May 18, 2016 (LBO) – Several changes to Sri Lanka’s financial services will be enacted soon such as leasing services offered by banks, Finance Minister Ravi Karunanayake said, speaking at a forum in Colombo.
A proposal in the budget that banks should stop leasing from June 1 will be modified, he said.
“Finally, it is being settled. We are looking at an upper limit where anything below 5 to 7.5 million rupees cannot be done by banks and can be handed over to finance companies,” he said.
Earlier, the proposal to take leasing out of the banking portfolio was brought in through the budget due to the concern that Sri Lankan banks had limited themselves to collateral-based lending and were not engaging in ‘business model’ based lending.
But the proposal was put on hold with bank unions putting forward suggestions. Karunanayake explained this at the Daily FT-Colombo MBA Alumini Association organised forum ‘Reforms: The Way forward for Sri Lanka.’
Commenting on other areas in the financial sector, he said consolidation in the banking and financial services sector was important, and rating of finance companies will be considered.
“The present system has not worked,” and some significant changes need to take place.
In terms of exchange control, Karunanayake said: “The concept of exchange control will be repealed, and protective measures will be put in to the Monetary Act or Banking Act so there is no unnecessary out flight of money.”
Earlier, the proposal in the budget was to repeal the Exchange Controls Act and introduce a Foreign Exchange Management Bill, but Karunanayake said this may amount to the same thing.