Business

BOC, People’s Bank fail to meet debt obligations to private banks 

  • CBSL Deputy Governor says state banks burdened with facilitating essential imports
  • Notes control measures taken to prioritise foreign currency payments

By Imesh Ranasinghe 

Sri Lanka’s two state banks, Bank of Ceylon (BOC) and People’s Bank, have not been able to meet their obligations to private commercial banks on a timely basis due to facilitating essential imports, said Central Bank of Sri Lanka (CBSL) Deputy Governor T.M.Y.J.P. Fernando. 

Speaking yesterday (23) at a webinar held by the CBSL on its annual report for 2021, Fernando said that the two state banks’ inability to meet their dues on a timely basis has put “a little stress” on the banking sector.

“The two state banks have been getting involved in facilitating essential imports, and haven’t been able to meet their dues on a timely basis, which has brought a little stress to the banking sector,” she said.

According to her, the state banks have not been able to meet their commitments to the private banks over interbank borrowings.

“With control measures taken now, alongside measures taken to control import expenditure, the situation is improving, and the banks are prioritising their foreign currency payments,” Fernando said.

She added that there is “a little stress” amidst the banking sector with regard to the foreign currency position.

At the end of 2021, BOC recorded a Profit Before Tax (PBT) of Rs. 43.2 billion with a revenue growth of 17% compared to 2020. It also recorded a Net Interest Income (NII) of Rs. 111.3 billion with 49 % growth, while its total assets reached Rs. 3.8 trillion.

Meanwhile, People’s Bank reported a consolidated total operating income of Rs. 110.7 billion and total operating expenses amounting to Rs. 50.5 billion, which represents an increase of 21.9% and 14.9%, respectively, over 2020. 

At the end of Q1 2022, BOC recorded an amount of Rs. 25 billion owed to banks, which is a 44% increase from the previous quarter. People’s Bank owed Rs. 107 billion to banks in FY2021, a reduction from Rs. 164 billion in FY2020. 

Moreover, the financial statements for the banks as at 31 December 2021 showed that the liquid assets of both state banks in off-shore banking had reduced by $ 1 billion in 2021. 

BOC’s liquid assets had decreased from $ 855 million in 2020 to $ 701 million in 2021, while liquid assets of People’s Bank had gone from $ 1.165 billion in 2020 to $ 239 million in 2021.