June 26, Colombo (LNW): Sri Lanka banking sector has come under fire of two leading Ministers Dr. Ramesh Pathirana and Dr. Wijeyadasa Rajapakshe for half-hearted support to the struggling Micro, Small and Medium Entrepreneurs (MSMEs) thereby endangering a quicker recovery in the economy following multiple crises.
Industries and Health Minister Dr. Ramesh Pathirana urged private enterprises to stand against unfair banking practices and to continue lobbying for their interests regardless of political affiliations.
Speaking at an awareness conference organised by the Ceylon Federation of MSMEs on ‘Business debt and finance management’ on the side-lines of the Industry Expo 2024, Pathirana insisted the need for businesses to create conversations and pressure policymakers to address their concerns.
Dr. Pathirana warned that banks might channel most of the funds from international credit lines to their wealthy clients, calling for vigilance and protest against such practices.
“We learn that banks are trying to pull the usual pattern of getting the most of the funding facilities to their already rich clients from the loans extended by the international agencies like the World Bank and the Asian Development Bank,” the Industries Minister alleged.
He also pointed out that promoting fair banking practices are essential to drive economic development in Sri Lanka.
Separately at the same conference, in a scathing critique of the banking system, Justice Minister Dr.Wijeyadasa Rajapakshe criticised the policymakers for their failure to establish a credible economic policy to support enterprises and entrepreneurs.
“Banks are established to support industries, entrepreneurs and people, not to flaunt their large balance sheets and profits. State banks, in particular, were created to expand the economy by supporting agriculture and industrial development, rather than solely providing credit facilities to the wealthy,” he said.
He criticised the economic transformations post 1977, noting that these changes have had detrimental effects on the overall growth of Sri Lanka.
“Prior to the open economy, the Bank of Ceylon was established to assist farmers, with over 300 branches set up countrywide through Agricultural Service Centres under Prime Minister Sirimavo Bandaranaike.
The People’s Bank was also directed to support enterprises. Unfortunately, the overnight privatisation of the National Development Bank (NDB) and the profit-driven focus of the two State banks — Bank of Ceylon and People’s Bank, have deviated from their original missions,” he elaborated.
The Justice Minister also revealed troubling practices in the banking sector, where loans are often granted based on personal connections and political influence rather than proper evaluations and compliance.
He claimed that the two State banks have over Rs. 620 billion in non-performing loans (NPLs), asserting that at least half of this amount will likely be written off eventually, as the banks did not secure any collateral or guarantees.
