Covid Maneuver: Banks & Regulator Respond
Babu Nair: How has the Sri Lankan banking sector been able to be resilient in the pandemic scenario?
W.A. Wijewardena: The S r i Lankan banking sector had taken the technological path since some time. The pandemic came as a shock as face-to-face transactions took a hit. The banks could not render services in the usual way. Some leading banks moved to the digital platforms more easily than others. Some banks introduced banking via vehicles. This allowed the banks to give cash to their customers. This way the customers did not face liquidity problem and could buy essential goods.
When it came to other banking services like account opening, the systems were already in place. An automated clearing house has been introduced by the Sri Lanka National Payments Platform, called LankaPay. Through LankaPay, customers could log in to their respective bank accounts and make payments to government departments. This way, with just a click of a button anyone could pay their bills, income tax, etc.
The central bank introduced QR codes for use by retail shops. The customers could make payments just by scanning the QR codes. The Sri Lankan banking system will not have any problems even if the lockdown is to be extended.
Have the changes in banking methods affected the business of banks?
The government of Sri Lanka is trying to stimulate the economy by giving lower interest rates. The lending rates have been brought down considerably. However, the government is supporting the banks fully. Several taxes like VAT, nation-building tax etc have been eliminated for the current financial year. The negative impact of the reduction in interest rates has been offset by the removal of expenses. Hence, the banks’ profits remain the same. The banks will have to provide for upcoming businesses. They will also have to seed the capital for new startups and invest in newer technology to ease the banking system.
Have there been any changes in the non-performing assets?
NPAs have gone up as customers have not been able to repay.
Has the government given a moratorium on repayment of loans?
The Central Bank had announced a moratorium of 6 months which was further extended by 3 months.
The phygital system has worked so far. What is the road ahead for the banks?
Sri Lankan banks are taking many steps. The important ones are:
1. The use of APIs is coming up. Data collected through APIs will be used to develop internal banking products.
The sharing of data between the banks is bringing transparency in the banking sector.
2. The Central Bank’s initiative to introduce blockchain technology for customer services is also being implemented.
3. Cryptocurrency is being promoted by the Central Bank. The aim is to reduce physical currency by replacing it with digital currency.
How is the banking industry going to take business to next level?
The new normal is setting in. The banks will have to train their staff for the new technologies. Most of the banks are going for AI technology for processes. The law does not allow the banker to share the data unless they have the consent of the customer.
babu@bankingfrontiers.com
Dr W.A. Wijewardena, former deputy governor of the Central Bank of Sri Lanka, shares interesting insights on measures taken by Sri Lankan banks to stay afloat in the aftermath of the pandemic: