Amitha Gooneratne - Managing Director, Commercial Bank (fifth from left) and Ranjith Pemasiri - Acting Chairman, RDA exchange copies of the agreement. Others from left are Lalitha Jayasinghe - Director, ICC Pvt Ltd.; Ranjani Gamage - Senior Manager Legal; Tamara Bernard - Senior Accounts Manager; Ravi Dias - Chief Operating Officer of Commercial Bank; Sujatha Cooray - Secretary to Ministry of Highways and Road Development; Piyasena Dissanayake - Board Member of the RDA and Harsha De Saram - Vice Chairman, ICC Pvt Ltd.
- First to sign milestone deal to disburse Rs. 1.5 b to RDA from corporate tax savings
The Commercial Bank of Ceylon has become the first bank in Sri Lanka to support national development initiatives with concessionary long term lending from its Investment Fund Account (IFA) set up in accordance with a proposal by President Mahinda Rajapaksa in the 2011 budget.
The Bank, rated internationally as Sri Lanka’s best, will provide a loan of Rs 1.5 billion to the Road Development Authority (RDA) payable over 14 and half years, in the first ever disbursement from the IFA scheme proposed in the National Budget of November last year.
The funds are to be used in a two and a half year project to rehabilitate/improve a 21.5 km stretch of the A6 highway between Dambulla and Habarana, under the government’s infrastructure development programme, the Bank said. International Construction Consortium (Pvt) Ltd., (ICC), is the designated contractor who is also a key client of the Bank.
The Department of External Resources of the Ministry of Finance and Planning under the direct supervision of the Secretary to the Treasury, Dr. P B Jayasundera facilitated the successful arrangement of the loan.
As envisaged by the IFA scheme, an agreement covering this loan was entered into on Tuesday, 30 August, 2011 by the Commercial Bank and the Road Development Authority.
The loan will be disbursed in stages as the project progresses, and will be the first of several to be disbursed from the Commercial Bank’s IFA for projects designated to be accommodated under the Fund.
Commenting on this milestone private-public partnership, Commercial Bank Managing Director Amitha Gooneratne said: “We are proud to be the first bank to respond to the government’s proposal to ensure that tax savings are used efficiently and productively in the national economy at a stage of accelerated development. It is a tribute to the professionals in our team that we have progressed rapidly to the formalisation of the industry’s first IFA loan agreement.”
In its 2011 budget the government reduced VAT on financial services from 20 percent to 12 percent, and reduced tax on profits of banking and financial institutions from 35 percent to 28 percent. With this reduction, the President proposed that all banking and financial institutions be required to formulate separate Investment Fund Accounts to transfer tax & VAT savings arising from these proposals. The Central Bank and the Department of Inland Revenue thereafter issued specific regulations requiring banks to adopt low interest rates and longer term maturity for lending these funds to designated areas – including infrastructure development, vocational training, agriculture and IT related activities.
Consequent to the ratification of these proposals, state institutions can now borrow direct from local banks instead of being dependent on Treasury borrowings from foreign institutions, leading to benefits such as savings of foreign currency, faster disbursements and the active participation of the lending banks in monitoring progress of projects.
In the year ending 31 December 2010, the Commercial Bank posted net profit of Rs. 5.523 billion, crossing the milestone Rs. 5 billion mark in profit after tax for the first time with a 28.3 per cent growth over the preceding year. The Bank’s profit before tax grew by a healthy 29.5 per cent to Rs. 9.317 billion, an increase of more than Rs. 2 billion in 2010.
Established in 1969, Commercial Bank is the fastest growing bank in Sri Lanka, and the most internationally-lauded financial institution in the country. The Bank has been adjudged ‘Best Bank in Sri Lanka’ for 13 consecutive years by ‘Global Finance’ Magazine and has won multiple awards as the country’s best bank from ‘The Banker,’ ‘FinanceAsia,’ ‘Euromoney’ and ‘Trade Finance’ magazines.
The Bank’s operations in Sri Lanka encompass 202 service points and an ATM network of 436 terminals, the largest cash dispensing facility in the country.