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CBSL continues accommodative monetary policy stance

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Monetary Policy Review: October 2020

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 21 October 2020, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively, thereby continuing the prevailing accommodative monetary policy stance.

The Board noted the decline in overall market lending rates, following the unprecedented monetary easing measures taken by the Central Bank thus far during the year, and expects the broadbased downward adjustment in market lending rates to continue, thereby ensuring affordable credit flows to productive sectors of the economy in the prevailing low inflation environment.

Global monetary policy continues to remain accommodative as global growth prospects remain bleak with the resurgence of COVID-19 in many parts of the world

The global economy, as per the World Economic Outlook (WEO) of the International Monetary Fund (IMF) released in October 2020, is projected to contract by 4.4 per cent in 2020. The outlook for growth in 2020 is less severe than the IMF’s previous forecast, supported by large scale policy stimuli implemented worldwide. However, the recent surge in COVID-19 cases globally has prompted several countries to reimpose lockdowns, which may dampen global growth prospects.

Against this background, most central banks across the globe are expected to continue their accommodative monetary policy stance in the foreseeable future.

The Sri Lankan economy is expected to move along a faster recovery path, despite the latest surge in COVID-19 cases locally that could hamper near term growth prospects.

The release of GDP estimates for the second quarter of 2020 by the Department of Census and Statistics (DCS) has been delayed. It is likely that the second quarter of 2020 has recorded a greater contraction than in the first quarter, followed by a recovery in the third quarter of the year. However, as per the DCS, the unemployment rate, which was estimated at 5.7 per cent in the first quarter of 2020, has declined to 5.4 per cent in the second quarter. The level of employment has also remained broadly unchanged in the second quarter compared to the large decline reported for the first quarter. These suggest that economic activity has remained without much deterioration in the second quarter. Other developments observed in leading indicators and high frequency data since the relaxation of the countrywide lockdown measures suggest that Sri Lanka is on a path towards economic revival. The unexpected COVID-19 cluster that has emerged recently could somewhat affect this momentum in the near term, but the expeditious measures that are being taken by the government to contain the spread could limit this impact.

External sector remains resilient with improved liquidity in the foreign exchange market

Better than expected outcomes in the external sector, as reflected by the incoming data, are indicative of the resilience of the external sector amidst growing worldwide uncertainties triggered by the outbreak of COVID-19. Alongside the improvement in earnings from merchandise exports, restrictions imposed on the importation of non-essential goods and low crude oil prices helped narrow the trade deficit substantially during the nine months ending September 2020. Services exports, excluding the tourism sector, continued to record a healthy growth led by computer and logistic services related activities. Workers’ remittances continued to record a notable acceleration since June 2020. In the meantime, Sri Lanka successfully settled the International Sovereign Bond (ISB) of US dollars 1 billion matured in early October 2020, continuing the unblemished record on debt servicing. The exchange rate remained stable and the depreciation of the Sri Lankan rupee against the US dollar is limited to 1.5 per cent thus far during the year. In this background, the Central Bank continued to purchase a sizeable volume of foreign exchange from the domestic market. Gross official reserves were estimated at US dollars 6.7 billion at end September 2020, which provided an import cover of 4.6 months.

Inflation is expected to remain within the desired range

Headline inflation, based on the Colombo Consumer Price Index (CCPI), decelerated in September 2020, on a year-on-year basis, while there was some acceleration in the National Consumer Price Index (NCPI) based headline inflation due to the rise in food prices. Meanwhile, core inflation based on both CCPI and NCPI continued to remain low, reflecting subdued demand conditions. The recent increase in food prices is expected to be short-lived supported by domestic supply side developments as well as the recent reduction in prices of several essential goods. Accordingly, inflation is expected to remain broadly within the desired range of 4-6 per cent in the near term and over the medium term with appropriate policy measures.

Most market interest rates have declined, reflecting the impact of the measures taken by the Central Bank thus far during the year

In response to the monetary easing measures effected to bring down borrowing costs of businesses and households, both market deposit and lending rates adjusted notably so far during the year. The Average Weighted Prime Lending Rate (AWPR) declined to historic lows in recent weeks, while new lending rates also adjusted downward in line with the expectations of the Central Bank. The imposition of lending rate caps on selected financial products in August 2020 has also helped bring down the overall lending rates in the market. Further space remains for market lending rates to decline, particularly with the high level of excess liquidity in the money market, which is deposited with the Central Bank at the SDFR of 4.50 per cent at present.

