Voluntary merger of banks welcomed
Following the presentation of the 2016 Budget, banking and financial
sector analysts have commended the proposal to encourage the voluntary
merger of banks.
Deputy Chairman, Commercial Bank, Preethi Jayawardena, said many
global banks have merged to build strong and vibrant banks, enabling
them to reduce costs.
"With mergers, there will be less competition. The NDB Bank and DFCC
were to merge but that did not take place. It is a good move to merge
and create large banks to support development," he said.
Immediate past president, Institute of Chartered Accountants of Sri
Lanka, Sujeiva Rajapaksa, too commended the move which he said could
"help create a strong banking sector that is vibrant and stable."
He said it was vital to have strong banks than many small banks that
had mushroomed. Big banks being merged will help them to canvas business
overseas. "Though the proposal is not mandatory, it will set the
precedence for mergers."
Through the 2016 budget, voluntary mergers are encouraged. It is
proposed that HDFC Bank be merged with the State Mortgage and Investment
Bank to create a National Housing Bank. Similalry, Lankaputra Bank to be
merged with the Regional Development Bank to create Lanka Enterprise
Bank and Sri Lanka Savings Bank to be merged with National Savings Bank.
The budget also proposes that banks have to cease leasing activities
from mid next year.
In this backdrop, senior banker and financial analyst, Mangala
Boyagoda, said the move to merge two housing development entities to
create a single strong entity for housing was a welcome decision that
will help boost the housing industry in the country.
The merger of the Lankaputra Development Bank with the Regional
Development Bank to create a Lanka Enterprise Bank is a commendable move
to boost development, he noted.
Financial analyst Rajive Senanayake also hailed the call for mergers,
claiming that it will help create a strong banking sector in the country
and stabilize the financial sector.
"Merging large scale banks with small banks will help to develop the
respective areas. This will prevent banks from running into difficulties
and help build confidence among customers," he added.
Vice President, National Chamber of Commerce of Sri Lanka, Sujeewa
Samaraweera, holds the view that voluntary and not forced mergers is a
sound decision that will help banks to have a strong financial base to
attract foreign investors who look for financial stability of a bank.
Another banking expert, speaking on the basis of anonymity said, the
country's financial system needed urgent structural changes to ensure
banks and non-banking financial institutions (NBFIs) to be
well-positioned to achieve the envisaged US$ 100 billion economy by
The regulatory framework should be designed to monitor the emerging
business models of banks and NBFIs, the analyst said.
During 1988 to 1990, some 13 financial institutions had failed with
only two being revived with new investments. In 2002, a prominent bank
collapsed and in 2007, the deposits of the bank were transferred to a
new savings bank.
Banks and NBFIs account for around 65 percent of the financial system
assets of the country. Malaysia and Singapore have consolidated banks
and NBFIs to create a vibrant and stable financial sector in the
country, experts said.
General Manager/CEO, LankaPay, Sunimal Weerasooriya, said having
strong balance sheets is essential for banks and financial institutions
to finance large scale projects.
"The operational aspects should be looked into thoroughly, if mergers
are to be successful. The technology should also be ready."
Chairman, HVA Group, Rohan Fernando, said bank mergers was proposed
sometime ago. "It is good for any business to look at mergers and
acquisitions at a time the operating costs are increasing year on year.
To be competitive and to reduce excess overheads, the best way forward
is to merge.
Hence the proposal made by the Finance Minister is in the right
A novel Budget -Rohitha Bogollagama
Former Foreign, Enterprise
Development and Investment Promotion Minister Rohitha
From a broader perspective, this Budget provides a wide spectrum both
politically and economically. This is a novel budget in that context,
because they have brought in many policy associated proposals.
When you get policy framework simultaneously implemented it may
involve a period of time more than what is meant on a given year.
Balancing act by the government may be greater here to ensure what
they meant and what they meant well for the people.
