Q: How is the bank faring at this time given the economic scenario here in Sri Lanka?
A:We have witnessed some degree of moderation in the growth of credit during this year in response to the higher interest rates that have prevailed. This challenging situation was compounded by the rising credit costs and resulted in a slight increase in nonperforming loans because the higher rates coupled with higher taxes reduced people’s disposable incomes and thus eroded their debt servicing capacity. So even corporates were impacted negatively by poor consumer sentiment. Despite these economic odds however, I would say that by and large the bank has been faring quite modestly – this is reflected in our nine month results released to the Colombo Stock Exchange (CSE) in October. Our results are especially noteworthy given that the effective tax rate in the banking sector currently hovers at around the 50 percent level.
Q: What is your take on the state of the broader economy and how is it being impacted by global markets?
A:The broader Sri Lankan economy remains fragile and as a result, volatility in global markets is felt deeply – especially given the sharp decline in the value of the Sri Lankan Rupee against the US Dollar. This has led to higher interest rates and rising inflation, which has dampened demand. On a positive note, I believe that the global economy is in much better shape than it was a few years ago. We are seeing some synchronised growth in all major economies led by the US albeit with some moderation in China. What’s important for us is to build a strong domestic economy that can withstand the pressure of the spillover effects of these global rebalancing exercises to benefit in the medium term.
Q: And how do you view the bank’s prospects in the medium term?
A: Due to the bank’s proven track record of being able to adapt to challenging conditions and display superlative performance, I’m optimistic about growth prospects in the medium term. However, one of the main challenges we need to overcome is addressing the higher capital requirements. The banking sector’s capital is governed by the international Basel Committee on Banking Supervision (BCBS), which raises the minimum threshold from time to time. In addition, the Central Bank of Sri Lanka also issues directions to banks stipulating the minimum level of capital that must be maintained. In consideration of all these factors, we are moving towards a modest yet sustainable and quality growth for the next few years.
Q:To what extent have the protests and strikes witnessed in recent times affected business?
A:Although there weren’t any reported incidents affecting the bank’s operations directly through these negative
externalities, there’s no doubt that protests and strikes have a knock-on effect on overall business and productivity. In order to arrest these issues, it is incumbent on all of us to create economic opportunities benefitting a larger section of society so that people will either engage in jobs or enterprises – instead of engaging in revolts – as they have meaningful tasks to perform.
Q: Do you feel that the value of the rupee is reasonable?
A: It is obvious that nobody likes a weaker rupee but the question is whether we have done our part to counterbalance any undue pressure. The answer is clearly ‘no.’ But that does not mean that we must defend it by selling the limited dollar reserves we have, which is counterproductive because we’ll have to spend them anyway. So this is why we must at least now start building a stronger agricultural base to ensure food security so that the country doesn’t have to de pend on imports alone. And secondly, we must stimulate export oriented domestic in dustries by way of local (private) and foreign direct investments. This way, we can provide a strong counterweight to the strengthening dollar. We must also open our factor markets but this must be done carefully, and without hurting local sensitivities and while appreciating cultural differences. Therefore, I believe that policy makers will have to find the right balance in policy without going to extremes as this has proved to be a failure.
Q: In your opinion, how can Sri Lanka improve its ‘Ease of Doing Business’ ranking and global competitiveness?
A: Cutting red tape and simplifying processes will enable Sri Lanka to become an appealing investment destination for both local and foreign investors. I have seen people go through the mill to obtain approvals as they’re sent from pillar to post.
While our people will continue to appreciate physical contact in transactions, there’s also a growing clientele who choose to do their banking on the go on their smartphones or laptops
Sri Lanka is yet to fully harness the technology that can make a huge difference in improving productivity in all areas. Another area for improvement is simplifying the tax system, which remains complicated for businesses despite the new Inland Revenue Act. An effective law enforcement mechanism and an arbitration system are also prerequisites for improving the ease of doing business, and global competitiveness.
Q: To what extent are innovation and technological change impacting banking?
A: Technology plays a vital role in the banking sector in reshaping how customers use banking services. While our people will continue to appreciate physical contact in transactions, there’s also a growing clientele who choose to do their banking on the go on their smartphones or laptops, which is both convenient and less costly. We have also observed telecommunications service providers offering similar services to that of banks, which has increased competition for banks. Our strategy is to identify the right balance between the traditional banking model versus digital banking and collaborate with financial technology firms to cater to that emerging segment to create a win-win solution for all stakeholders.
Q: Should organisational performance and environmental sustainability go hand in hand?
A:We strongly believe in this as business is only a component of the wider environment, and unless our actions help nurture and sustain the environment in which we operate, the sustainability of the business is at peril. So there is a deep responsibility on the part of businesses towards the environment. This is why we try to reduce our carbon footprint by going digital, and through energy saving in terms of lighting and heating. Our most significant endeavour was the promotion of green lending and introducing an environmental sustainability policy across the bank, which minimises impacts of lending activities on the environment. With this promotion, we’ve demonstrated that we believe in triple bottom line, and people, profit and planet are at the heart of all decisions at Pan Asia Bank.
Q: Could you outline the bank’s plans especially in regard to expansion?
A: We have projected modest growth during the next three years given the need to adhere to rising capital requirements. However, the bank will continue to introduce innovative products as we remain alert for opportunities presented in the market and shifts in consumer
Click here to view the LMD article