Bank of Ceylon is resilient in issuing a clarion call to the shipping and logistics sector to maximize on the opportunities for growth through the bank’s attractive investment portals.
Kanchana Ratwatte, Chairman of the country’s prestigious state-owned banking entity- Bank of Ceylon has contributed a wealth of experience towards re calibrating the bank to conquer the challenges faced during this global pandemic.
With experience in the telecommunications industry as the Director General of Telecommunications, experience in Shipping as the Chairman of the Ceylon Shipping Corporation and experience in standardization as the Chairman of the Sri Lanka Standards Institution, and with over twenty years in the IT field with the private sector and a reputed Lawyer, Chairman Ratwatte contributes professionalism and a wide comprehension of what is required to ensure customer satisfaction and consistent progress for the nation through the Bank’s journey towards consolidation.
BOC is seen as a panacea for many economic ills in the wake of the pandemic and its aftermath. What is your opinion?
Before I respond to the pandemic situation let me first draw your attention to the general economic situation that prevailed at the time; a new President was elected to office in 2019. It was an economy that had been battered by the devastating effects of the Easter bombing with the tourism industry reeling and all related industries being affected. Even without the effects of the sordid events general interest rates which had been single digit in the year 2014 had shot up to 15 or 16 % by 2019. There was a VAT of 15%. There were other taxes such as NBT and WHT. With all these high costs most enterprises were in great difficulty. It was in this backdrop that the GOSL intervened in offering a moratorium and also introducing a low tax regime with VAT being brought down to 8 %. Certain other taxes were removed altogether. We also saw a gradual reduction of interest rates which was reduced to single digits. Here was the platform that had been set by the Government to give a thrust and a turbo boost to the economy.
It was in this scenario that the World Health Organization (WHO) declared a state of pandemic in the first quarter of 2020. The Government of Sri Lanka was prompt in reacting to the situation by imposing a lockdown in the country. Despite the fact that this was an unprecedented situation, the nation prevailed through it. There were 11 deaths reported during the initial wave which was solely due to the aggravated stages of Covid-19 and not for the lack of food or for the want of better medical facilities or economic upheaval. The essential services pertaining to agriculture, finance, exports and logistics prevailed within the government directives.
As far as the banking sector was concerned, certain innovative measures had to be adopted to deal with the unfolding situation. The Central Bank of Sri Lanka (CBSL) and the Government of Sri Lanka through the intervention of the Treasury made timely decisions in order to enable the entrepreneurs to overcome the challenges that they were faced with.
It was in this context that a second and third moratoriam were introduced by the Central Bank in the month of March until September 2020 with a further extension till March 2021. As per the features of the moratoriam we were in a position to assist about 220,000 customers from various enterprises. While this resulted in the immediate negative impact of LKR six billion on our balance sheet it also resulted in all sectors keeping at bay the impact of the pandemic to a considerable extent.
The other significant feature that was introduced by the CBSL was the Saubagya Loan Scheme where loans were offered at a previously unheard of rate of merely 4% as working capital.
While the entire component of money disbursed by CBSL was LKR150 billion, BOC accounted for LKR 40 billion which was proportionately disbursed among the enterprises to rejuvenate the economy.
In your opinion is SL on the road to recovery?
Taking into consideration the various sectors; for instance in agriculture we are expecting a bumper harvest due to the adequate rain received. The export sector bounced back by 60-70 percent despite travel restrictions and limited buying power as the sector was flexible enough to adapt and evolve to suit the growing demands of the new normal. For instance the winter collection for 2020 planned by the garment sector transitioned towards the supplying of PPE kits which showed a surge in demand. Tourism had already been severely impacted by the Easter bombings during the preceding year and continued to plummet due to the lockdown. Yet despite that, we had over 3000 tourists visiting the country in 2020 and we were harnessing the available resources to cater to more arrivals in future until this new wave hit the entire world by surprise. The food and essential items were made available during the lockdown as essential imports were not hampered by the unprecedented situation. Additionally, many niche categories were identified and developed which resulted in an influx of SMEs and other entrepreneurships flourishing on a mass scale. People from all strata of society were compelled to make rapid transformations to the digital era almost overnight.
What were some of the loan schemes that were introduced by BOC?
The bank introduced a beneficial loan scheme; mainly targeting the SME sector.
