Banks of Sri Lanaka

C.M.K.Liyanage AG/2009/27861

Content page 1. Introduction 3 2. Classification of Bank 4 • Commercial Banks 5 • Savings Banks 14 • Merchant Banks 16 • Investment Banks 20 3. Central bank of SriLanka 21 4. The objectives of the Central bank 22 5. The Functions of the Central bank 23 6. Credit control by the Central bank 23 7. Exchange Rates 24 8. World Trade Organization 25 9. International Monetary Fund 26 10. References 27 Introduction Banks in SriLanka The banking sector is one of the most important sections of an economy of anycountry. In the modern world all the financial systems are depending on the bankingsector. Now a days banks are not only play a role of loan supplier or money Deposit,savings holder. Modern banks serve various kinds of services for their valuablecustomers. 2

There are four major type of banking systems available in Sri Lanka under thesupervision of Central bank of Srilanka. • Commercial Banks • Merchant Banks • Investment Banks • Savings Banks The central bank is the apex institution in the financial system of Sri Lanka.There are 26 commercial banks in operation in the country. 10 of these are locallyincorporated and the balances are branches of foreign banks. Two of the localcommercial banks are state owned. Merchant/ Investment Banks offer a wide array of services includingidentification and financing of project, leasing, bill discounting, underwriting shareissues, margin trading facilities, loan syndication, bridging finance, participation inproject equity, other forms of project finance, managing private share issues/placements, financial and management consultancy services etc. There are 10 suchbanks in Sri Lanka at present. The Savings Bank’s primary activities are accepting various savings depositsfrom public, investing in government securities, and investing in long-term debtinstruments. Commercial Banks Savings Central 1. Classification of Banks Merchant Banks Bank Banks 3 Investment Banks

Commercial BanksState Owned banks Private Banks 4

• People’s bank • Sampath Bank • Bank Of Ceylon • Commercial Bank Of Ceylon • Hatton National Bank A commercial bank is a type of financialintermediary. Business Banking is another term • Seylan bankfor Commercial banks. This type of banksprovides checking accounts, savings accounts, and • Nation’smoney market accounts and that accepts time Trust Bankdeposits. Many banks offer both commercial and retail • Unionbanking services. But Commercial banking may also Commercialbe seen as distinct from retail banking, whichinvolves the provision of financial services direct to Bankconsumers. In Srilanka all commercial bankes arecontrolling under the supervision of Central Bank of • Pan AsiaSrilanka. Banking Corperation • NDB Bank • DFCC Bank 5

The Functions of Commercial banks Commercial banks engage in the following activities.1. Accepting money on term deposit2. Lending money by overdraft, installment loan, or other means3. Providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures4. Safekeeping of documents and other items in safe deposit boxes5. sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a “financial supermarket”6. Cash management and treasury services7. Merchant banking and private equity financing8.9. Traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities.10. processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means. State Owned Commercial Banks There are two state owned Commercial banks in Srilanka. They are, 1. Peoples Bank 2. Bank of Ceylon People’s Bank Vision To be the Bank of the aspiring People of Sri Lanka: empowering people to become value creating, competitive and self-reliant. 6

Mission For Customers To take pride in providing an excellent service in the most caring, responsive and professional manner. For Owners To generate benefits for the national economy whilst being independent and commercially viable. For Employees To create opportunities for our employees to benefit from their high performance by becoming value creating, skilled, self confident and professional individuals who are also team players. For Society To support empowerment and sustainable development by contributing to the upliftment of education, culture and environment island wid Service Profile Savings Products• Harvest Savings Account• Infants - Isuru Udana• Minors - Sisu Udana• Young Savers - YES• All those who wish to make their dreams come true - Jana Jaya• Ladies - Vanitha Vasana• Senior Citizens - Parinatha• For maximum benefits - Peoples Bank MAX• Senior Citizens Pilgrimages - Vandana• Teachers - Guru Setha• Health Sector Employees - Suwa Sevana• Regular Savers - Investment Savings• General Purposes - Ordinary Savings A/c. (Single/joint)• Institutions o Co-operatives o Partnerships o Sole Proprietorship o Limited Liability Companies o Corporations o Statutory Bodies Current Accounts 7

