Asset Quality

Apr 01, 2014 (LBO) – Sri Lanka’s two largest state banks have taken a 20 billion rupee hit on credit losses in 2013 and had slashed their troubled gold-backed loan portfolios as the precious metal’s price slumped, interim accounts show.
State-run People’s Bank set aside 11.7 billion rupees as general provisions in 2013 up from 3.2 billion rupees a year earlier.

With specific provisions of 1.9 billion rupees, total provisions rose to 13.
7 billion rupees, up from 3.8 billion rupees a year earlier.

State-run Bank of Ceylon, made 7.7 billion rupees of general provisions up from 2.
6 billion rupees a year earlier, but reversed 898 million rupees of specific provisions made earlier.
Last year there was also a 1.7 billion rupees unspecified write down.

The two banks together saw credit loss provisions double to 20.5 billion rupees in 2013 from 9.
2 billion in 2014.

Sri Lanka’s private banks which were also exposed to pawning or gold-backed loans had to take in credit losses and cut their portfolios.
Some were also converting a part of their gold-backed loans to ordinary loans, bankers said.

Provisioning allows early recognition of losses and cleans up the balance sheet.

Accounts of People’s Bank showed that gold