The ‘Divi Udana’ which means the birth of life loan scheme is another agglomeration of 24 types of loans ranging from 8.5 percent to the lower end of six to four percent re-finance schemes. The lesser interest rates are mainly focused on deserving segments of entrepreneurs, such as women entrepreneurs, small borrowers or those from difficult areas and even special rates for environmentally friendly projects. Even 8.5 percent is a significant reduction in interest rates from 2019, which was about 15-16 percent as mentioned earlier. Initially the 8.5 percent loan was offered to the fisheries sector in a phased out scheme which commenced in Matara in order to upgrade the fisheries industry. LKR ten billion has been disbursed among a customer base of over 39,000 with more promotions and engagements underway to promulgate this scheme. We have significantly disbursed loans apart from the fisheries sector, to the agriculture sector, dairy sector and many more areas which was mainly focused on creating food security in these crucial times.
The advent of the annual ‘Maha’ season brings with it an additional crisis faced by the government which is inadequate storage facilities. While the produce during the ‘Yala’ season is often only one third of the crop, the balance 2/3 comes in Maha. Therefore in order to create a balance and food security the Pledge Loan Scheme enables a person who owns a storage facility to make it available for inspection, hand over the keys, source 25 percent funding while the Bank provides 75 percent of the funds in order to purchase the grain items for storage. This is accessible for paddy and maize and many more grains produced locally.
BOC has already funded 15-20 billion rupees worth of food storage during the Maha season. What we aim to achieve is the enhancement of the capacity to store over a longer period in order to ensure that the farm gate price increases and the farmer gets his due and is motivated to engage in agriculture which is a vision of the current government. Another focus area of the BOC’s loan schemes covers the dairy and poultry sectors in which low interest loans are offered to entrepreneurs. The bank follows a two pronged approach in which the beneficiary farmer communities and the regional bank staff are addressed through seminars and workshops conducted by the senior management island wide.
The 150 year old history of tea is a legacy left behind by the British which brings significant foreign revenue to Sri Lanka. With over 500,000 estate workers and other stakeholders such as transport, shipping, warehousing and their families which amounts to over three million people who directly and indirectly benefit from the tea trade, therefore we need to maximize on the current global demand and extend an extensive support.
What has the government envisioned for the Shipping & Logistics trade?
While we have gained world prominence on a 150 year old tea industry that was introduced by our colonial rulers, we are on the cusp of creating our own promising destiny using the plethora of resources we possess as an island nation.
The vision of the GoSL since 2008 had been to create a maritime legacy. Therefore, development of the Colombo Port and Hambantota Port was conducted in stages and phases with over USD three billion being invested till the change of government in 2015.
While our island has been surviving mostly on agriculture based industries and foreign exchange derived from remittances, there is an obvious transition which needs to take place for an island nation which lies in the middle of the Malacca Straits and Suez Canal sea route. The existing Colombo Port is an additional three days of sailing in order to reinforce on medicine, food, refueling and other supplies, which birthed the idea of developing a new port in Hambantota – a mere nine nautical miles from the sea route incurring lesser sailing time for ships.
The recent accident on the Suez Canal drew the attention of the entire world to the importance and value of shipping assets. Officially declared open in 1869 and nationalized in 1956, the Suez Canal has served as a major multi-faceted, transnational revenue earner. Initially managed by the French, followed by the British and now owned by the Egyptians, the canal provides a revenue of US $ 15b to their economy.
The GOSL invested large resources for the development of the Colombo Port with the impending addition of ECT and WCT terminals which would provide additional capacity and Hambantota Port. Now, it is time for the private sector to reap the benefits by utilising the large infrastructure that’s already in place. The proximity of the international airport to the port in Hambantota is a major advantage that could be exploited.
If the miniscule nation of Hong Kong rose from obscurity to become a major shipping hub which serviced mainland China and continues to be a force to reckon with even though China has opened its own ports, we too can position ourselves to be a force to contend with in the Shipping and Logistics sphere regionally and globally.
In retrospect, we too had our own container line and oil tankers which were competing with global giants as a respected carrier. Unfortunately that is relegated to the annals of our history, yet we need to re-emerge as a force to reckon with. Yes, we do see certain private sector conglomerates foraging into this area in the recent past which is definitely the path to tread.
Why should the stakeholders of the shipping & Logistics industry choose to bank with BOC?