• Personal Accounts - Individual • Personal Accounts - Joint • Business Accounts - Sole Proprietorship/ Partnership/ Limited Liability Companies / Statutory Bodies Loan Products • Education - (Local to Abroad) • Purchase of Vehicles • Any Purpose Loan • A comprehensive Housing Loan Scheme - Jaya Nivasa • Consumer Durables from Selected Reputed Companies • Purchase of Vehicles • PALS for Professionals • Waidyasiri Loans • Suwa Sevana Loan Scheme for Health Sector Employees • Guru Setha Loan Scheme for Teachers • Big Buy Scheme for Govt. / Corp/ Statutory Board Employees • Loan Scheme for members of local Government • Loan Scheme for Telecom Employees • Pensioners Loans • Loan/ Over draft against deposits • Videshika - Loan scheme for Employees Abroad • Business Loans - Tourism/ Commercial • Loans - Vanitha Vasana • Swarna PradeepaOther Services • Money Transfer (Inter Branch) • ATMs / Operation Facilities using Cards • Credit Cards • Slips - Funds Spreading • International Money TransfersForeigen Currency Accounts • Special Foreign Investment Deposit Account (SFIDA) • NRFC Accounts • NRFC Fixed • RFC Accounts • RFC Fixed • RRFC • RNNFC Accounts • Sierra • Peoples eRemittance 8

Bank Of Ceylon Since in 1939, Bank of Ceylon play a major role in srilanka economy. It has, • 305 Local Branches • 03 foreign branches • 325 ATM Machines Vision Bankers to the nation Mission Customers Foster most rewarding relationship with trust and reliability for our customers, exceeding their expectations. Staff We offer our staff, recognition and rewards to be the best team of achievers in service excellence. Owners As per expectations of our owners, be a catalyst in national development, with profitability. Society Extending banking service to larger society as a beneficial beacon in the country. Service Profile Savings Accounts• Ran Kekulu Children’s Savings• 14+ Savings• 18+ Savings 9

• Kantha Ran Ginum • Ethera Thilina • Ran Govi Thanapath • Ranawiru Ran GinumForeign Savings Accounts • NRFC Savings • NRFC Fixed Deposits • RFC Savings • RFC Fixed Deposits • RNNFE • Export Foreign Currency AccountsCurrent accounts Private Commercial Banks In Srilanka There are several private commercial banks in Srilanka. We can put all thisbanks under same structure. Here we study only glance about two private banks. 1. Hatton National Bank 2. dfv 10

Hatton National Bank In 1888, Hatton Bank commenced business in Sri Lankas hill country station ofHatton, to serve the flourishing tea industry that produced the countrys most famousexport. Now a days it has 189 branches island wide. Vision:To be the acknowledged leader and chosen partner in providing financial solutionsthrough inspired people. Mission:Combining entrepreneurial spirit with empowered people and leading edgetechnology to constantly exceed stakeholder expectations Values: 11

Treasureprofessional&personalintegrity atalltimesDemonstratemutualrespectinallourinteractionsPassionateineverythingwedoCommitte 12

Service Profile • Savings Accounts • Current Deposits • Borrowing funds (housing,Education,Leasing,Credit cards) • e-banking • Project financing • Treasurery Services • Rural credit • Micro finance SEYLAN BankSeylan bank is a Bank with a Heart which established in 1987 as a Public LimitedLiability Company. The theme of Bank is Just, Fair and Consistent. Vision "To be the leading financial solutions provider that delivers exceptional value to stakeholders" Mission"To exceed customer expectations by providing competitively priced superior services through speedy and multiple delivery channels, whilst rewarding staff through recognition and empowerment; being a responsible 13

corporate citizen; adopting environmental friendly practices and adding superior value to shareholders" Values• High ethical and professional conduct• Passion for excellence• Courage to adapt to chang• Continuous improvement• Mutual respect and trust• Building lasting relationships Service Profile• Savings Accounts• Current Deposits• Borrowing funds (housing, Education, Leasing, Credit cards)• e-banking• Seylan Leasing• Palm top banking• Foreign currency exchange 14

Savings Banks State Owned Banks • National savings Bank A savings bank is a financial institution whose primary purpose is accepting savingsdeposits. It may also perform some other functions.In some countries, savings banks werecreated on public initiative, while in others, socially committed individuals createdfoundations to put in place the necessary infrastructure. In Srilanka all Savings banks arecontrolling under the supervision of Central Bank of Srilanka. Functions • The savings bank serves the man of small earnings and without capital by providing a safe place to keep his savings and an experienced agency for investing them so as to yield him an income. • The savings of the average wage-earner are usually not large enough to admit of his investing in bonds, mortgages, and other forms of investment open to the man of means, nor is the man of small income qualified by experience in such matters to select a safe and profitable investment. • But the savings bank takes these small savings of scores of individuals, which collectively amount to very considerable sums, and invests them for the depositors in such ways as to insure safety and a fair return. 15