Credit to the private sector picked up notably in August 2020 and the upward trend is expected to continue supported by low interest rates

Following the contractions recorded in the preceding three months, credit disbursed to the private sector expanded notably in August 2020, reflecting the impact of low lending rates as well as concessional credit schemes. The expansion of credit to the private sector is expected to continue in the period ahead, despite the recent rise in COVID-19 infections, which is expected to be short-lived. Meanwhile, the overall domestic credit continued to expand sharply driven by the substantial increase in credit to the public sector. Accordingly, the growth of broad money further accelerated in August 2020.

Policy rates maintained at current levels

In consideration of the current and expected macroeconomic developments highlighted above, the Monetary Board, at its meeting held on 21 October 2020, was of the view that the current accommodative monetary policy stance is appropriate. Accordingly, the Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively. The Central Bank will continue to monitor domestic and global macroeconomic and financial market developments and take further measures appropriately to ensure that the economy promptly reverts to a sustained high real GDP growth path, while maintaining inflation in the 4-6 per cent range under its flexible inflation targeting framework.

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Seylan Bank’s Islamic Banking Wins Gold at SLIBFI Awards 2019 and Bronze at IFSSA Awards 2020 for Islamic Finance Deal of the Year

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Seylan Bank PLC’s Islamic Banking Unit has placed Sri Lanka prominently in the world of Islamic Finance, securing the joint Gold Award for Deal of the Year 2019 at the recently concluded Sri Lanka Islamic Banking and Finance Industry (SLIBFI) Awards 2019 and Bronze for the same deal at the regional Islamic Finance Forum of South Asia (IFFSA) Awards 2020. Seylan Bank was recognized for successfully financing a Diminishing Musharaka Facility to Timex Bukinda Hydro (U) Ltd as part of a syndicate facility.

The SLIBFI Awards, the premium industry awards for Islamic Finance in Sri Lanka, are presented in conjunction with KPMG, whose key role is to ensure an impartial evaluation process. An independent panel of judges of repute assist in the final adjudications, under the guidance of KPMG. The IFFSA Awards recognize the high achievers in the South Asian region for their efforts in Islamic Banking and Finance during 2019 with industry leading practitioners from Pakistan, Bangladesh, Maldives, India, and other South Asian Countries competing alongside Sri Lanka for accolades.

“Islamic banking is broadly adopted around the world and the preferred choice for some of our clients. Seylan Bank’s Islamic Banking Unit takes pride in being able to facilitate such an important deal for our client. Furthermore, this multiple award-winning deal has also placed Sri Lanka firmly in the global Islamic Finance map” said Ramesh Jayasekara, Chief Operating Officer, Seylan Bank.

The Timex Bukinda Hydro (U) Ltd project transaction has resulted in Sri Lanka understanding the proficiencies and capabilities of Islamic Banking and Financing which has a mere 20-year history in the country. It also portrays Sri Lanka’s own management expertise and engineering capabilities in establishing hydro power plants overseas, thereby putting Sri Lanka on the Global Islamic Banking map.

Speaking on the dual awards M Z Sameer Mohamed, Head- Islamic Banking Unit – Seylan Bank stated, “We are very humbled by the recognition this transaction has received from the wider Islamic Finance community. It has firmly placed Sri Lanka as a partner of choice for future cross border transactions via Sharia compliant platforms, and also created confidence in Foreign Investors and other leading Islamic Financial institutions to obtain more syndicate financing facilities in achieving their corporate goals, which as a result would promote Islamic Finance.”

Seylan Bank, the Bank with a Heart, operates with a vision to offer the ultimate banking experience to its valued customers through cutting-edge technology, innovative products, and best-in-class service. The Bank has a growing clientele of SMEs, Retail and Corporate Customers and has expanded its footprint with 173 branches across the country and an ATM network of 216 units. Seylan Bank has been endorsed as a financially stable organisation with performance excellence across the board by Fitch Ratings, with the bank’s national long-term rating revised upward, from ‘A-(lka)’ to ‘A (lka)’. The bank was ranked second among public listed companies for transparency in corporate reporting by Transparency Global. Seylan Bank has also been named the Most Popular Banking Service Provider in Sri Lanka in Customer Experience by LMD consecutively in 2019 and 2020. These achievements are a testament to Seylan Bank’s financial stability and unwavering dedication to ensure excellence across all endeavours.

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LOLC Finance launches SAVI, the first Credit Card for Pensioners and State employees

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Taking Sri Lanka on a journey towards a cashless world, LOLC Finance – Sri Lanka’s largest Non-Banking Financial Institution (NBFI) has introduced a Credit Card named Savi, which has been exclusively designed for pensioners and State sector employees in the country.

