Asset Quality

Apr 01, 2014 (LBO) – Sri Lanka’s two largest state banks have taken a 20 billion rupee hit on credit losses in 2013 and had slashed their troubled gold-backed loan portfolios as the precious metal’s price slumped, interim accounts show. State-run People’s Bank set aside 11.7 billion rupees as general provisions in 2013 up from 3.2 billion rupees a year earlier.

With specific provisions of 1.9 billion rupees, total provisions rose to 13.7 billion rupees, up from 3.8 billion rupees a year earlier.

State-run Bank of Ceylon, made 7.7 billion rupees of general provisions up from 2.6 billion rupees a year earlier, but reversed 898 million rupees of specific provisions made earlier. Last year there was also a 1.7 billion rupees unspecified write down.

The two banks together saw credit loss provisions double to 20.5 billion rupees in 2013 from 9.2 billion in 2014.

Sri Lanka’s private banks which were also exposed to pawning or gold-backed loans had to take in credit losses and cut their portfolios. Some were also converting a part of their gold-backed loans to ordinary loans, bankers said.

Provisioning allows early recognition of losses and cleans up the balance sheet.

Accounts of People’s Bank showed that gold