• It thus encourages among the masses habits of thrift and industry, and accumulates for productive uses money which otherwise would lie idle or be squandered in unwise expenditures. From the standpoint of the employment of funds also there is a wide difference between savings banks and commercial banks. • The function of the savings bank is primarily that of investment, while the commercial bank makes advances to business concerns for current needs. The savings bank invests the depositors savings to bring profit to him; the commercial bank loans its credit to make profit for itself. The savings bank exists for the saver; the commercial bank for the borrower. National savings Bank National Savings Bank (NSB), is a state-owned savings bank in Sri Lanka. Itwas incorporated in Ceylon by the National Savings Bank Act No. 30 of 1971 and wasgranted the status of the Licensed Specialized Bank in terms of the Banking Act No.30 of 1988. It has 126 branches, 14 Postal Banking Branches, 21 NSB Piyasa and aSavings Shop.It also carries out postal banking with the cooperation of 642 postoffices and 3,408 sub-post offices of the Sri Lanka Post. Service Profile • Deposit products • Foreign Currency Accounts • Loans & Advances • Card products • Online banking • Foreign Remittences 16

Merchant Banks Merchant Bank of SriLanka Merchant banks In banking, a merchant bank is a financial institution primarily engaged inoffering financial services and advice to corporations and to wealthy individuals.The term can also be used to describe the private equity activities of bankingThe chief distinction between an investment bank and a merchant bank is that amerchant bank invests its own capital in a client company whereas an investment bankpurely distributes (and trades) the securities of that company in its capital raising role. Both merchant banks and investment banks provide fee based corporate advisoryservices, including in relation to mergers and acquisitions. In Srilanka all Merchants banks arecontrolling under the supervision of Central Bank of Srilanka. Functions • Primarily Merchant Banks are involved in International finance and long-term loans for multinational corporations and governments. • They provide both finance (credit) and underwriting (insurance). • Portfolio management • Leasing • Loan syndication • Project finance 17

• Issue management Merchant Bank of SriLanka Merchant Bank of Sri Lanka PLC [MBSL] is a public quoted company withlimited liability incorporated on 4th March 1982, listed on the Colombo StockExchange. Service Profile • Trade Finance • Leasing • Corporate Advisory Services • Capital Market Activities • Fund Management • Corporate Secretarial & Legal Development Banks A Development bank is a national or regional financial institution designed toprovide medium- and long-term capital for productive investment, often accompaniedby technical assistance Development Banks or Development Finance Institutions as these arenormally called in the financial world are a post World War II phenomenon. Theirestablishment in Africa, Asia and other developing countries in most cases coincidedwith the attainment of independence. 18

Functions  Provision of Capital to Industries, which can play role in economic development.  Lends money to small scale industries.  Services of Mutual Funds  Funds raising schemes for development companies.  Project advicing services  Project Management National Development Bank VISION A World-class SriLankan bank MISSION To be dominant in the financial services sector, creating superior long-term shareholder value and contributing to economic development in Sri Lanka by exploiting regional opportunities and delivering innovative solutions with best in industry service excellence through an inspired team VALUESIntegrityWe believe in truth, justice and fairplay, above all else.CareWe will never lose the human touch. We will care for our colleagues, our customers,our community and our environment.PassionWe will embrace challenges with passion and aggressively pursue our goalsTeamworkWe will work together as a team, supporting each other, respecting every individualand drawing strength from our diversity.ServiceWe will always strive for excellence in serving our internal and external customers,through professionalism, innovation and creativity Service Profile 19

• Privilege Banking • Savings Accounts • Current Accounts • Minors Accounts • Foreign Currency Accts. • SFIDA • Fixed Deposits • eZ Pay • Leasing • Loan Schemes • Safe Deposit Lockers • VISA Debit Card • Western Union • BancassurancCorporate Services • Project Loans • Working Capital Finance • Trade Services • Leasing • Cash Management • Treasury Products • Bancassurance • Commercial Markets 20

