The country’s bankers are to soon break away from the Leasing Association of Sri Lanka (LASL)— the representative body comprising of leasing professionals from the leasing & finance firms and banks— to form a separate representative body comprising of only banks engaged in the leasing business, Mirror Business learns. According to sources close to the development, LASL, which is largely represented by leasing and finance companies, has reportedly been acting inimical to the banks and allegedly have had close door meetings with the policy makers to further their own agenda at the expense of the banks engaged in the business
Out of the nine directors in the LASL executive board, only two represent the banking sector. It had been in the grapevine that the budget 2016 proposal barring the banks from engaging in leasing business was a result of the majority representing the leasing and finance sector intimating the policy makers to that effect. The new Association representing only the bankers engaged in leasing business will be formed as early as in early July, according to sources. While the original proposal to ban the banks from engaging in leasing business was due in June, it was among many other budget proposals, which were not enacted due to strong lobbying by the industry and interest groups. However, Finance Minister Ravi Karunanayake in May was on record saying that the government was planning set upper limits between Rs.5 million and Rs.7.5 million on banks engaged in leasing business. It is believed a final decision in this regard is to be announced by the Finance Ministry as early as this week, following a meeting with the banking sector representatives. A source said the bankers however are ready to take up the cudgels against any decision by the policy makers which could create a favourable environment for one party at the expense of the banks. According to Central Bank data, Sri Lanka’s non-bank financial institutions (NBFIs) accounted for the lion’s share of 68.8 percent of total leasing assets by end 2015, while the balance is held by the banks. During the year, NBFIs saw its leasing assets growing 23.9 percent or Rs.95 billion to Rs.492 billion, slower than the 50.7 percent growth in banks due to the latter’s low base. The top 10 NBFIs have a market share of 70 percent of NBFI leasing assets and 48 percent of industry assets while the top 3 NBFIs’ leasing assets are bigger than the largest bank’s leasing assets. Limiting the choice, which ultimately lead to higher prices for the consumer and absence of consumer welfare, is acting diametrically as opposed to the vision of creating a social market economy by the Premier Ranil Wickremesinghe.