinghe Group of Companies, the largest pawnbroking firm with over twenty five branches, said. This firm and a host of other similar organisations charge 42 per cent per annum as interest compared to the 16 per cent charged by banks. Furthermore, these firms deduct the first month's interest calculated at 3.5 per cent upfront from the sum advanced. When contacted for a comment on their pawnbroking side, Bank of Ceylon Acting General Manager Douglas Weerasinghe said that they have registered a 100 per cent growth since December last year mainly because of their low interest rate of 16 per cent and no upfront deductions are made from the advance paid. Asked what they do with unredeemed articles, he said that after sending three reminders to the pawnee, all unredeemed articles from all the branches are taken to the Katunayake Free Trade Zone targeting Sinhala-Tamil New Year and year-end bonuses paid to thousands of garment factory girls where they are grabbed in no time. The items are sold for the cost of gold only and without any manufacturing charges. If these women were to have this jewellery made in jewellery shops they run the risk of buying low-quality gold and also paying manufacturing charges. Experienced hands in the banks thoroughly scrutinise every piece of gold before advancing money on them. A leading private sector commercial bank, the Hatton National Bank said that at any given time at each of their main branches there will be several millions of rupees outstanding on gold articles pledged with them. Deputy General Manager (operations) at HNB, P.R. Nayagam said that unlike the small-time businessmen, the banks advance Rs. 7,500 per sovereign and the interest is gradually lowered from 22 per cent as charged a few years ago, to 16 per cent at present. In his bank, Nayagam said that the interest rate is calculated on a daily basis and if a person who has obtained Rs. 10,000 can make a payment of even Rs. 500, half will be deducted from the advance made and the balance on the interest due. At HNB if a person has pawned three articles together, he or she can redeem even one piece to meet the needs of the pawnee. The pioneer bank that introduced pawning, the People's Bank, was not available for comment. "Banks pay around 8 per cent on deposits made with them and charge 16 per cent interest on pawned articles whereas we pay 14 to 15 per cent on deposits with us. Furthermore, banks have unlimited funds in their customers current accounts for which they pay no interest. However, we are not competing with banks in the business of pawnbroking", Mr. Nalaka Edirisinghe said when told about the massive benefits a pawnee accrues, through banks. Non-bank pawnbroking establishments are now open every all 365 days of the year from 8.00 am to 8.00 pm, and advance Rs. 6,000 on a gold sovereign, which mainly enables them to stay in business. |
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