BoC chief outlines new loan schemes

The Bank of Ceylon Chairman Udayasiri Kariyawasam in an interview with the Sunday Observer explained about the new loan schemes introduced by the bank to mark its 67th anniversary. Here are excerpts of the interview

by a special correspondent

The Bank of Ceylon has just celebrated its 67th anniversary, which was backed by, I may call a huge advertisement blitz. What were you trying to tell the people?

Our intention was to emphasize our resolve to serve the people and the nation with renewed vim and vigour, as the Bankers to the Nation. You might remember that last year during our '66th Anniversary' we declared the year for customer care and backed it by introducing 'Customer Care Assistants at all branches. We proved ourselves to be a caring and sharing bank, which has the interest of the customers at heart; we projected ourselves as a worthy partner in the progress of our customers.

In this 67th year we are projecting ourselves as a bank capable of proving tailor-made services, new and innovative products backed by years of experience and expertise, state of the art technology and global reach.

You earlier mentioned state of the art technology and global reach. Could you elaborate? Largest network

We are the Bank with the largest network of branches, throughout the country with 306 branches and 49 extension offices; We are the biggest bank in Sri Lanka with 5.9 million customer accounts and total assets worth over Rs. 329 Billion.

We have overseas branches in London, Chennai and Male also a worldwide network of 1,200 correspondent banks in 115 countries. Accordingly our presence is truly International and our reach is extensively global. Further, 221 branches and 35 extension offices have been brought under an on-line, real-time computerised network, which is augmented by an ATM network of 160 ATMs.

We have our own internet i.e BoC-iNet, connected to the internet, BoC customers enjoy 'Any Time Money' through ATMs and 'Any Branch My Branch' facility through the on-line network.

Our retail Banking, Trade Finance and Treasury Operations are backed by three novel interacting Software Systems (ICBS, Bank Trade and ITMS) and we are now in a position to meet different dimensions of customer requirements very effectively and efficiently.

We have negated the implied somewhat negative policy of the Sinhala adage 'Colombata Kiri Gamata Kekiri', as far as our reach is concerned. We could proudly say that with the Bank of Ceylon it is 'Colombatath Kiri, Gamatath Ema Kirimai'.

We have breached the geographical divides to enable a farmer from Medawachchiya to enjoy the same banking facilities that a planter in Colombo enjoys.

We are ready to market our network capability. A number of firms, companies including banks have approached us for mutual working arrangements through which they expect to serve their customers through our branch network. We are in the process of finalising arrangements, including pricing and methodologies.

Your reach no doubt is great, your delivery channels are vast. What do you propose to offer the customers in terms of products and services, which are new? What are the value additions on offer to woo and win customers?

Yes, I can make special mention of the package of loans, which we have introduced to coincide with our 67th anniversary celebrations. Specialty is that it comes in the form of a package of facilities, something similar to an all under one umbrella, one-stop-shop facility. It is a Credit Package consisting of a Housing Loan Scheme, Personal Loan Scheme, Boc Credit Cards and Lease Financing Schemes - a formidable combination, which will cater for the specific and special needs of customers.

You mentioned about specific and special needs of customers. Will you elaborate?

Yes, housing could be the specific need and landscaping could be the special component. In the same way housing could be the specific need and top up facility to re-use the amounts settled to go for a home theatre system could be the special addition, even a vehicle could be the special requirement.

The Special Housing Loan Scheme, is available in our branches. On-line applications will be a reality very soon. This scheme meets all housing needs.

Eligibility requirements

How about the eligibility requirements, the quantum and other terms and conditions? Professionals, permanent Government/statutory boards and private sector employees, self-employed persons, farmers and cultivators are eligible to seek facilities under this scheme. House builders of course should be limited liability companies.

It need not be stressed that repayment capacity is a matter of paramount importance in raising a loan. The prospective borrowers should have an adequate income, may be wages and emoluments, as well as fixed or seasonal income.

As far as the quantum is concerned a range between Rs. 1 million to Rs. 25 million is on offer. At the lower end of the quantum bucket Rs. 1 million and Rs. 2 million are available for furnishing and landscaping and interior decoration. A tidy sum of Rs. 10 million is on offer to buy a plot of land. At the upper end of the bucket, Rs. 25 million is available to purchase land and construct a house.

The rate of advance revolves around a percentage-based table connected to the market price, BOQ and estimates. For example 90% of the BOQ value is the rate applicable to house constructions. One of the main concerns of a borrower is the rate of interest. The basic rate of interest attached to the loan scheme is 12.5% per annum i.e. just around 1% per month.

It is very competitive, and comfortable. The rate of interest is linked to the quantum of the loan and a great deal of flexibility, to be exercised by the borrower, has also been introduced to the rates by connecting it to the AWPLR (average weighted prime lending rate). The borrower therefore enjoys the liberty of choosing a convenient rate from three categories i.e. quarterly, annual or three-year rate to match his market expectations.

Long repayment period

Naturally a borrower will aim for a long repayment period, which will lower his periodic loan commitments. Where does this new loan scheme figure with regard to this vital component of a loan?

