‘Savings - the foundation for investment’

By Indeewara Thilakarathne

[email protected]

Here in an exclusive interview with Sunday Observer, General Manager/CEO of National Savings Bank Mr. S.P.R. Perera emphasises on the importance of the habit of savings at individual and national levels.

As today’s savings becomes tomorrow’s investment, savings will build a financial security both at individual and national levels. While individuals can invest their savings in educational and welfare of their children, the nation can build a secure financial system which would cushion out the adverse impact of global financial crises on local economy.

Mr. S.P.R. Perera reveals a wide range of customer centric changes envisaged by the Bank with new products on the offing, third generation IT and transforming NSB into a modern bank with social responsibility at its heart.

Excerpts of the Interview -

Q:In the light of financial meltdown and resultant global financial crisis adversely affecting the financial systems and economies in diverse parts of the globe, the importance of individual and national savings is felt more than ever before. Against this back drop, how important is savings at individual and national levels?

A: Indeed, savings plays a vital role in any economy and if the domestic savings portfolio is in a healthy position, certainly it reduces the risk of illiquidity which leads for financial turmoil that the world encounters today. Currently the national savings against GDP in Sri Lanka stands at 18% and NSB’s contribution towards this is comparatively high.

NSB which was established in 1972 is dedicated for savings and the prime objective of the Bank is to inculcate the habit of savings among the people and to provide facilities for them to save through the islandwide network of branches. At present NSB has 133 branches scattered all over the island, 4042 Agents (Post Offices and sub-post offices) and ATM network of 120 which too will be expanded soon. We are catering currently to 15.5 million customers.

With the expansion of Credit Card Culture, there is a tendency to spend more on consumption than focusing on savings. In order to minimize this unhealthy position as a Bank established for promoting and mobilizing savings, we have introduced a wide range of customer friendly savings products.

Though we are barred to open Current Accounts for customers we have normal savings account that can be used as an active account which provides unrestricted deposits and withdrawals.

This account attracts comparatively a higher rate of interest which is not second to any competitive rate offered by any other domestic bank. We recently came up with a new savings product called “Happy Savings” with very flexible terms and an ever higher rate of interest, currently 14.5%.

This “Happy Savings” offers host of other benefits including Full Government Guarantee and Life Cover upto Rs. 1.0 million. Credit facilities, concessional rate of interest in Pawning Advances and consumption loans are some among others. The unique feature of “Happy Savings” is that your rate of return is high when your investment is high. This challenges the “High Return - High Risk scenario in investment.

Q:Apart from encouraging and promoting savings, what are the other areas NSB ventures into?

A: Of course, we too understand the needs of our clients. One of the basic needs of any individual is a safe shelter. Here the Safe Shelter means easily obtainable, no burden, easy payment terms with grace periods, repayment matches or suit to your affordable income and above all very courteous and prompt delivery.

All these are in one basket when you obtain a NSB housing loan which is branded as “Ge Dora Housing Loan”. We are the leader in this segment and we continue to do so in the future too. Under this we consider housing loans not only to buy a house but also to construct a house or to buy a plot of land for residential purposes or to make additions or renovations.

Above all to settle an existing housing loan that you have already taken at an exorbitant interest rate from any other financial institution will also be offered. We are so flexible, you name it we offer. Among others to name a few, Pawning Advances and Consumption Loans too are available.

Q:What are the investments that NSB make?

A: NSB as the leading Licensed Specialized Bank in the country is statutorily bound to invest 60% of its deposits with any Security, Stock, Debenture or Treasury Bills of or guaranteed by the Government. Currently this amounts to 70% and out of the balance about 20% has been invested as Housing Loans and Loans to other Banks.

Q:In the light of mushrooming financial institutions offering rather unrealistic interest rates, what is the main advantage that customers of NSB have over the others?

A: Unlike in the past banking businesses face shrinking margins due to stiff competition. The people think that some private Financial Institutions offer 20-25 percent interest rates and why NSB which is dedicated to savings cannot offer much higher rates for their deposits. It is obvious and proved now, that those financial institutions cannot sustain the offered or agreed high rates and some have failed even to return the principal.

“High Return - High Risk” is the norm of investments. But in NSB, this has changed to “High Return- Low Risk”. Let me explain what made me to say so; that is in NSB every single deposit along with the due interest is guaranteed by the Government. You are aware of the recent bailouts of Northern Rock of UK, Lehman Brothers , Bear Stearns, Merrill Lynch and many more.

These depositors did not have any cover. In that respect NSB depositors are much more fortunate because their deposits are fully backed by the Government Guarantee. So my message is that our depositors should not panic but be more prudent and think twice not on the high return that never comes your way but the principal which you are going to deposit.

Q:Application of cutting edge technology is part of modern day banking. How far is NSB is successful in adapting latest technology in its banking practices?

A: The advancement in Information and Communication Technology has had a profound impact on the banking industry over the last two decades. As banking businesses face shrinking margins, global/local competition, and the need to deliver loyalty-creating customer, we at NSB too were compelled to change the way that we do business.

The need for good corporate governance, better risk management and compliance also forced us to think differently in order to avoid the bitter experiences that highlights in the industry. In this scenario, we are in the process of upgrading our existing software and have provided anywhere any time banking to our clients. Now with the 120 ATMm located islandwide our customers can make withdrawals and make deposits from any NSB ATM service point.

The Bank has already linked with Master Card so that customers can enjoy this facility globally.

The Bank acts as agents in Sri Lanka for the two web-based fund transfer systems “Xpress Money” and “Instant Cash”. NSB also became a member of the SWIFT in August 2007. This enabled NSB to make remittances more secure and fast. We had several programs for migrant workers.

Joining the bank with “Eurogiro” network, will enable NSB to operate throughout the entire post office networks of UK, Italy, USA, Japan and Korea. For instance, Italy, where there are large Sri Lankan expatriate workers, has 14,000 post offices. We are in the process of finalizing MOU with “Eurogiro”, so that customers may be able to use the extensive post office network to send their remittances to Sri Lanka.

We have already signed MOU with Korea, Italy and Israel.

In order to facilitate this segment we also offer NRFC and RFC accounts to this segment.

And last but not least, let me conclude quoting a battlefield statement.

“Ultimately it is not the weapon that counts, but the person behind the weapon”.

Our dedicated staffs’ personalized, courteous and prompt service count in our endeavour to delight our customers.