Investment Banks An investment bank is a financial institution that assists corporations andgovernments in raising capital by underwriting and acting as the agent in the issuanceof securities. An investment bank also assists companies involved in mergers andacquisitions, derivatives, etc. Further it provides ancillary services such as marketmaking and the trading of derivatives, fixed income instruments, foreign exchange,commodity, and equity securities. Unlike commercial banks and retail banks, investment banks do not takedeposits. To provide investment banking services in the United States an advisor mustbe a licensed broker-dealer. The advisor is subject to Securities & ExchangeCommission (SEC) (FINRA) regulation[1]. Until 1999, the United States maintained aseparation between investment banking and commercial banks. Other industrializedcountries, including G7 countries, have not maintained this separation historically.Trading securities for cash or securities (i.e., facilitating transactions, market-making),or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the"sell side". Dealing with the pension funds, mutual funds, hedge funds, and the investing publicwho consumed the products and services of the sell-side in order to maximize their return oninvestment constitutes the "buy side". Many firms have buy and sell side components. InSrilanka all investments bankes are controlling under the supervision of Central Bank ofSrilanka. 21

Central Bank Of SriLanka The Central Bank of Ceylon was set up by the post independence Governmentin recognition of the importance of an active monetary policy regime and a dynamicfinancial sector to support and promote economic growth. The Exter Report on the rationale and the legal framework for the CentralBank was presented to the Government of Ceylon in November 1949 and led to itsformation. The Central Bank of Ceylon was established by the Monetary Law Act(MLA) No.58 of 1949 and commenced operations on August 28, 1950. It wasrenamed the Central Bank of Sri Lanka in 1985. The Central Bank was given wide powers to administer and regulate the entiremoney, banking and credit system of the country. The Central Bank was also giventhe sole right and authority to issue currency and it also became the custodian of theinternational reserves of the country. The Vision This vision statement clearly indicates that the Bank is deeply committed to contributing to the prosperity of Sri Lanka . Mission Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence The objectives of the Central Bank (as specified in the MLA in 1949)a ) The stabilization of domestic monetary values (maintenance of price stability).b ) The preservation of the par value or the stability of the exchange rate of the Sri Lankan Rupee (maintenance of exchange rate stability).C )The promotion and maintenance of a high level of production, employment and real income in Sri Lanka.d ) The encouragement and promotion of the full development of the productive resources of Sri Lanka 22

The objectives of the Central Bank (According to the modernization program in 2000)1 The maintenance of economic and price stability Price stability safeguards the value of the currency in terms of what it will purchase at home and in terms of other currencies. Price stability or stable prices means low inflation. Experience has shown that the economy performs well when inflation is low and is expected to be low. Interest rates are also low in these conditions. Such an environment allows an economy to achieve its growth potential and fosters high employment. Free from the disruptive effects of high and variable inflation, both consumers and producers make economic decisions with confidence. Low inflation or price stability fosters sustainable long-term economic growth and employment. The Central Bank uses monetary policy measures to control inflation.2 The maintenance of financial system stability A stable financial system creates a favorable environment for depositors and investors, encourages efficient financial intermediation and the effective functioning of markets, and hence, promotes investment and economic growth. Financial system stability means the effective functioning of the financial system (financial institutions and markets) and the absence of banking, currency and balance of payments crisis. Financial instability is caused by bank failures, excessive asset price volatility, and collapse of market liquidity or a disruption to the payments system. Financial system stability requires a stable macro-economic environment, effective regulatory framework, well organised financial markets, sound financial institutions and safe and robust payments infrastructure. The maintenance of financial stability entails the prevention, detection and reduction of threats to the financial system as a whole, through the surveillance of markets and financial institutions, oversight of the payments system and crisis resolution. 23

Functions of the Central BankIn order to achieve its core objectives as well as to discharge its responsibilities aseconomic advisor and banker to, and agent of the GOSL, the CBSL undertakes thefollowing functions.Core functions Economic and Price Stability Financial System StabilityAncillary to core functions Currency Issue and ManagementAgency functionsThe Central Bank of Sri Lanka undertakes the following four agency functions for theGovernment of Sri Lanka. Employees Provident Fund Management Foreign Exchange Management Public Debt Management Regional Development Credit control by the Central BankThe Central Bank discharges this role by establishing the required legal framework,regulating and supervising key categories of financial institutions, maintainingstability in key financial markets, overseeing the payments and settlements system,acting as lender of last resort and by regular surveillance of the entire financialsystem, including insurance and stock market activities. 24

