Banking Growth

Mar 09, 2012 (LBO) – Branches of banks in Sri Lanka’s northern province are now lending most of their deposits in the region itself in a resurgence of economic activity following the end of a 30 year war. “There are still some areas that the banks have not been eager to go by themselves,” he said.

“So the chicken and egg situation still remains in those areas. But in the next few months we will use some moral suasion to encourage them to go in to those areas.”

The loan to deposit ratio of banks in the north was as low as 19 percent in 2009 indicating only 19 cents of every rupee of deposits were loaned in the area. But by September 2011 it has climbed to 52 percent from 32.88 percent by end 2010.

“I think it is a very healthy sign,” Central Bank Governor Nivard Cabraal said. “It fulfils an important need. And we would like to see that trend continuing, because this is a lagging area.

“And those areas have to be supported more than other areas.”

The central bank has been pushing lending in former war-torn areas and encouraging banks to open branches. The region now has 196 branches, with even foreign banks opening up.

The central bank also started some ‘re-financing’ schemes