Clean Slate

A top rung Economists is suggesting the government converts one of the two state owned commercial banks to a Non-Performing Loan (NPL) management agency in view of clearing the local financial sectors financial overhang.

rnrnldblquote Most Sri Lankan banks cannot provide the risk capital or seed capital to high potential businesses because of their bad debt overhang and small size
dblquote , said Arjuna Mahendran, BOI Chairman and key member of the government
quote s economic think-tank during a presentation titled ldblquote Modernizing Sri Lankan banking sector
dblquote , at a financial forum organised by HSBC
quote s local operation.

rnrnAccording to a recent study by the IMF, Sri Lankan banking sector is saddled with a NPL ratio of 19 percent and only few banks operate with a NPL ratio below 10 percent.

rnrnThis initiative would eliminate bad debts off the local banks
quote balance, enabling them to embark on fresh lending to fuel economic growth.

rnrnldblquote The equity capital of the debt rec