WHY DOES SRI LANKA NEED TO PRIVATIZE GOVERNMENT BANKS?
Posted on June 29th, 2022

BY EDWARD THEOPHILUS

The current economic crisis in Sri Lanka is a consequence of misguided economic management based on deluded policies that have become operative since 1970 elected government and the management of government banks have been politicalized by the elected government and party members were attempting to control all affairs of banks, which were including recruitment of employees and granting credit facilities to customers.  National Savings bank was established to promote savings, it was turned to manage the wrong way by beginning providing credits against public savings. The administrators had a lack of understanding of bank management.

The government banks became like a prostitute the consequence of such a situation was providing financial support to wrong customers without credit policies. The best option is to change this situation by providing credit support based on internationally accepted policies. When I was working in the Bank of Ceylon I developed credit policies with the support of international finance consultants and the bank management changed all these good policies and allowed to change credit policies and to play with the capital of banks. People of the country have no idea why the government banks need to privatize to make financial disciplines and convert them to be viable banks in the country with credit policies.

The following steps must be taken by the government.

  • Fifty per cent of the capital structure of all banks should be privatized and proceeds should be used to improve the capital structure of banks.
  • Credit facilities of banks based on policies and no political influence should be allowed to operate banks.
  • Banks must have independent management and the management decisions force them to be personally accountable to bank executives and
  • The current staff of banks should be reduced to the required level.

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