BANKING SECTOR
Compiled by Yamini Sequeira
STRAINING AT THE LEASH
Eugene Seneviratne describes the challenges facing the banking sector
Q: How do you view the banking sector’s prospects for the rest of this year?
A: There are vast opportunities for banking and financial services, along with the potential for renewal and growth. Year 2024 holds particular promise. Although the sector has weathered a challenging period over the past few years, things are looking up – this provides a solid foundation and demonstrates immense potential for greater contributions to the economy.
Bankers need to continue supporting clients beyond the concerns of profitability, helping them to navigate and thrive amid rapidly evolving conditions. A long-term strategy of this nature is crucial for sustainable success in the banking sector.
Recovery in the banking sector hasn’t reached the desired levels as yet but there are promising signs of improvement. While a debilitating downturn was witnessed previously, we’re seeing positive indicators such as GDP growth.
Despite ongoing political instability, the Central Bank of Sri Lanka’s adherence to sound policies is commendable and contributes to stability.
Moreover, prioritising sectors and industries that are crucial for economic growth – such as tourism and construction – is vital. Supporting them will benefit businesses that have faced severe challenges and it’s essential for overall economic prosperity.
A focussed effort on these key industries is necessary for sustained national growth.
Q: How has the present situation affected the retail banking sector?
A: We remain optimistic about retail banking – we have clear targets and strategies to reduce non-performing assets (NPAs) below market levels. Prioritising client support over business growth last year enabled businesses to survive, recover and position themselves for future success.
Q: And how should issues related to NPAs be addressed by the banking sector?
A: There are two distinct groups to consider when addressing challenges facing the banking sector with regard to NPAs – i.e. wilful defaulters and individuals who are genuinely facing economic hardships.
It’s crucial to handle these cases discreetly and not treat the two groups as being the same. While laws and regulations are in place, banks should exercise prudence and selectivity in their approach. We must revisit previous strategies, focussing on nurturing genuine defaulters instead of pursuing legal action.
A more supportive approach is needed for genuine defaulters such as those impacted by unforeseen crises like COVID-19 or the Easter Sunday attacks.
This involves excluding them from stringent action, and providing funding and support, to help them recover and contribute to the economy. These clients have the experience and expertise to withstand challenges compared to new customers who are to be experimented with.
However, it’s also essential to identify and address wilful defaulters who exploit economic crises for personal gain.
The priority should be to support organisations facing challenges such as shortages of materials or labour issues post-crisis, emphasising the importance of nurturing their businesses for long-term economic stability.
In the past two years, we’ve seen significant impacts on retail, particularly with NPAs.
Presently, the drop in disposable income hinders growth across sectors as survival takes precedence over new investments or spending.
Q: What challenges does the banking sector need to overcome?
A: The brain drain continues with talented individuals leaving at an alarming rate. Retaining talent has become increasingly challenging due to the overall country situation.
Losing our best resources poses a considerable obstacle – especially when merely recruiting newcomers isn’t sufficient to fill the gap. This challenge extends beyond banking, affecting industries nationwide where technical expertise is in high demand but short supply.
Furthermore, talent migration poses a serious long-term issue for the country, impacting sectors from healthcare to engineering; this necessitates urgent attention and solutions.
Taxation policies exacerbate the issue, driving talented individuals to venture overseas, thereby burdening the rest of the population. The middle class in particular is feeling the strain – this is evident in their everyday struggles to afford basic necessities for their children.
Q: With resource sustainability becoming a key priority for companies and nations, what areas must corporates focus on?
A: Across the nation, individuals must recognise their responsibility to conserve resources such as energy, water and food. This collective effort is essential to address national issues and reduce the burden of taxes.
We need to cultivate a culture of conservation at all levels of society – i.e. from politicians and companies, to families and individuals. By instilling this mindset, we can impact the likes of environmental preservation, resource management and literacy.
We must prioritise fulfilling our responsibilities rather than solely relying on others. Generating and supporting renewable energy is an urgent national priority that needs to be embarked on without delay.
It’s not too late to make a positive change.
