Posted on August 15th, 2020


When looks at the structures of various banks established in the country the proposed industrial development bank invite to consider a different structure, especially the proposed bank must get away from trading bank functions as Sri Lankan bankers, as well as the attitude of regulators’ have stuck with money creation and cheque books and short-term lending and securities. Sri Lanka has many trading banks with intense competition between them. These popular features could include the proposed industrial development later deeply analyzing how could such businesses absorb to bank critically analyzing the business environment.  

I have no idea of talking too much about the proposal but I would like to highlight the following points that should be considered when forming the bank. There may be views against my points and it is essential to consider views and the bank should be established without a severe burden to the government.     


The proposal was made with an idea to establish the bank as a government bank and the meaning of this term is to establish the bank as a government own entity.   The current financial position or the strength of the government doesn’t permit to allocate a large sum of budget spending to establish a bank because of a massive commitment to various government services.  However, the concept of government ownership could be interpreted and broadened by different strategies.

  • The government can be contributed to the entire volume of the capital of the bank if it has funds, sufficient reserves, and an ability to spend budget funds ignoring other areas.
  • The government can contribute a possible amount of capital without harming the idea of government ownership and continuing allocations in other areas of the economy.
  • Government banks and government institutions could contribute to the capital fund of the bank to maintain the ownership of the government and this would be more practical than proving funds for capital from the budget.
  • The government agencies could contribute to the fund if the agencies have reserves and excess.  Many government agencies spend unnecessary purposes and such money can divert to buy shares of the bank.
  • The government and its agencies can contribute paid-up capital intending to withdraw later the contributed amount of capital by the sale of ownership to the domestic private sector or other government agencies in the future.

The ownership of the government can go up to 60% and it would not harm the term that is owned by the government, but the style of contribution may diverse. When the private sector is allowed to contribute to the capital it would scrutinize the management and operations of the bank. Private partners always look at how the bank is operating and if anything needs to correct they will take actions.

From the balance ownership, 10% could be given to Sri Lankans to those who were born in the country and living exile.

From the balance, 25% of ownership could be given to Sri Lankan institutional and individual investors

The balance volume of 5% ownership could be given to foreign investors.

The bank should be established as a public company with limited liability. The bulk of shares own the treasury and the government agencies.


The capital structure should consist of the issued capital and debt capital (preference shares) as given below.

Authorized Capital: Rs10.00 trillion

Issued capital (Ordinary Shares fully paid) = Rs 1.00 trillion

Debt Capital (Preference Shares 6%, fully paid) Rs 500 billion

The bank should contribute 50% of annual profit to general reserves until the bank builds a strong capital structure, and the balance profit could be paid to shareholders including the government 60% of the ownership.


  • The bank maintains a healthy finance portfolio which is based according to the requirement of industrial development. The finance portfolio will be balanced to increase the contribution from the industrial sector to 25% of GDP.
  • The bank develops a credit and operational policy framework to achieve the vision and work with the mission and objectives.
  • Bank will have internal divisions financing for large industries, medium industries, and small industries.  Besides, there will a division to provide financial supports for free trade zones and foreign investors.
  • The main financing system would be against collateral and cash flows.
  • Finance monitoring and remedial management for finance should be maintained and the implementation of monitoring and remedial management will be organized with a time framework.
  • The industry Research Division should be established in the bank that develops industry and company averages and prognosis.  The company prognosis is confidentially maintained.
  • Finance monitoring and customer classification will annually perform but the information will not be given anyone.
  • The financing policy document will be prepared and the financing business will consistent with the policy document.
  • The bank performs a non-financing business to increase the volume of profits and to give a healthy and competitive return to investors.
  • The business of the bank will not go beyond the tolerable level.


The bank must recruit graduates who completed university courses in various subject areas and advanced Diploma from graduates from TVET institutions rural, semi-urban, and urban areas without giving preference for specific subjects learned and gives them 6 months of intensive training and two years of English language program, which will base on high skilled comprehension, writing, and speaking skills.


Internal audit support detecting irregulates in operations and risk asset review aims at reviewing credit decisions, the quality of credit portfolio, classification of the credit portfolio, and identifying grated credit to make loss provision and many areas.


The bank will launch a bank building each district and provide renting facilities for other businesses in the area to cover the cost of construction and provide accommodation at affordable rents and initiate an insurance company to provide insurance services to customers but credit guarantee services will not be provided.   

The bank budgets making annual profits from all businesses and pay higher returns than the market rate of interest.      

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