STATE OF BANKING
TRANSACTING IN REAL TIME
Your take on the state of the banking sector in Sri Lanka is…?The sector is robust and well-governed. We now customise products, and clients have numerous options, when it comes to investing and borrowing. And with the dawn of the digital era, product portfolios have expanded.
What measures have the banks taken to expand their outreach to rural parts of the island, and enable people in these areas to access banking services? Rural communities are of strategic importance to banks, as they comprise around 80 percent of the country’s population.
So all banks are making an effort to reach these communities by adopting methods such as value chain financing – i.e. funding the grass-roots level of the value chain. This helps eliminate unregulated financing and exploitation by middlemen, and reduces the share of non-performing loans.
Widening the ATM network is another tool that banks are utilising, to expand their outreach. Due to advanced technology, customers are now able to use any ATM machine, irrespective of the bank at which their account is located.
Mobile banking has made a significant difference. Although not everyone may have a bank account, they do have mobile phones. Therefore, it’s easier to draw them into mobile banking, through user-friendly systems.
The major challenges or issues that beset the local banking sector are…? Firstly, the market is saturated, with over 25 banks in the country. So there is tremendous competition. You may come across five or six banks operating in a single town, and all of them targeting the same customer base.
There is also a bipolarisation of deposits – i.e. a mismatch between demand and supply – due to the shortage of liquidity in the market.
Limitations in human resources in the banking sector pose a third challenge. When banks expand, they require more staff. And if there’s inadequate organic growth in talent within the organisation, banks are compelled to recruit from the market, which could lead to poaching.
So there’s a need to forecast requirements, and train and develop employees accordingly.
In your view, how has banking been impacted by digitalisation? Digitalisation has made it easier for customers to engage in transactions. Advanced mobile banking apps enable clients to carry out most personal transactions on their mobile phones. Digitalisation has also helped reduce the cost of transactions.
The efficiency of the banking system has improved with the use of digital tools, as it has enabled real-time transactions via integrated networks. Client efficiency has improved, too. A customer need not go from bank to bank with instructions to process transactions – you can do this on a mobile device, in a matter of minutes.
The Government, for its part, is making an effort to digitalise public databases. For instance, plans are in place to introduce a digital national identity card system. This will help banks bring customers aboard easily, as the need for verification documents will be eliminated. Similarly, the plan to establish a digital land registry will benefit the banking sector, because it will simplify the process of title clearance in mortgage-backed lending.
If the information is available digitally, it eliminates the need to spend time trying to re-clear a title when it is being mortgaged to a different bank.
Do you think that enough is being done by policymakers or the regulator, to capitalise on the banking sector’s strengths? The trade liberalisation that is transpiring – in parallel with the liberalisation of exchange controls – has been beneficial to the sector.
Establishing the Colombo International Finance City (CIFC) as a financial hub will lead to several international financial institutions setting up offshore branches in this country. This will help improve Sri Lanka’s positioning in the global arena, and earn revenue through several sources, including licensing fees to operate in Sri Lanka.
In terms of what more can be done, I believe that we need the involvement of banks in policymaking, especially in terms of the Foreign Exchange Management Act that is currently being formulated. Banks, too, need to play a significant role and offer insights – because ultimately, they play a pivotal role in executing policy.
What is your mantra for success? Commitment and hard work
Describe yourself in a word…