The card was introduced as a part of LOLC Finance’s overall digitisation strategy which is in line with the Central Bank’s ‘2020 – Year of Digital Transactions’ plan to promote and create awareness on digital payments throughout the country.

The Savi Credit Card comes with a variety of offers and benefits exclusively for pensioners and State sector employees. The applicants are not required to pay the joining fee and the annual charges which makes their experience with the card much more rewarding.

A special savings account with a free ATM card with zero charges on withdrawals and online transactions are among the many benefits offered with the Savi card. In addition, LOLC Finance has partnered with some of the country’s leading retail outlets to offer valuable discounts and offers to Savi cardholders.

Conrad Dias, Director/CEO of LOLC Finance PLC and Director LOLC Holdings PLC said, “LOLC Finance is on a mission to support and promote cashless transactions to all segments of the society. We believe, it is our duty to enable pensioners with a cashless journey with multiple benefits since they are the forefathers of our society. Our digitisation strategy has always been a definite competitive advantage that has placed us ahead of our peers at all times”.

The Head of Consumer & Digital Business of LOLC Finance, Hasala Thilekaratne added, “The Savi card is designed to offer unmatched convenience and financial support to this very important segment of our economy. It is also designed on a unique concept to attract and build partnerships with key service providers and to ultimately deliver significant value to the end user. These partnerships will be based on key verticals, always ensuring that the focus and relevance to the target audience is given priority, which in turn will give the end user more reasons to embrace the product”.

In addition, Savi Cardholders are eligible to apply for an instant loan to the maximum value of Rs. 2.5 million with approvals within 24 hours to fulfil any of their urgent financial requirements.

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JKOA joins hands with Asus to release the all-new Expert Center Series Desktop PCs

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ASUS Global designates JKOA as their authorized dealers in Sri Lanka

John Keells Office Automation (Pvt) Ltd. (JKOA), the nation’s leading provider of office automation solutions has partnered with ASUS, the leading multinational company known for the world’s best motherboards, PCs, laptops, notebooks, monitors, graphics cards and routers. ASUS with over 16000 world-class employees and around 5000 R&D teams diligently working towards novel innovations and advanced technology has indeed gained itself a world-renowned recognition for their contribution towards the advancement of the digital world. ASUS Global has designated JKOA, established in 1992, a fully owned subsidiary of John Keells Holdings PLC as their authorized dealers in Sri Lanka. JKOA is highly regarded and is known as a veritable mover and shaker in office automation solutions encompassing a product portfolio of globally established brands. Through this partnership, ASUS has unveiled the All-New Expert Center Series Desktop PCs to Sri Lanka. These are varied, state-of-the-art business desktops that enables extended asset lifecycles, wide range of configurability and eco-friendly sustainability.

To satisfy the needs of every different type of trade and industry, ExpertCenter desktop PCs are built and available in a wide scope of segments and structure. These range from ExpertCenter D3 to D9, offering diverse configurability and meeting or surpassing a variety of world-leading reliability and environmental certifications. Encompassing every single industry, from education and creation, manufacturing to retail, ExpertCenter desktops are prepared to supply long, steady benefits with consistent performance, demonstrating unwavering quality and enterprise-grade manageability.

Extended asset lifecycles empowered by industry-leading ASUS motherboards, plus easy expandability for lower total cost of ownership (TCO) with an ASUS motherboard at the center of each ExpertCenter desktop, businesses are guaranteed of world-leading versatility and unwavering quality. These include the renowned 5X Protection III, a set of hardware safeguards that ensure long-term durability of ASUS motherboards. ExpertCenter desktops have also passed US military-grade durability standards and are also engineered for long-term reliability and quiet operation, even at full performance with multi-channel thermal solutions, customized fan profiles and power-efficient power supplies. The added advantage is that each ExpertCenter desktop PC is prepared both to boost efficiency and remains steady, indeed after several years of functioning. All these advantages along with a 3-year manufacturer warranty makes the product well suited for any organisation.

Based on performance and needs of an organization, the ExpertCenter desktop PCs have been grouped under three categories. First, specially designed for enterprise, organizational and governmental use: ExpertCenter D9 desktops feature effortless multitasking power and Intel vPro® processor technology to manage thousands of hardware endpoints. Secondly, specially designed for advanced SMBs: ExpertCenter D7 desktops maximize employee productivity with high computing and graphics performance, plus comprehensive connectivity to cope with diverse demands.

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