During the past few months, Sri Lanka has witnessed a rocky economic growth, influenced by unfortunate events that took place. These events took the spotlight away from the country’s booming tourism, retail/trade, banking and other sectors alike, hurting expected yields of growth, development and overall progress.
Mirror Business recently sat with Pan Asia Bank (PABC) Marketing, Cards and Deposit Mobilisation Deputy General Manager Nalaka Wijayawardana, to understand where the bank stands in the prevailing unstable economy, and what it plans to do for the betterment of the institution’s financial performance.
Following are excerpts from the interview.
How does Pan Asia Bank plan to face the current headwinds in the economy?
Banks are generally very sensitive to the economic situation of the country compared to other industries, and Pan Asia Bank is no exception. However, we are confident that with some of the positive developments that have taken place since the tragic incidents, the country’s economic development will get back on track sooner than later.
One such positive development is Central Bank recently applied a cap on the maximum interest rates on any deposit. I think of it as a positive move, because with that, the cost of funds will be kept at a certain stable level by eliminating cut-throat competition purely on pricing, which would have sent the rates flying- if there was no ceiling. With that of course we anticipate that things will improve.
Having said that, we do understand that the recent tragic events would push customers to move into a very defensive mentality where they will only buy the basics and not the discretionary stuff resulting in customer spending going down sharply.
Basically, all these things will have an effect on economic growth but regardless the deposit rate cap is a good move in my opinion.
Could you elaborate on the latest deposit promotions by Pan Asia Bank?
At the moment, we are focused on offering more value additions to attract customers since the maximum rate that can be offered on a deposit is now regulated.
These days we are strongly promoting our flagship savings account, Champion Saver, which in terms of rates, offers 7.5 percent (AER7.78 percent), which is the highest that you can offer for a savings account in Sri Lanka in the current context, in compliance with the Central Bank.
Of course this can change every quarter based on the new formula. What makes this product special is that it doesn’t create any restrictions on the customer in terms of the number of withdrawals they can make, so customers can have 100 percent access to their money any time they want, and as long as they maintain the required balance, they’ll get the interest rate. That is a value addition because in certain cases, in order for someone to get a higher rate, they have to restrict the number of withdrawals per month, which effectively restricts access to their own money.
In terms of children’s savings accounts, we have two versions with two distinct value added features. Daskam Children’s Savings Account, which offers a 10 percent additional deposit for every customer deposit is one such product. The uniqueness about Daskam is, until the child reaches the age of 12, every time a customer deposit is made to the account, we match it with an additional 10 percent deposit and then the interest will be applied to the full amount at 8 percent, which is the highest interest rate permitted for a children’s savings account in Sri Lanka in the current context.
We also have a Mithuru MAX savings account which has a unique gift scheme. As you reach a higher tier of balance in the account until the child reaches the age of 13, you are entitled to a range of gifts in addition to the interest. The gifts include remote controlled drones, bicycles and many other exciting items.
Why should someone invest in Pan Asia Bank deposit scheme?
When you make a deposit, there are a few things that you expect from it. One is, you expect a high return, so in that aspect, we offer the highest rates possible under the current guidelines.Secondly, a person should be able to access their money if and when they need which we offer through Champion Saver. Even if you place a Fixed Deposit, you can obtain a cash-back loan against that, up to 90% of the FD amount. So accessibility is also offered by us.
Thirdly is the safety of the funds. We are a Central Bank regulated licensed commercial bank in Sri Lanka. So in terms of safety, there is absolutely no question.
So, you get higher returns, accessibility and safety. In addition, we offer these other value added benefits and various features as I mentioned earlier. So -as you can see, we are meeting all the requirements that a person would expect from placing a deposit or saving for the future.
Are you aggressively trying to mobilise deposits to boost lending?
Deposits are anyway required to lend. But when it comes to promoting loans, we are more concerned about the quality than quantity. So simply we do not want to for a short-lived gratification. You can become aggressive and create a hyped up growth, but if it doesn’t conform to the required quality, eventually you have to provide for those loans and it will eat into your profits and start a vicious cycle.
So while we are ambitious when it comes to growing our portfolios, it will not come at the expense of quality. We address this by looking for unique lending opportunities that offer us the appropriate risk/reward levels. One such example is the pensioners loans, which is a very high quality portfolio for us, with low non-performing loans.
What mode of investment, be it through fixed deposit or any other scheme offered by the bank, do you encourage customers to take?
First of all, saving in the form of deposits is highly encouraged, because you don’t know when you will need money. As you know many other asset types take time to be converted in to cash. For example, you can buy a land, but then if you urgently need cash due to changing circumstances, it might take weeks or months and the same is true for selling a vehicle. So in that sense, as an asset class, cash deposits is a must have.
When it comes to choosing a deposit product it depends on the customer’s personal circumstances.
From a bank’s perspective, it is generally beneficial to promote CASA (Current account and savings account deposits) as those are comparatively, lower cost funds for the bank as opposed to higher cost fixed deposits.Still, we always make it a point to promote a full range of deposit products because it’s all about what is best for the customer according to his/her needs and wants. We shouldn’t push something just because it is good for us because on the long run the customer will not trust us.
Banking is all about trust and the customers rely on us to provide them with advice on these things, so we encourage our frontline staff to ask questions, understand customer requirements and then give them the most appropriate solution.