Currently BOC has the most attractive single digit interest rates that are beneficial for all, with the Average Weighted Prime Lending Rate (AWPLR) at 5.6% and we do lend a lesser 1 to 2 percent to our prime customers which is a conducive environment for any industry. Our main focus is to restore the years the metaphorical locust has eaten away and BOC has pledged to extend extensive support needed to do so.
The world trend has continuously evolved with progress being made in leaps and bounds in the maritime industry from invasions to colonizations to the formation of Silk routes, Spice routes and other prominent milestones. Now with China propagating its One Belt One Route (OBOR) vision and the introduction of large carriers, the time is ripe for establishing larger ports for mid sea refueling and other logistical purposes. Hence, the importance of Hambantota, where even two internationally reputed hotel chains already have their imprint in place. The port related industries have not yet materialised at the rate the GOSL expected. We should strive now to expedite private sector investments into this area.
We also need to develop the office spaces, banks, insurance companies and other port related industries to evolve into the Southern Business Hub. Due to its spaciousness, will not be congested as Colombo and its development will receive further infrastructure support from the government. The natural harbor of Trincomalee has also been the cynosure of all eyes; national and international and its development is pivotal for overall development of the maritime industry of SL in the near future.
BOC has a vast island wide network of branches and a strong international representation through our very own subsidiary in London, branches in Male, Hulumale, India and Seychelles. In these difficult times we have been able to increase the remittance market with foreign exchange. As against the previous year, 2020 saw an increase of 15 percent growth in this sector. Foreign remittances reached 2.7billion USD in 2020 with the BOC component accounting for more than 40 percent of the remittance market of SL. This year the YoY incremental remittance amounts to 10 percent which is a stamp of confidence of the strength of the Bank.
We are vigorous and dynamic as a state bank and would take this opportunity to invite the shipping industry to take advantage of the thirst to lend on the part of BOC with its capacity remaining the highest in the country as the NUMBER ONE bank by far using any parameter.
What are some of the stellar achievements of BOC this year?
As stated above, BOC achieved USD 2.5 billion in foreign remittances which is 40 percent market share during the year and a 15% increase in comparison to the previous year. We have achieved a growth in our loan book of 28 percent for the financial year 2020. Our deposit base has grown by 15 percent from last year to LKR 2.3 trillion. Our asset base has grown to over LKR 3 trillion which is by far the highest by any entity in this Island. We are also the largest commercial entity with its footprint island wide. Playing a true leadership role, we account for 23 percent of the banking sector assets and leading in loans, advances and deposits by well over the 23 percent market share.
What sort of workplace dynamics have played a key role in revamping BOC to fit into the 21st century?
BOC has encouraged open dialogue and approachability with a customer-centric focus in which the Bank takes the first step towards servicing the requirement of the customer. There is no hubris in being a prestigious state owned institute as the sole desire of its staff amounting to over 8000 island wide is to reach out to the nation and its people- which is evident in the Covid- 19 period and thereafter. The senior and middle management are keenly aware of the issues faced by their regional customers due to the close interaction and the rapport built. This has generated a positive impact as customers are more loyal towards the bank due to the support rendered during adversity.
There is unity in diversity as the staff hail from all parts of the island and bring in their unique expertise. Each of them contribute towards a stronger bonding and upliftment of the institution and the nation, which resonates in their commitment, engagement and involvement in their roles as it exceeds a mere occupation and can be defined as a vocation. With such a divergent associated with cultural, religious and ethnic beliefs a balance and mutual respect is prevalent in the staff who display excessive compassion and a willingness to support customers at any given time.
BOC has a broader vision and mission which is intertwined with the vision of the present Government, HE the President and Prime Minister to ensure the enhancement of the local industry. This was prevalent prior to the pandemic as greater focus was channeled to the introduction of technology, local entrepreneurship and the introduction of Sri Lankan brand names.
What expertise and experience have you brought to this prestigious establishment?
Although I am a relative newcomer to the banking industry, my involvement and experience in various capacities in the public sector has been fruitful in enhancing my current posting as it gives me an overall understanding of a vast caliber of customers and their unique requirements. It has also been vital in steering this prestigious establishment in accomplishing the vision of a nation at a time the global community is trying to grapple with the most difficult crisis. We are resilient in these difficult times and have stood by our loyal customers.
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