A long repayment period, extending up to 25 years is available. The customer also could opt for grace periods and repayment holidays. Only the interest due on the loan will be recovered during the grace period/repayment holidays. Here again flexibility has been introduced by providing grace periods/repayment holidays to the tune of six years. The borrower has the option to enjoy this concession in three intervals to match his/her cash flow.

The house property for which the loan is raised would serve as the collateral for the facility. The borrower may offer an alternative property as security when confronted with a problem relating to defects in the title of the land.

The Mortgage Protection Assurance cover has been made compulsory under securities to free the family of the borrower from the burden of repayment, which might befall them in the event of the untimely death of the borrower. The scheme stretches itself even to cover the insurance premium payable on the Protection Cover. It is comprehensive.

Many complaints have been raised by borrowers regarding the time taken, even exceeding not months but years for the processing of loans and final disbursement. Will the customers face the same dilemma under this loan scheme?

We have taken several steps to eliminate delays and grant loans as expeditiously as possible. We have simplified the loan application; centralised housing loan units have been established at Provincial level.

A clear set of instructions and information, as to the documents to be submitted along with the loan application will be issued to the borrower. Our expectation is to disburse the loan within seven days. Borrowers' cooperation by way of submitting all documents is vitally important to achieve success in our seven-day disbursement plan.

Personal loan scheme

Can you outline the benefits of the Personal Loan Scheme and the Credit Package? The Personal Loan Scheme has been formulated focusing on the credit needs of the public and private sector employees. The basic eligibility criteria are:-

Age group 18 to 55 years with a clear DRU and CRIB records

Minimum take-home pay of Rs. 15,000.00 (monthly)

Permanent Public (Govt./Statutory Boards) and Private sector (listed companies/institutions) employment.

Even employees on a contract basis drawing a monthly salary of Rs. 50,000 are also eligible. A loan may be raised for any legally acceptable venture or purpose.

As mentioned by you this scheme specially focuses on middle to medium income earners, who expect the generous support of the lending institutions in meeting, their credit needs. How generous is your bank in this respect?

This scheme has many new features, which no doubt will add the comfort and convenience to the borrowers. Let me start with the quantum. A minimum Rs. 100,000 and maximum Rs. 2 million are on offer subject to the condition that the quantum is not more than 10 times the borrower's gross salary. We have been very practical in arriving at the repayment capacity.

The Repayment capacity and the quantum of the loan in turn may be boosted by the addition of proven additional income or the salary of the spouse.

We have been very progressive and taken a bold step to minimise the security requirements under this loan scheme. Security is limited to an undertaking given by the employer to remit the salary or part of the salary to a designated branch.

Competitive rate

The Repayment period runs up to five years and repayment could be either fixed or equated at the option of the borrower.

It appears that security has been lowered to the extent of, I may call, a piece of paper. Is there any more value additions?

Yes! There are many more to come. With the aim of expediting processing and arriving at a competitive rate of interest, a score card system has been annexed to the loan scheme. The rate of interest will be decided based on the scoring. A rating at grade 1 and 2 will entitle the borrower for a rate of 16% p.a. and a rating at grade 3 and 4 will earn a rate of 18% p.a.

No processing charges, no early settlement fees will be recovered from the borrowers one of the special features is the option given to the borrower to top up the amounts repaid thereby converting the loan to a revolving facility. Also options are available to enhance the loan amount in tandem with salary increases. The loan amount could also be increased to the tune of Rs. 5 million, if backed by a mortgage over property. Even residual amount of an existing mortgage could be used for this purpose.

Have you taken any steps to eliminate bottlenecks and minimise delays.

A new application form has been introduced to minimise the procedure. Special field Units have been set up at Provincial level to attend to customer requirements and to liaise between the borrower and his employer.

Could you please enlighten me on credit cards and leasing facilities of which you made reference? The BoC acts as an issuer and an acquirer under the world renowned VISA and Master Card emblems.

Cards come in different categories such as local and international, credit cards and debit cards, affinity and loyalty cards and offer a wide variety of options for the customer to choose a card to go hand in hand with his particular needs.

Social responsibility

But as a piece of social responsibility I may add Credit Cards are only for convenience, but not for credit. But coupled with little doses of discipline and responsibility a credit card could become a handy tool to tide over financial crunches conveniently.

Leasing an alternative mode of financing and provides many benefits to the lessor and the lessee. The customer is free from the burden of employing capital as 100% finance is available and asset acquisition has been made very easy. Lease finance is available for plant and machinery, office equipment, vehicles and professional equipment. The repayment period is generally linked to the economic lifespan of the asset, but may not exceed five years.

You may observe that any one of the facilities so far described by me could be effectively used either singularly or in plural as a combination by a businessman or professional focused on success and development.

The BoC has opened its gates of financing wide and invites the businessmen, the professionals and others to make the best use of it.

In fact you have opened the flood gates of credit finance widely. Won't repayment be a problem for those who take a dip into credit financing?

You might remember, I mentioned about a dose of discipline and responsibility. 'Deserve before you desire' should be the key phrase in credit financing. All what matters is Repayment Capacity; it's the decisive factor. We have defined the segment of the market, enjoying a steady income in focus when we formulated these schemes.

That does not mean we do not cater to the other segments of the customers. True to our motto 'Bankers to the Nation' we have a repertoire of credit products to cater to the specific requirements of the customers in different segments of the market.