Opinion
Financial institutions under pressure to lend: A dangerous trend

In 2008, the housing crisis in the United States caused a global credit crunch that was felt all around the world including the US and the UK but also Russia, Ireland, Mexico and several Baltic states. The crisis was truly global, yet Sri Lanka was spared the worst effects of the crisis for various reasons primarily due to the regulatory structure which restricted exposure to high risk financial assets. The financial crisis did create issues for Sri Lanka’s exports, and, generally speaking, there was a drop in both the prices of and demand for commodities. Sri Lanka nonetheless survived the financial crisis and even thrived for a few years following the defeat of terrorism.
Yet, Sri Lanka may have another looming crisis and it is not the property ‘bubble’. While the property market is currently lacking in liquidity, there is adequate room for upward social mobility from the working classes and there is demand in many sub-sectors of the property market. Perhaps, there will be an oversupply of luxury condominiums sometime in the near future, but this too is a small market segment when compared to the property market as a whole. Further, the mortgage industry is also heavily regulated and banks generally discount the value of a property it is lending against.
Sri Lanka may however face more severe issues in the near future with the level of personal debt that many Sri Lankans have taken on. From the point of view of the financial institutions, unsecured credit card debt is perhaps the major threat to the stability of the system. As per a report from October 2018, Sri Lanka’s total credit card debt stood at Rs. 101 Bn. A report in April 2019 showed that total credit card debt had increased further to Rs. 109 Bn, which is an Rs. 8 Bn increase in 7 months. Since April 2019, the overall economic performance of Sri Lanka has suffered at least two major setbacks. First, the Easter Sunday Attacks, which created a dramatic drop in tourist arrivals, a major income earner for Sri Lanka and an industry that employs millions directly and indirectly. Second, just as the country’s economy seemed set for a revival, the Covid19 pandemic struck, affecting tourism specifically but virtually every other industry as well.
Many Sri Lankans had no choice but to resort to utilising any debt instrument available to them in order to make ends meet. There is little doubt that many Sri Lankans would have opted to utilise the available balances on their credit cards, plunging them further into debt with even higher interest rates and expensive penalties and charges.
Even if we assume that credit card debt in total would ‘only’ be around Rs. 120 Bn at this point in time, we have to also consider other forms of personal debt. Most mortgages are well secured due to the discounting requirements from the CBSL; thus even in the unlikely event that there would be a crash in the property market, most lenders will be well collateralised. This is not the case with credit cards, and exposure to the credit card sector is significant across banks of all sizes at all tiers.
Yet, this still only part of the problem. Consider personal loans, though quantums are smaller, the risk is high for the lending institutions as more often than not, personal loans are unsecured and usually borrowed for consumerist purposes. Most people in Sri Lanka buy durables including televisions, washing machines, etc., on consumer finance schemes, and again some of this risk is taken by banks and other lending institutions. The durable item will often be obsolete in a year or two, so any default is unlikely to be covered by the value of the goods. Education loans are another instrument which many consumers use to fund their educational pursuits or those of their children. Often these too are unsecured and only linked to monthly income. Thus, considering credit card debt plus other forms of unsecured personal debt, both Sri Lankan borrowers and the lending institutions might well be engaging in an unstoppable ‘snow-ball’ effect.
Against this backdrop, it is with some consternation that we note the comments made by the Minister of Industries Wimal Weerawansa, at a business conference, held at the BMICH, a few days ago. During the event he stated that he has “not seen such rigid policies when lending to entrepreneurs or industry like in this island” while also alluding to the annual profits of some banks which are over Rs. 3 Bn in some cases. Mr. Weerawansa did not, however, point out that Sri Lanka’s largest state bank, the Bank of Ceylon reported a loss of Rs. 300 Mn for the quarter ended June 2020. Sampath Bank saw its profits drop by 36% for that same quarter. Cargills Bank made a 64 Mn loss in Q2 2019 and the June 2020 quarter also saw non-performing loans (NPL) increase to 5.3% of total loans industry wide. This is all before the worst effects of the pandemic driven lockdown can be baked into the numbers. Indeed, many banking professionals expect further provisioning and write-offs in the coming year.
The Minister also stated that the banks in Sri Lanka were less interested in lending to industries. What he perhaps meant to say was that lending on industrial projects was restricted. However, economists agree that many of Sri Lanka’s major industries; tourist hotels, hydro-power, garments and other manufacturing related projects have all been heavily backed by bank finance. He went on to say that the CBSL “has developed a lot of monetary policy for the benefit of the bankers and not for the benefit of the clients…” This once again is a mischaracterisation of the structure of the system. Banks are run through depositors’ funds and the depositors are Sri Lankan citizens; it is their money that the banks lend with margins under strict guidelines. The CBSL’s main duty is to protect the hard earned money that citizens deposit in the banks.
It is very important that we understand the current predicament in its entirety before making such comments which are quite clearly meant to put pressure on financial institutions to lend more funds. Veterans of the banking industry are well aware that banks are one of the key drivers of economic activity in any economy, but more so in Sri Lanka where FDI has been lagging for many years.
The shareholders of banks do not own the funds that are being lent; it is the citizen’s deposits that are being lent. In basic terms, banks take funds as deposits; on demand, on short-term tenors and on medium to long term tenors. Banks must be cautious about lending funds even on a short term basis if their funding structure is tilted towards demand deposits. Capital adequacy will not be anywhere near enough if ad hoc lending strategies are given priority. A lender’s major task is to identify the borrower and their risk profile verses the steps that can be taken to mitigate risk. The important term here is to mitigate risk, not to altogether absolve yourself from the risk.
