Sri Lanka’s premier business chamber, the Ceylon Chamber of Commerce (CCC), yesterday endorsed the ongoing financial sector consolidation advocated by the Central Bank of Sri Lanka.
“We believe consolidation of the finance sector is the right way forward. With it, the businesses can look forward for a brighter 2014,” CCC Chairman Suresh Shah told a media briefing held to celebrate the CCC’s 175th anniversary.
Shah further said the CCC is ready to extend its support to the Central Bank in this process to make the transition as smooth as possible.
In line with one of its two main responsibilities—ensuring the financial system stability—the Central Bank has presented a master plan to consolidate the country’s over-expanded banking and finance sectors. Under this new plan presented by Central Bank Governor Ajith Nivard Cabraal, the Central Bank expects to significantly trim down the number of banks and nonbank financial institutions (NBFIs) operating in the country.
Though no exact figure is mentioned, the Central Bank expects to pool the existing banks to create five large banks with asset bases of Rs.1 trillion each along with a large development bank through the merging of two existing development banks.
However, t he Central Bank expects to shrink the NBFI sector to 20 large companies from the current 58 through mergers and business absorptions.
The plans for such acquisitions should be submitted by May 31, 2014 as the majority of Category small finance companies are expected to be absorbed by December 2014, while any remaining are expected to be completed by the first half of 2015.
However, some while agreeing on consolidation in principle, have raised concerns about the tight timelines set by the Central Bank for the process to be completed.
Meanwhile, CCC Vice Chairman Rajendra Theagarajah commended the government’s continued focus on infrastructure development.
“It boosts the growth potential of the economy and opens up opportunities for the private and public channels to link,” he noted.