Apr 29, 2010 (LBO) – Sri Lanka’s Nations Trust Bank (NTB) is to use a ‘feeder branch’ network to expand in the former north-east war zone to bring down operating costs, and wants donor agencies to subsidize credit risks, a senior official said. However Rajakaruna warned banks operating in relatively unfamiliar territory are open to new risks.
“These markets like (northern) Jaffna have been unknown for 30-odd years, and because of that people say they are low risk markets,” Rajakaruna said.
“That is what we know of 30 years before. No one has been banking in these areas and habits would have changed, we have to be careful with the breakeven and returns that are available.”
He said large amounts of multilateral and government funding is coming to the north and east after the war ended.
Donors can help banks to disperse loans by underwriting some of the lending risks, Rajakaruna said.
“There could be a possibility where we could structure loans with their aid. They could share some of the risk; insure risks,” Rajakaruna said.
“It’s good that they have made public announcements to commit money. When they make the commitment they could subsidize the credit cost.” “It is possible that we may look at smaller bran