Bank of Ceylon is 75!

Saturday, 26 July 2014 04:16 - - {{hitsCtrl.values.hits}}

With the Bank of Ceylon completing 75 years on 1 August, it is an appropriate time to look back at the early days of banking in Sri Lanka. The bank was established on 1 August 1939 following the acceptance of the recommendation of the Banking Commission of Ceylon appointed in April 1934 that a State-aided bank should be established in Ceylon, as the country was then called. The need of a bank to assist the national entrepreneurs who found it difficult to obtain capital is explained by one-time Chairman of Bank of Ceylon A.S. Jayawardena thus: “As our people came to achieve an increasing role in managing the affairs of the British colony of Ceylon after the first World War,

the inadequacy of financial services available to nationals became a n important national issue. The few expatriate banks catered almost exclusively to the financing of foreign trade related to exports of plantation crops, whereas the rest of the economy received a trickle of credit through highly discriminatory ‘shroff windows’ of banks and a small group of money lenders who came from India and some pawn brokers. Thus, when the winds of the Great Depression wafted to Sri Lanka, the national entrepreneurs were reduced to penury.” The intuitive taken by the State Council member for Kandy, George E de Silva in November 1932 to appoint “a Commission to go into the system of Commerce, Banking and Insurance of this Island” led to the appointment of the Commission “to inquire into and report upon the existing conditions of Banking and Credit in Ceylon”. It took another nine months from July 1933 for the appointment of the Commission which was headed by Sir Sorabji Nusserwanji Pockanawala. The other members were two distinguished Sri Lankan medical personnel, Sir Marcus Fernando and Dr. S.C. Paul. Its report was issued as a Sessional Paper in December 1934. The Commission Report was discussed by the State Council under a resolution moved by the Minister of Labour, Industry and Commerce Peri Sunderam on 28 February 1935. It read: This Council approves the immediate establishment, under the provisions of ‘the Joint Stock and Banking Ordinance 1897,’ a State aided Bank in Ceylon generally on the lines indicated in Chapter VI of the Banking Commission. The successor of Perin Sunderam as Minister, G.C.S. (later Sir Claude) Corea cleverly pioneered the establishment of the Bank of Ceylon in the midst of opposition from British colonial masters. This was on 1 August 1939 as mentioned earlier. First bank The earliest mention of a financial institution in Ceylon is that of a bank established in Kandy. This was in 1828 when Jeronis Peiris and Louis Peiris set up the ‘Bank of Kandy’ as a private institution. The ‘coffee era’ had just begun, as Sir Thomas Villiers describes in ‘Mercantile Lore’: “It was the early days of coffee and money was always in demand. Colombo was very far away, taking no less than four days to reach from the hill capital. The road, too, led through robber-infested country, and was consequently never safe. Sardiel, Ceylon’s Robin Hood, was only one of the many who made the cart road a danger. There were bands of highwaymen, not to mention rogue elephants and other savage animals, reported all along the less-frequented paths. So it came about that the Kandy Bank became a most useful institution, keeping money in custody till called for and furnishing money on Colombo orders, when getting money from Colombo was very hazardous business.” Mention is made of a ‘Bank of Ceylon’ being incorporated in London under Royal Charter a few years later. It was opened in Colombo in June 1841with a branch in Kandy. It crashed in 1847 with the falling price of coffee. Several other foreign banks were in operation by the end of the 19th century.