Crisis has pushed banking industry to rapidly embrace digital future, says DFCC CEO

This is part of the interview series titled ‘Mirror Business S&P SL2- Insights’ conducted in collaboration with the Colombo Stock Exchange (CSE). The interview features DFCC Bank PLC Director/ CEO Lakshman Silva. Following are excerpts from the interview.

How has COVID-19 impacted DFCC Bank’s business operations and how has the bank responded to these impacts?

Not only Sri Lanka, but the whole world was affected by the COVID-19 pandemic. Banks were identified as an essential service for the people of this country during this period. Therefore, while never compromising the health and safety of our staff in any way, DFCC Bank strived to ensure a continuous service for our customers even during this crisis period.

Our main priority was to somehow accommodate and provide timely solutions to customers who were also facing a very challenging situation.

The bank, which generally operates with around 2,000 employees, operated with approximately 250 dedicated individuals during this time, but we never failed to meet the needs of our customers. Additionally, some initiatives that we had begun over the last year in terms of our digital transformation and ATM/CDM expansion helped us to offer customers an uninterrupted service during this time.

What is your assessment on how the banking industry will fare over the next 18 months and what challenges do you anticipate in the industry?

Our country has faced many challenges over the past 2 years, from the Easter Sunday attacks to COVID-19, but we have yet been resilient. I believe this crisis period has pushed the whole banking industry to rapidly evolve to embrace a digital future.

Speaking on behalf of DFCC Bank, we have now shifted our focus to play a more proactive role and go beyond to provide customers much more than a mere financial solution. As much as possible, we have extended moratoriums, provided low-interest loans and restructured facilities to ensure the success of our customers, and we believe this in turn will aid Sri Lanka’s economic revival.

As a whole, I believe the local banking and financial sector is well positioned to emerge stronger than ever after this crisis, after enduring the challenges, learning from them and adapting to meet the needs of the hour.

Is your business model resilient enough to recover from the impact of a crisis and manage potential crises in the future?

A large part of the bank’s goal of being the most customer-centric and digitally enabled bank by 2025 is centered around evolving with the times and meeting customers’ changing needs. This is especially true in the case of crises, as we saw a drastic shift in the way customers interact with the bank during the COVID-19 pandemic, with the adoption of digital banking being seen across most customers and financial institutions.

DFCC Bank has been aligned with this thinking since early on. While opening nearly 20 branches in 2019 alone, we have been quick to introduce unique digital innovations that have helped revolutionize payments and provide added convenience to customers.

Lakshman Silva

All our digital products and services have identified and cater to a financial need in the market, and hwave hence been adopted widely. Taking a customer-centric approach, we are also equipped to monitor the feedback and make the necessary amendments to better serve all our stakeholders.

Could you elaborate on a few growth prospects for the bank going forward and how you intend to capitalize on these growth opportunities?

In the future, we want to be digital to the core. We believe employee engagement, cost reductions and increasing customer engagement are key to achieving this.

We believe our dedicated staff who supported the bank during this crisis period have been the backbone of our strength. We believe empowering them to act on behalf of the bank is a significant move we’d like to make to ensure future success.

Similarly, by expanding our products and services portfolio, we have gained popularity among new customers owing to the benefits and superior service we are able to provide on an ongoing basis. Some of DFCC Bank’s products and services that gained the most traction, especially during this period, are DFCC iconnect, DFCC Virtual Wallet and Premier Go. This is in addition to our unique credit cards scheme with interactive estatements that have received high praise from customers and partners alike.

With the expansion of the bank’s digital footprint within the country’s banking industry, we have placed added focus on SME businesses by providing financial assistance where necessary in order to support their growth. The SME sector is the backbone of the country’s rural economy, and we believe it is our duty to assist them during this difficult time.

How is the bank responding to the government announced credit relief in the wake of COVID-19, and how much has the bank already lent out to SMES?

DFCC Bank conducts all operations in line with Central Bank guidelines and directives, in an effort to work together to revive the local economy.

Although 2019 was a difficult year, due to the Easter attacks, the bank recorded very sound growth indicators. Our loan book (customer advances) grew by 9.2 percent in 2019, which is quite high compared to most peers; CASA ratio increased by 4 percent to 22.7 percent in 2019 from 2018; and the NPL ratio was at 4.85 percent, which is one of the lowest among peers, as well as recording the slowest growth. All these indicators made it possible for the Bank to support the country’s SME sector during the COVID-19 period.

Primary among its contributions to the sector was the introduction of the DFCC Sahanaya product. The new credit line amounting to approx. Rs. 2 billion was extended to DFCC Bank’s trade-related, export-oriented customers in order to provide immediate relief and encourage them to avail market opportunities of the future.

The bank provided loans of approximately

Rs. 5-25 million to eligible businesses under this new scheme, at an interest rate of 9 percent per annum. With a maximum loan tenure of 4 years, DFCC Bank offered term loans and permanent working capital loans through DFCC Sahanaya.

Focusing on the shareholder, what efforts and initiatives are you taking to drive shareholder value amidst this pandemic?

Due to the present pandemic, and respecting the advice issued by health authorities we could not conduct our Annual General Meeting in March this year and rescheduled it to June.

Accordingly, a virtual meeting was conducted successfully with the shareholders given the opportunity to interact with the Board of Directors.

The shareholder dividends were delivered to them soon after the AGM. As a financial institute, the bank has maintained a very good dividend payout ratio over the years. As a responsible organization we are determined to create value to our shareholders.

Finally, what is your message to the shareholders, especially in the context of COVID-19 and the way forward?

Our strong foundation, stability and the expertise of the senior management have aided us to work towards technological transformation, while developing deeper relationships with all our stakeholders.

We believe that DFCC Bank has adjusted well to the new normal in banking, gaining the trust and confidence of all stakeholders due to our undeterred service during crisis periods and constant evolution of products and services. Owing to this, we believe the bank is well positioned to play a pivotal role in the country’s economic revival.

We are also grateful to our shareholders who connected virtually to attend the bank’s AGM recently in adherence to government protocol and health guidelines to prevent the spread of COVID-19. The virtual AGM & EGM facilitated shareholders to interact with the proceedings and vote remotely online, which delivered instant results with secure access and tracked delivery, all while maintaining complete confidentiality.