Regulation and Supervision • • •  •Monitoring and Surveillance • • • •Fina 25

• Deposits • Loans • Treasury Bills and Bonds • Repurchase Agreements • Commercial Paper • Corporate Bonds and Debentures • Asset-backed Securities • Financial Leases • Shares • Financial Derivatives Exchange Rates In finance, the exchange rates (also known as the foreign-exchange rate,forex rate or FX rate) between two currencies specifies how much one currency isworth in terms of the other. It is the value of a foreign nation’s currency in terms ofthe home nation’s currency.The average rates of the following currencies quoted on that day by commercial banksin Colombo for Telegraphic Transfers (TT) at 9.30 a.m. are as follows.Daily Exchange Rates 07.07.2010 Currency Buying Rate (Rs.) Selling Rate (Rs.) Dollar (USA) 112.6700 114.2000 170.0300 Pound (UK) 173.4000 Euro (EU) 141.4400 144.6600 26

Franc (Switzerland) 105.6300 108.1300 Dollar (Canada) 106.1500 108.7800 Dollar (Australia) 95.1000 97.6000 Dollar (Singapore) 80.7600 82.4900 Yen (Japan) 1.2819 1.3129 World Trade Organization The World Trade Organization (WTO) is an organization that intends tosupervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the MarrakechAgreement, replacing the General Agreement on Tariffs and Trade (GATT), whichcommenced in 1948. The organization deals with regulation of trade between participating countries; itprovides a framework for negotiating and formalizing trade agreements, and a disputeresolution process aimed at enforcing participants adherence to WTO agreementswhich are signed by representatives of member governments and ratified by theirparliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations,especially from the Uruguay Round (1986-1994).The WTO has 153 members, representing more than 97% of total world trade and 30observers, most seeking membership. The WTO is governed by a ministerial conference, meeting every two years; ageneral council, which implements the conferences policy decisions and isresponsible for day-to-day administration; and a director-general, who is appointed bythe ministerial conference. The WTOs headquarters is at the Centre William Rappard, Geneva, Switzerland. Functions of WTOAmong the various functions of the WTO, these are regarded by analysts as the mostimportant: • It oversees the implementation, administration and operation of the covered agreements. • It provides a forum for negotiations and for settling disputes. 27

• Additionally, it is the WTOs duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making.• Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.• The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization• ] Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank. International Monetary Fund• The International Monetary Fund (IMF) is the international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments.• At present number of registered countries with IMF are 182, operations in 110 countries with 2600 employees.• It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies on other countries as a condition for loans, restructuring or aid.• It also offers highly leveraged loans, mainly to poorer countries.• Its headquarters are in Washington, D.C., United States.• The International Monetary Fund was created in July 1944, originally with 45 members, with a goal to stabilize exchange rates and assist the reconstruction of the worlds international payment system.• Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances (Condon, 2007). The IMF was important when it was first created because it helped the world stabilize the economic system.• The IMF works to improve the economies of its member countries. Functions• Developing fair and monitor currency exchange rates among all the countries. 28

• MF also provides short tem loans to its member countries so they could bring their imbalanced payment system into balance. • One more important function of IMF is to draw lending money model for borrower countries. In this way IMF also acts as Debtor. • IMF also provides Training and Technical assistance in the areas of finance management system, Tax system, banking system development to its member countries through its Monetary and Exchange Affairs Department, the Fiscal Affairs Department, and the Bureau of Statistics. • The Legal Department, the Bureau of Computing Services, and the area departments also coordinate. • IMF also helps to draw a systematic system for foreign transactions to take place. • It provides advice on microeconomic development. Referenceshttp://en.wikipedia.org/wiki/List_of_banks_in_Sri_Lankawww.answers.comhttp://buildsrilanka.com/Banks.htmhttp://www.cbsl.gov.lk/htm/english/05_fss/fss.htmlhttp://www.sampath.lk/http://www.business.com/directory/financial_services/banking/banking_institutions/commercial_banks/sri_lanka/weblistings.asphttp://www.hnb.net/ 29

http://www.peoplesbank.lk/http://www.cbsl.gov.lk/http://www.mbslbank.com/http://www.ndbbank.com/http://www.nsb.lk/ 30

Banks of Sri Lanaka

by Chanuk Liyanage

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