The Central Bank is relaxing many rules and making a push for credit growth in the Jaffna District so that normalcy can be restored as soon as possible targeting loans amounting to Rs. One billion, through a special loan scheme, to be disbursed by the year end to the once war-torn region’s SME sector.
Central Bank Governor Ajith Nivard Cabraal and other top Central Bank officials met branch managers and regional managers of commercial banks operating in the Northern Province, at the Municipal Council conference hall in Jaffna.
"Many internally displaced persons are returning to their homes and it is important that normalcy is restored as soon as possible and this is where you bankers have a big role to play," Cabraal told the bankers.
"The government is keen that economic activity and livelihoods return to normalcy. Credit is important for economic growth so we need you to be committed and increase lending. I know you have no problems in collecting deposits, but there has to be much more lending as this would stimulate growth," he told them.
Lend, lend, lend...
The Central Bank has allocated up to Rs. 3 billion to be disbursed through commercial banks to the SME sector under special loan scheme ‘Reawakening the North’ and Cabraal said he wanted the banks to target loan creations amounting to Rs. One billion by the year end.
Two of the largest banks in the country, Bank of Ceylon and People’s Bank, both state-owned, have already lent considerably under this scheme but is waiting for more funds to come from the government to be able to a growing waiting list of borrowers.
Bank of Ceylon has disbursed Rs. 117 million among 1046 SMEs and have a further 1,711 applications pending for the need of funds. Under a similar loan scheme, the bank has lent Rs. 11 million among 274 borrowers and 2,801 applications remain pending.
Under its normal lending activities, Bank of Ceylon has lent more than Rs. 182 million in the Northern Province.
People’s Bank has lent over Rs. 200 million and has loans amounting to Rs. 600 million waiting for funds to be disbursed.
The regional heads of these two banks told Cabraal that the government should expedite the funds so these loans could be disbursed.
"If you can target loans amounting to Rs. One billion by the year end, I will see to it that you get the funds," Cabraal said.
Debt forgiveness...
The bankers suggested that loan defaulters ought to be forgiven due to the circumstances and Cabraal said it was a good idea, saying such a bail out to those affected by the war and had to spend time in IDP camps would be beneficial.
"Banks should probably forgive interest on loan repayments for 2009. They could probably consider a freeze on repayments for 2009 at least. It would be the right thing to do and there is justification for doing so," he said.
No identification...
The Bankers said many people lacked proper documentation establishing their identity.
"This is not an issue and do not let this stop you from opening accounts and lending. Enterprises need to grow, so lend. For the time being the identification cards issued by the camps through the Ministry of Defence would suffice," Cabraal said, adding that the Financial Investigations Unit of the Central Bank would also be notified about this.
Abandoned property and accounts...
Cabraal also said if customers could make a reasonable claim to their properties and abandoned accounts held with the banks, the banks should release such funds immediately.
"If the abandoned accounts are held with the Central Bank do not wait for them to be cleared by your head office. You release the funds to the depositor and I will see to it that the Central Bank transfers the funds within a day," he said.
Loss of documentation and gold...
Many of the banks had lost vital documents—titles and deeds—and gold jewellery that were held in their custody due to the conflict and had problems when claiming insurance.
Dr. Ranee Jayamaha, Advisor to the President on Banking, undertook to look in to this matter.
Security matters
Bankers told Cabraal that it was difficult to access some areas and IDPs without having to obtain security clearance for each visit.
The banks are servicing people in difficult areas, providing deposit taking services and also locating beneficiaries of inward remittances.
They asked Cabraal whether it could be arranged for blanket approval valid for a longer period of time.
The Central Bank Governor told them that he would do his best to resolve this issue. |
