Business

‘Bad Bank,’ Big Stakes: Sri Lanka’s Rs. 300bn gamble on growth

Published

2 months ago

2026/02/12

The top table at the SLCSMI press conference.

Sri Lanka’s small and medium enterprise (SME) sector—responsible for 52 percent of GDP and employing nearly half the national workforce—has become the next decisive test of the country’s fragile economic recovery.

A proposal to establish a Rs. 300 billion “Bad Bank” to absorb distressed SME loans now places policymakers at a crossroads: act boldly to revive credit and growth, or risk entrenching stagnation in the real economy.

The Sri Lanka Chamber of Small and Medium Industries (SLCSMI) on Tuesday told journalists that they had unveiled a detailed blueprint aimed at restructuring an estimated Rs. 460 billion in non-performing loans (NPLs), much of it concentrated among SMEs battered by successive shocks—from the Easter Sunday attacks and the pandemic to sovereign default and climate-related disruptions such as Cyclone Ditwah.

While headline indicators suggest macroeconomic stabilisation, including lower inflation, improved reserves and a profitable banking sector, credit transmission to smaller enterprises remains severely constrained, Chambers think tank pointed out.

“This is not about rewarding defaulters,” said SLCSMI President Prof. Rohan De Silva. “It is about protecting the productive backbone of the economy. If SMEs collapse, the consequences will extend far beyond individual balance sheets.”

Despite strong liquidity and a return to profitability in the banking system, thousands of SMEs remain blacklisted at the Credit Information Bureau (CRIB), unable to access fresh working capital.

The Chamber argues that unless distressed assets are separated from viable enterprises, banks will remain structurally risk-averse, prolonging the paralysis in private sector credit growth.

The proposed “Bad Bank” would function as a specialised rehabilitation vehicle, purchasing or warehousing toxic SME loans and granting viable firms a five-to-ten-year restructuring window, shielded from parate execution, to rebuild cash flows. Senior Vice President Colvin Fernando described the initiative as an economic circuit-breaker rather than a bailout. “These are not failed enterprises,” Fernando said.

He added:”They are businesses hit by extraordinary external shocks. Unless we ring-fence these distressed loans, credit transmission will remain paralysed.”

The concept draws on international precedents where asset management companies were deployed after systemic crises. Yet such mechanisms succeed only when governed by strict asset valuation discipline, professional management and insulation from political interference. Without these safeguards, they risk becoming vehicles for concealed subsidies or fiscal leakage.

The most contentious element of the Chamber’s proposal lies in its funding model. It calls for a hybrid structure combining low-cost international financing, a levy on commercial bank profits and the utilisation of unutilised balances from the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF).

Prof. De Silva argues that the banking sector, having restored profitability partly through elevated interest margins during the crisis years, has both the capacity and systemic responsibility to contribute. “The banking system has returned to strong profitability,” he said. “A structured contribution toward SME rehabilitation is not punitive—it is an investment in systemic stability.”

The suggested mobilisation of pension fund balances, however, is likely to provoke scrutiny over governance and fiduciary safeguards, while a levy on bank profits may raise investor sensitivity in a sector that has only recently regained confidence.

Fernando acknowledged the risks, emphasising that transparency and strict eligibility criteria would be essential. “This must be professionally managed, transparent and focused strictly on viable enterprises. Without discipline and accountability, the entire purpose would be defeated,” he cautioned.

Adding urgency to the debate is the Government’s decision to lower the VAT registration threshold to Rs. 36 million annually from April 1, 2026, drawing more small firms into the tax net. The Chamber warns that tightening tax compliance while credit remains restricted could create a double squeeze. “You cannot increase tax burdens and restrict financing simultaneously without economic consequences,” Prof. De Silva observed, describing the timing as highly sensitive.

Immediate Past President Mohideen Cader underscored the scale of the stakes. With SMEs contributing 52 percent to GDP and already under severe strain, he warned that inaction would result in irreversible economic scarring.

The macroeconomic logic is clear: without restoring SME balance sheets, private investment and employment growth are unlikely to regain momentum. Yet the countervailing risk is equally apparent. A poorly designed vehicle could create moral hazard, transfer private losses onto public shoulders and introduce new contingent liabilities into an economy still emerging from sovereign default.

Sri Lanka’s IMF-backed reform programme has so far focused on fiscal consolidation and debt sustainability. The SME “Bad Bank” proposal introduces a more complex phase in the recovery narrative—one that shifts attention from stabilisation to growth. The question confronting policymakers is whether the economy can sustain recovery without unclogging the credit arteries that feed its most labour-intensive sector.

The Rs. 300 billion proposal is, in essence, a calculated gamble that repairing SME balance sheets will unlock lending, revive investment and restore economic momentum. If executed with rigour, transparency and independence, it could serve as a bridge from crisis management to expansion. If mishandled, it risks deepening vulnerabilities in a system that has only recently regained its footing. For an economy seeking to move beyond stabilisation, the stakes could hardly be higher.

By Ifham Nizam

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Business

Low-floor buses launched to boost accessible public transport for differently-abled

Published

10 hours ago

2026/04/26

Thilina Walpola

A new low-floor bus service that gives priority to persons with disabilities and special needs was launched last Tuesday (21) from the Makumbura Multimodal Center (MMC).

The service was inaugurated under the patronage of Minister of Transport, Highways and Urban Development, Bimal Rathnayake.

