Dec 20, 2015 (LBO) – Sri Lanka’s Finance Ministry is to transfer part of the government accounts maintained by the state banks to private banks in order to reduce state expenditure.
Finance Minister Ravi Karunanayake told Parliament Saturday that there will be a cost saving of about 15 billion rupees through the new proposal.
“State banks currently have a spread of around 5.5 percent whereas private banks have a spread around 2.5 to 3.5 percent,” Karunanayake said.
“So we are using that difference. State banks have around 1,000 billion rupees government owned accounts; There will also be an interest income.” he said.
He also pointed out that they are prepared to use that saving to capitalize the undercapitalized state banks in line with BASEL minimum liquidity requirements.
“While protecting state banks we need to raise their competitiveness. We are also trying to capitalize the undercapitalized banks,” Karunanayake said.
“So we intend the savings on reductions of expenditure and the increase in the savings that we will get through the private sector would be used to capitalize banks.”
Karunanayake said there will be no change in the budget deficit as the recent changes into budget has been set off against cost reductions of the government expenditure.
The third reading of the budget passed with a two thirds majority on Saturday afternoon.
Sri Lanka’s banking sector employees held a demonstration recently against the government’s maiden budget for 2016 while urging a review of budget proposals.