Rationalise costs to bring down bank rates

Head of National Portfolio Development for the United Nations (UNOPS) Rohantha Athukorala, addressing the Institute of Bankers at the Bank of Ceylon Auditorium last afternoon, said that the banking sector must now rationalise the cost base so that the lending rates can be reduced to spur business growth.

He noted this was important given the focus of the Budget 2011 being on a private sector platform – namely the SME sector with key strategies like the Rs. 5,000 million cash mobilisation to waive off any unpaid taxes as at March 2009, setting of the knowledge centre in each province to drive business development services and the 10% income tax bracket.

If the interest rates do not come down, Athukorala said the country would not benefit from the cutting edge budget that has been presented to the country. He intimated that there was some degree of liquidity in the market as at now, but based on the regional chamber feedback, this is bound to get mopped up with the new business ventures which will start up in the new year.

The speaker said that with the ferry service that will begin between India and Sri Lanka, the Mannar region can become a centre of business activity. Separately, the proposed industrial estate that has been advertised recently for the SME sector, the overall business environment will become conducive for the banking industry to focus on with more competitive interest rates, he noted.

The other areas that the banking sector must partner in the development agenda of the country are in the Northern Province; the fisheries sector which has received many developmental incentives in the Budget including Rs. 300 million for the development of traditional fishery villages and improving of fishery-based tourism, the spice industry where a five-year subsidy has been offered and the packaging industry where duty reduction on machinery imported has been offered are essentially SME sector-driven, said the speaker.