Accordingly, ten specially designed low-floor buses have been introduced into the transport service today. These buses are specially designed so that wheelchair users, visually impaired passengers and also expectant women can board the bus with ease, the Transport Ministry said.

Each bus has 30 passenger seats and separate seating areas have been allocated for passengers using wheelchairs.

The pilot project operates on routes from Makumbura to Colombo Fort and from Makumbura to Kadawatha. These routes also cover major hospitals including the Colombo National Hospital and the Maharagama Apeksha Hospital.

Speaking at the event, Subject Minister Bimal Rathnayake stated that while these buses prioritize the differently-abled community, they will also provide a comfortable and reliable transport service for all passengers.

He also noted that 122 low-floor buses are planned to be introduced into service before the end of this year, and that in the future the service will be expanded to areas such as Kandy, Batticaloa, Matara and Jaffna.

Business

Nestlé Lanka Announces Change in Leadership

Published

10 hours ago

2026/04/26

Thilina Walpola

Nestlé Lanka Limited has announced the appointment of Manav Sahni as its Chairman and Managing Director effective 01 May 2026. He will be succeeding Bernie Stefan, who will be transitioning to a new global role within the Nestlé Group. Bernie Stefan led Nestlé’s Sri Lankan operations through a particularly challenging time since 2023 – and has successfully guided the company through a strategic turnaround, positioning it on a axis for sustainable growth.

Speaking on his tenure at Nestlé Lanka, Bernie commented “Leading Nestlé Lanka has been a deeply meaningful chapter in my Nestlé journey. I am grateful to have worked alongside an amazing and resilient team that continues to make a difference for Sri Lankans across the country. On a personal note, it was an amazing opportunity to live on this beautiful island and experience firsthand the openness, warmth and kindness of its people, which has been the highlight of my Nestlé career to date. As Nestlé Lanka marks 120 years of enriching Sri Lankan lives, it is especially humbling to reflect on the role we have played in building on this legacy – positively touching individuals and families, strengthening community partnerships, and advancing our sustainability commitments. I am thankful to my colleagues, partners and stakeholders for their collaboration and trust, and to the wider business community, including through my role as a Board Member of the Ceylon Chamber of Commerce, for the opportunity to reinforce Nestlé’s commitment to responsible corporate citizenship. I leave very confident in the strength of the team and the journey that lies ahead.”

Manav Sahni brings with him over 18 years of experience in the FMCG & Telecom sector. Prior to taking on the role as Chairman and Managing Director of Nestlé Lanka Limited, he has been heading Nestlé’s Dairy business for the South Asia Region, where he expertly managed a highly diverse portfolio, driving sustainable business transformation.

“I am thrilled to take on the role of Chairman and Managing Director of Nestlé Lanka at such a pivotal moment in its journey. Nestlé has been part of Sri Lankan households for generations, and I am excited to work with the team to continue delighting consumers with tasty and nutritious products, while strengthening the positive impact we create through our brands and initiatives.”

Business

Majestic Cineplex Returns Bigger Better and More Immersive

Published

10 hours ago

2026/04/26

Thilina Walpola

Ceylon Theatres will unveil the newly revamped Majestic Cineplex on the 29th of April 2026, beginning a new chapter for one of Sri Lanka’s best known cinema destinations. Located at Majestic City Colombo, Majestic Cineplex returns with major technology upgrades, enhanced comfort, and a range of premium viewing options, reinforcing Ceylon Theatres’ long standing reputation for raising the bar in cinema entertainment experiences in Sri Lanka. Accordingly, the upgraded Cineplex will be completely open to the public from 29th April 2026 onwards.

For generations of moviegoers, Majestic Cineplex has been a landmark venue in Colombo, and its latest transformation brings together the nostalgia of a familiar name with the excitement of a modern cinema experience. Leading the new screen line up is Majestic Platinum, which introduces Sri Lanka’s first and only digital LED cinema screen. Designed to deliver sharper visuals, deeper contrast, richer colour, and outstanding clarity, the auditorium features a 3D 4K Tricorne LED Cinema Screen together with Dolby Atmos surround sound. Majestic Platinum offers 226 seats, including 18 VIP recliner seats for those chasing a premium cinema experience.

The cineplex also features three additional theatres, each designed to offer a high quality movie experience. Majestic Superior includes Barco 2K projection, 3D capability, and 7.1 surround sound, with seating for 150 patrons. Majestic Ultra features the same advanced projection and audio systems with 149 seats. Majestic Gold offers a more private luxury setting with Barco 2K projection, 3D capability, DTSX surround sound, and 30 leather recliner seats, ideal for those looking for the most premium and exclusive experience.

Patrons can also enjoy an upgraded café experience with freshly prepared and ready to eat food available for purchase at the counter, along with convenience of being served to your seat. The new café experience, together with the upgraded theatres make for a more relaxed, enjoyable, and fulfilling experience for everyone.

Discussing the relaunch, Ganga Rathuvithana, General Manager Operations at Ceylon Theatres said, “Majestic Cineplex has always been a special part of Colombo’s cinema culture, and we are proud to welcome audiences back with an experience that reflects the future of movie entertainment. We have always believed in investing in the best available technology, from introducing Sri Lanka’s first 3D cinema to now launching the country’s first digital LED cinema screen. Our revamped Majestic Cineplex is designed to give movie lovers something truly special.”