BOC steps up post-COVID banking support

• Over Rs. 16 b disbursed overall already
• Rs. 4 b lent to regions out of 
• Rs. 7 b approved under CB-sponsored Saubagya COVID support scheme
• Gets Rs. 30 b zero-capital following CB’s reduction of SRR by 2% last week
• New lending thrust on SME, exports, IT startups, overseas returnees startups, small holder plantations, agriculture, fisheries and aqua culture, food security, storage and transportation and middle-class housing development
• BOC makes Rs. 29 b pre-tax profit in 2019 despite economy slowing to 2.3%
• Chairman Ratwatte keen on State giant extending more support to businesses as priority to ensure profit growth of bank is commensurate with GDP performance

By Nisthar Cassim

State-owned industry leader Bank of Ceylon is stepping up support to the private sector especially the small and medium enterprises (SMEs) to spur revival of businesses impacted by the COVID-19 pandemic, thereby ensuring the country’s economy returns to normalcy at its earliest with the active support of the financial giant.

Last year despite the economy suffering the lowest growth rate of 2.3% post-war, BOC had made a hefty pre-tax profit of Rs. 29 billion, though down from Rs. 33 billion in 2018. 

BOC’s new Chairman Kanchana Ratwatte is keen to ensure that the bank gives priority to helping its customers, especially those in the private sector and the SMEs to grow better this year, utilising the sound economic platform of the bank. He said when the customers make profits, the bank stands to gain as the borrowing capacity and the repayment capacity improves along with it.

“As a State-owned bank it is important to empower the engines of growth first. This need is far greater following the challenges posed by the novel coronavirus pandemic. By helping our customers to be back in business, the bank too can sustain its profitability but not the latter at the expense of customer’s wellbeing. Our profitability must be commensurate with the performance of the country’s GDP,” Ratwatte told the Daily FT in a brief interview. 

As part of extending working capital support to COVID-hit businesses to pay salaries, rent or utilities, BOC has got approval for Rs. 7 billion under the Central Bank-supported Saubagya COVID-19 Renaissance facility. Of this nearly Rs. 4 billion had been requests from the regions via BOC branches. 

A further disbursement of Rs. 1 billion will be made this week onwards. 

Outside the CB scheme, BOC has disbursed over Rs. 12 billion as working capital to its customers.“With the 2% reduction in the Statutory Reserve Requirement (SRR) by the Central Bank last week, BOC benefits with around Rs. 30 billion in zero capital and we are stepping up our support to the private sector, especially the SMEs further,” Ratwatte said.

“We will use this additional funding to lend to priority sectors in the economy such as SME, agriculture, fisheries and aqua culture, food security, storage and transportation and middle-class housing development, plantations and IT” BOC Chairman revealed. 

The Central Bank last week announced the second phase of the refinance scheme worth Rs. 120 billion, which is aimed at the banking sector stepping up financial support to more COVID-hit businesses. 

Ratwatte said BOC will use its own internal funds to lend at concessionary rates to those customers who didn’t qualify for the first refinancing scheme of the Central Bank.  

Based on the first phase approval, BOC estimates around Rs. 15 billion via the second phase of CB supported Saubagya COVID-19 Renaissance facility.

The interest rate applicable under the CB-supported scheme is 4% and repayment period for borrowers is 24 months including a six month grace. Borrowers are required to pay interest during the grace period.