20% shareholding of BOC and People’s Bank to be sold to depositors, staff

President Ranil Wickremesinghe yesterday in his interim budget proposed to allot 20 percent of shareholding of the two state banks; Bank of Ceylon and People’s Bank to their depositors and staff.
He said the move will help to recapitalise the two banks amid the liquidity issues faced by them due to higher interest rates and rising non-performing loans.

“In order to meet recapitalisation requirement borne out due to increase in interest rates, rising NPLs, loan settlement issues faced by businesses due to economic crisis, and liquidity issues faced by the state banks, it is proposed to allow 20 percent of shareholding of the Bank of Ceylon and People’s Bank by their depositors and staff,” Wickremesinghe said. He also pointed out that the government’s ability to provide additional capital to state banks in the current environment is very limited given the lack of fiscal space.  Experts have recently warned that if Sri Lanka was compelled to restructure its domestic debt, it could have a detrimental impact on the banking sector and its capital base.