The responsibility of the Finance Minister is to ensure that there is
no deviation of the policy introduced today and the revenue generation
The 'spending part' of the matter is generally easier but how do you
generate the money, that is the paradox, I see the government will get
into unless they become conscious and equally responsible to ensure the
smooth implementing process associated with budgetary recommendations.
That is one aspect of the budget I wish to highlight.
The other area is to provide for a friendly investment climate in Sri
Lanka, the fact that they are liberalizing the sectors for foreign
investment and equally encouraging the local entrepreneurship is
Now to do so, it is equally important that material provisions has
been provided for the local entrepreneurs, particularly in terms of easy
and cheap capital. The capital market has become more investor and
entrepreneurship friendly and due to this the government will be able to
consolidate some of their banking instruments.
The agriculture sector I have an issue. If they withdraw the
subsidies for fertilizer from those other than small scale farmers, the
other plantation sectors are going to get affected, because coconut tea
and rubber are not yielding the best prices at present.
When the fertilizer subsidy gets withdrawn, they may equally suffer
with the high cost of fertilizer in the open market. That part the
government will have to immediately address because the production base
has to be retained and encouraged. Fertilizer has been a major input to
get high yields in Sri Lanka. These are some of the things the
government must immediately consider.
I think the government has laid a good foundation for a conducive
environment for investment, I wish them well when it happens. Right now
the environment for foreign investment is right. I think transparency
and corruption free governments are very important for greater
investment flow. There is political stability and when it continues to
establish, the foreign investment will flow in.
The investment on land by foreigners have been encouraged by the the
2016 budget, it is another stimulating point.
With these proposals, the government, if they stand by what they have
said with greater responsibility I am sure, expected results of the
Budget can be generated in the course of 2016.
Not futuristic -Ceylon Teachers' Union
Attention paid through the 2016 budget to the education sector was
sorely inadequate with funds only being allocated for old projects with
no provisions being made for new initiatives, General Secretary, Ceylon
Teachers' union, Joseph Stalin, said. Commenting on the allocations for
the education sector, Stalin said it is just an icing on an old cake.
"The money is allocated for old project and no attention is paid to
current needs such as improving human resources in the sector," Stalin
Stalin said that the public sector employees, including teachers,
expected the Rs. 10,000 allowance provided, to be added to their basic
salary. "This did not happen," he noted.
The allocations have increased but only to improve primary
education,school development programs and to build teachers' quarters
and so on.
There is a need to go beyond this and look for new initiatives to
upgrade education services, Stalin noted.
He alleged that the budget has failed to pay due attention to both
teachers and principals.
"Attention has not been paid to address salary discrepancies," he
The previous government proposed to draft a new minute for the
setting up of a teachers' service which would address grievances of both
teachers and principals. The current plans do not include this.
"Issuing vouchers for school uniforms is another blunder. More
problems will crop up due to this," he said.
A complete sham - Ceylon Mercantile Union
The 2016 budget has paid more attention to employers' concerns than
concerns of the working class, alleged General Secretary, Ceylon
Mercantile Union. Sylvester Jayakody.
Commenting on the Appropriation Bill presented by the National Unity
Government, Jayakody said that each time it was a bitter pill that was
presented in the guise of a sweet. "The government talks of relief but
brings in price controls," he charged.
He noted that the proposed increase of working hours from eight hours
to nine hours would amount to a violation of international labour laws.
"The stipulation of eight hours of work was the result of working
class struggles," he said.
"In Sri Lanka, people are already working 45 hours per week and
comparatively, Chinese work 40 hours per week with 11 statutory
holidays. It is the same in the United States. In the Sri Lankan private
sector was already working more hours than workers from China or the US.
"The government must reconsider whether the working class, already
working long hours should be compelled to work an extra hour."
He also insisted that the private sector too has not gained anything
through this budget. "When the government came into power, the CMU
demanded a Rs.5000 salary increase for private sector employees.
Following discussions, we reduced our demand to Rs. 2500. Until now, the
private sector has not got an additional cent. This government has
failed to keep its promise," he added.