BOC takes the top role among the banking sector in prioritising to serving the national interest in foreign exchange operations

By Nishel Fernando

As the COVID-19 pandemic brought upon fresh challenges to Sri Lanka’s external account further adding pressure on the country’s foreign exchange reserves, the country’s largest bank, State-owned Bank of Ceylon (BOC) has taken a lead role in prioritising the national interest in stabilising Rupee Exchange rate while supplying importers with required foreign exchange to finance the imports of essential goods, fuel, COVID-19 vaccines as well as other pharmaceutical items.
The Bank of Ceylon (BOC), Deputy General Manager (International, Treasury & Investment),     Mr. R. M. N. Jeewantha recently sat down with Daily Mirror for a discussion on the Bank’s role in managing the foreign exchange outflows and inflows while elaborating on some of key foreign exchange services and products rendered by the Bank to its clientele. 
During the discussion, Jeewantha highlighted the BOC’s role in achieving the highest-ever workers’ remittances inflows to the country of $7.1 billion in 2020, where the Bank itself directly facilitated 40 percent of this figure single-handedly. 

 Following are the excerpts of the interview:

Q:  How did BOC manage its foreign exchange operation last year with challenges brought upon by the pandemic? 
When the pandemic hit Sri Lanka in March last year, we came under lot of stress and it brought many fresh challenges to us as a country, However, we curtailed  some of these challenges due the import restriction imposed by the Government.  We saw a 20 percent reduction in merchandise import expenditure in 2020 compare to 2019. 
In terms of overall foreign exchange inflows, the expected Foreign Direct Investments (FDI) target could not be reached while the tourism sector came to a standstill. However, the highlight in 2020 was the inward workers’ remittances. The country received a record $7.1 billion in workers’ remittances which was a 5.8 percent increase compared to the previous year. Of this amount, I am proud to say that more than 40 percent or approximately $2.8 billion was channeled into the country through Bank of Ceylon (BOC).
In the six-month period of the current year, we as a single Bank have increased our share in facilitating Workers’ remittances into the country from 40 percent to 42 percent. I must appreciate our present Board of Directors and Management for their role and support extended to us. They were very helpful, supportive, and understating of what we were doing. 
Country utilised the excess USD reserves to stabilise the Rupee (LKR) exchange rate. Sri Lanka went into 2020 with an exchange rate of Rs. 181 per USD and finished the year with only marginal depreciation of Rupee at Rs.186 per a USD while other countries saw a steep depreciation in their currencies.

Q:  Most banks are facing USD liquidity shortages currently putting importers in a rather vulnerable position. How does BOC manage the current USD liquidity shortage prevail in the market?
Yes, there’s some additional pressure in the market at the moment. This year, Bank Treasurers mutually agreed to maintain the USD exchange rate at Rs.200-203 levels and most Banks are operating within this exchange rate band.
Given our excess USD reserves from Workers’’ remittance inflows, we are managing well, therefore, we are in a position to stabilise the market when the need arises.
While certain banks have restricted opening LC facilities for imports, making outward payments and issuing foreign currencies, BOC continues to maintain these services. 
In fact, we have come up with a prioritised list to ensure that the country doesn’t face any shortages of essential imported items especially fuel.  We are playing a leading role in the country that facilitates the importation of vaccines for the on-going COVID-19 vaccination programme. We are remitting USD to bring in the required vaccines into the country working in tandem with the State Pharmaceuticals Corporation (SPC).
We have become the bank facilitating the majority of LCs for importers at the moment. For example, we are the largest USD supplier to the Pettah market while most of other banks temporarily halted extending LC and other payment facilities. Basically, we are not only catering to our customers, but also to customers of other banks based on national interest.

Q: How has been the reception for Special Deposit Accounts (SDA)?
The SDAs are the most popular product at the moment. We provide the most attractive interest rate for SDAs in the banking sector. As a result, we have attracted a major portion of the funds that came into the country through SDAs. 
BOC was the first bank to introduce SDA’s in Sri Lanka and we witnessed several foreigners investing in such. Keen interest is shown by investors from the Eurozone & Australia.
Contrary to speculation that the Government would discontinue SDAs in April this year, the Government extended it. With this development, we have also launched a new marketing campaign across digital channels as well as through our Business Promotion Officers (BPO) who reside in 10 countries.

Q: There has been considerable chunk of Worker’s remittance inflows coming into the country via informal channels. Much of these inflows were shifted to formal channels last year due to the pandemic. Do you believe that BOC would be able to sustain this trend? 

Yes, in 2020, Informal Funds Transfer systems such as Hawala and Undial couldn’t function as usual, due to the pandemic. This is one of the key reasons why we saw the 5.8% increase in Workers’ remittances into the country last year compared to 2019.
We expect this trend to continue this year as well while sustaining new customers that we have gained so far.  The latest Central Bank (CB) data indicates that worker’s remittances figures are in line with the target set for the year.
For BOC, the majority of Worker remittances inflows come from South Korea and Middle East.  Targeting Sri Lankan migrant workers in South Korea, we have launched a mobile app to transfer their funds conveniently   in partnership with one of the largest banks in South Korea, KEB Hana Bank.
We have deployed 25 Business Promotion Officers (BPO) in 10 countries including in Middle Eastern countries, Japan and South Korea. These officers provide 24*7 services in supporting and in addressing concerns of Sri Lankan migrant workers while facilitating and advising them on their fund transfers. 
During the pandemic last year, many BPO’s did not return to Sri Lanka. They continued to remain in their respective countries supporting Sri Lankan migrant workers by supporting to address their grievances. They also supported SL migrant workers to channel funds to their families and loved ones in Sri Lanka during this critical period. We must appreciate their efforts.

Q: In terms of export-financing, what’s the current role of the Bank and are there any future plans?

We provide credit facilities at attractive rates and also offer high rates for exporters who intend to maintain their export proceeds in foreign currencies. I would say we have a good relationship with all our exporters. We are determined to provide further incentives to exporters and are offering tailor made packages.
Moving ahead, we are launching a brand-new initiative named ‘Export Circle’ offering total solutions for exporters on 1st of August as we celebrate the 82nd anniversary of BOC. The Export Circle will offer A-Z solutions in meeting all needs of exporters in terms of both quantitative and qualitative measures.
In addition, we are keen to support the country’s national drive towards import substitution. We have already launched ‘BOC Sashreeka’ loan scheme to encourage the manufacturing of organic fertilizers and related activities to finance locally produced weedicide and pesticide.

Q: Moving forward, do you see current liquidity conditions in the foreign exchange market returning back to usual?

Once the $1 billion ISB maturing on 27th July is settled, we anticipate significant improvement in confidence and perception of the country by the foreign investors.
As we receive the foreign funding, we expect normalcy to set in towards the end of the 3rd quarter. Many foreign counterparties are willing to lend to us based on the strength of our balance sheet.
We are confident that the bank would surpass all expectations and continue to be the driving force in the Sri Lankan economy.