{"id":105526,"date":"2020-08-15T15:27:27","date_gmt":"2020-08-15T22:27:27","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=105526"},"modified":"2020-08-15T15:27:27","modified_gmt":"2020-08-15T22:27:27","slug":"the-proposal-to-establish-industrial-development-bank-part-2","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/08\/15\/the-proposal-to-establish-industrial-development-bank-part-2\/","title":{"rendered":"THE PROPOSAL TO ESTABLISH INDUSTRIAL DEVELOPMENT BANK (PART 2)"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

When\nlooks at the structures of various banks established in the country the\nproposed industrial development bank invite to consider a different structure,\nespecially the proposed bank must get away from trading bank functions as Sri\nLankan bankers, as well as the attitude of regulators\u2019 have stuck with money\ncreation and cheque books and short-term lending and securities. Sri Lanka has\nmany trading banks with intense competition between them. These popular\nfeatures could include the proposed industrial development later deeply analyzing\nhow could such businesses absorb to bank critically analyzing the business environment.\n <\/p>\n\n\n\n

I\nhave no idea of talking too much about the proposal but I would like to\nhighlight the following points that should be considered when forming the bank.\nThere may be views against my points and it is essential to consider views and\nthe bank should be established without a severe burden to the government.      <\/p>\n\n\n\n

OWNERSHIP\nOF THE PROPOSED BANK<\/strong><\/p>\n\n\n\n

The\nproposal was made with an idea to establish the bank as a government bank and\nthe meaning of this term is to establish the bank as a government own entity.   The current financial position or the\nstrength of the government doesn\u2019t permit to allocate a large sum of budget\nspending to establish a bank because of a massive commitment to various\ngovernment services.  However, the\nconcept of government ownership could be interpreted and broadened by different\nstrategies.<\/p>\n\n\n\n

  • The government can be\ncontributed to the entire volume of the capital of the bank if it has funds,\nsufficient reserves, and an ability to spend budget funds ignoring other areas.\n<\/li>
  • The government can\ncontribute a possible amount of capital without harming the idea of government\nownership and continuing allocations in other areas of the economy.<\/li>
  • Government banks and\ngovernment institutions could contribute to the capital fund of the bank to\nmaintain the ownership of the government and this would be more practical than\nproving funds for capital from the budget.<\/li>
  • The government agencies\ncould contribute to the fund if the agencies have reserves and excess.  Many government agencies spend unnecessary\npurposes and such money can divert to buy shares of the bank.<\/li>
  • The government and its\nagencies can contribute paid-up capital intending to withdraw later the\ncontributed amount of capital by the sale of ownership to the domestic private\nsector or other government agencies in the future. <\/li><\/ul>\n\n\n\n

    The\nownership of the government can go up to 60% and it would not harm the term\nthat is owned by the government, but the style of contribution may diverse.\nWhen the private sector is allowed to contribute to the capital it would\nscrutinize the management and operations of the bank. Private partners always\nlook at how the bank is operating and if anything needs to correct they will\ntake actions. <\/p>\n\n\n\n

    From\nthe balance ownership, 10% could be given to Sri Lankans to those who were born\nin the country and living exile.<\/p>\n\n\n\n

    From\nthe balance, 25% of ownership could be given to Sri Lankan institutional and\nindividual investors<\/p>\n\n\n\n

    The\nbalance volume of 5% ownership could be given to foreign investors.<\/p>\n\n\n\n

    The\nbank should be established as a public company with limited liability. The bulk\nof shares own the treasury and the government agencies.<\/p>\n\n\n\n

    CAPITAL\nSTRUCTURE<\/strong><\/p>\n\n\n\n

    The\ncapital structure should consist of the issued capital and debt capital\n(preference shares) as given below.<\/p>\n\n\n\n

    Authorized\nCapital: Rs10.00 trillion<\/p>\n\n\n\n

    Issued\ncapital (Ordinary Shares fully paid) = Rs 1.00 trillion <\/p>\n\n\n\n

    Debt\nCapital (Preference Shares 6%, fully paid) Rs 500 billion<\/p>\n\n\n\n

    The\nbank should contribute 50% of annual profit to general reserves until the bank\nbuilds a strong capital structure, and the balance profit could be paid to\nshareholders including the government 60% of the ownership.<\/p>\n\n\n\n

    BUSINESS\nPOLICIES <\/strong><\/p>\n\n\n\n

    • The bank maintains a\nhealthy finance portfolio which is based according to the requirement of\nindustrial development. The finance portfolio will be balanced to increase the\ncontribution from the industrial sector to 25% of GDP.<\/li>
    • The bank develops a\ncredit and operational policy framework to achieve the vision and work with the\nmission and objectives.<\/li>
    • Bank will have internal\ndivisions financing for large industries, medium industries, and small\nindustries.  Besides, there will a\ndivision to provide financial supports for free trade zones and foreign\ninvestors. <\/li>
    • The main financing system\nwould be against collateral and cash flows.<\/li>
    • Finance monitoring and\nremedial management for finance should be maintained and the implementation of\nmonitoring and remedial management will be organized with a time framework.<\/li>
    • The industry Research\nDivision should be established in the bank that develops industry and company\naverages and prognosis.  The company\nprognosis is confidentially maintained.<\/li>
    • Finance monitoring and\ncustomer classification will annually perform but the information will not be\ngiven anyone.<\/li>
    • The financing policy\ndocument will be prepared and the financing business will consistent with the\npolicy document.<\/li>
    • The bank performs a\nnon-financing business to increase the volume of profits and to give a healthy\nand competitive return to investors. <\/li>
    • The business of the bank\nwill not go beyond the tolerable level.<\/li><\/ul>\n\n\n\n

      EMPLOYMENT\nAND STAF TRAINING<\/strong><\/p>\n\n\n\n

      The\nbank must recruit graduates who completed university courses in various subject\nareas and advanced Diploma from graduates from TVET institutions rural,\nsemi-urban, and urban areas without giving preference for specific subjects\nlearned and gives them 6 months of intensive training and two years of English\nlanguage program, which will base on high skilled comprehension, writing, and\nspeaking skills.<\/p>\n\n\n\n

      INTERNAL\nAUDIT AND RISK ASSET REVIEW<\/strong><\/p>\n\n\n\n

      Internal\naudit support detecting irregulates in operations and risk asset review aims at\nreviewing credit decisions, the quality of credit portfolio, classification of\nthe credit portfolio, and identifying grated credit to make loss provision and\nmany areas.<\/p>\n\n\n\n

      BUILDING\nCONSTRUCTION PROGRAM<\/strong><\/p>\n\n\n\n

      The\nbank will launch a bank building each district and provide renting facilities\nfor other businesses in the area to cover the cost of construction and provide\naccommodation at affordable rents and initiate an insurance company to provide\ninsurance services to customers but credit guarantee services will not be\nprovided.   <\/p>\n\n\n\n

      The\nbank budgets making annual profits from all businesses and pay higher returns\nthan the market rate of interest.      <\/p>\n","protected":false},"excerpt":{"rendered":"

      BY EDWARD THEOPHILUS 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\u2019 have stuck with money creation and cheque […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-105526","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/105526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=105526"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/105526\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=105526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=105526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=105526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}