There are three broad categories of borrower:
1. Those who borrow with a genuine desire to repay
2. Those who borrow on the basis of repaying ONLY if the project or investment becomes a success
3. Those who borrow with the idea of not repaying no matter the circumstance.
Once you identify your customer and what category he falls into, you must then take a view on the risk proposition versus the profit motives and act accordingly. This is no easy task. At this current stage in our country’s recovery from the Easter attacks and the pandemic, increased lending even at lower interest rates can lead to serious instability in the system. In fact, the worst is likely still to come, considering that moratoriums are expiring at the end of September and the country’s economy has yet to show signs of a sustained recovery. Wages have fallen due to the lack of business activity, disposable incomes are non-existent, personal debt is on the rise, and non-performing loans are also increasing.
Yes, the banks in Sri Lanka have been very successful in the past and the industry is perhaps one of the most stable and dynamic in the country’s history. However, this is as a result of very carefully crafted policy and strict regulations. If anyone goes back a few decades to the height of terrorism in the nation, it is the banks that guaranteed some form of economic progress to the country’s people and its industry. Thus I urge the Minister and his colleagues not to be so brash as to think that the country, its people and its industry can survive and thrive on borrowings alone. The state and its institutions should provide a framework for success, beyond tax holidays and low interest rates. Consistency of policy, stability of currency, multi-stakeholder planning of key industries and attracting both FDI and foreign talent to the country are just some of the facets that must all come together before we start looking at enhancing lending portfolios to spur economic growth.
Rienzie Wijetilleke & Kusum Wijetilleke
– Colombo 7
rienzietwij@gmail.com
Opinion
The Presidential Youth Commission and current social challenges

By Professor G. L. Peiris
D. Phil. (Oxford), Ph. D.
(Sri Lanka);
Rhodes Scholar, Quondam Visiting Fellow of the Universities of Oxford, Cambridge and London;
Former Vice-Chancellor and Emeritus Professor of Law of the University of Colombo.
I. The Youth Commission in Retrospect
My tenure of office as Vice Chancellor of the University of Colombo coincided with the most turbulent period in the history of the university system in our country. There was a near total collapse of all systems, and the cost in terms of the loss of life, destruction of public and private property and disruption of all sectors of national life, was exorbitant.
As this time of upheaval drew to a close, the Government, in October 1989, appointed a Presidential Commission to examine, inter alia, “the causes of disquiet, unrest and discontent manifesting itself in the rejection of existing institutions and in acts of violence”.
As one of 7 Commissioners I played an active role in the work of the Commission and in the preparation of its Report. Revisiting its content recently, I was struck by the immediate relevance of its major themes and recommendations, and the thinking underpinning them, to dominant challenges in our society today.
II. Politicisation a Central Malady
“The oral and written representations to the Commission indicated virtual unanimity that politicisation and perceptions about the abuse of political power are some of the main causes of youth unrest in contemporary Sri Lanka”. This was the first sentence in the Report of the Commission which identified, as the main issue, “the abuse of political power in the undermining of democratic institutions”.
Pre-eminent among the recommendations of the Commission was the setting up of a Nominations Commission “which will recommend to the President the names of persons who will constitute the membership of (a) important Commissions responsible for recruitment, promotion,transfer and dismissal in certain vital areas; and (b) Commissions responsible for policy making in selected areas”. The composition of the Nominations Commission was to reflect the balance of political parties in Parliament.
Disenchanted youth, giving evidence before the Commission throughout the length and breadth of the Island, insisted that, although they were not averse to acceptance of adversity – inevitable at times in a nation’s history – what they would vehemently reject and rebel against was deprivation accompanied by palpable injustice.
III. An Institutional Response: The Constitutional Council
This concept of a Nominations Commission was the origin and inspiration of the Constitutional Council introduced into our Constitution by the Seventeenth Amendment in 2001.
Militating against the “winner takes all” mindset and seeking to establish merit and fairplay as the cornerstones of a rules-based system of public administration, the Constitutional Council mechanism dominated political events for a quarter of a century.
Dramatic swings of the pendulum from progress to backlash characterised developments during the whole of this period. The Seventeenth Amendment envisaged a Constitutional Council consisting of 3 Members of Parliament (Speaker, Prime Minister and Leader of the Opposition) and 7 representatives of civil society nominated by political parties in Parliament. The Eighteenth Amendment, in 2010, replaced the Constitutional Council with a Parliamentary Council which departed in crucial respects from the role of its predecessor, in that the Parliamentary Council consisting of 5 members – 3 from the Legislature and 2 from outside – could only make recommendations to the appointing authority, the President, but their concurrence was not required as a condition for validity of appointments. It was, therefore, a relatively weak instrument.
The Nineteenth Amendment of 2015, which brought back into being a Constitutional Council of 10 members – 7 Parliamentarians and 3 from outside – represented movement in the opposite direction by investing the Council with real authority. A further twist in the skein was signified by the retrogressive Twentieth Amendment, in 2020, which restored the largely impotent Parliamentary Council functioning as a mere advisory body.
The wheel came full circle with the Twenty First Amendment in 2022 which embodies the current law. This precludes the President from appointing personnel of vital Commissions – dealing with elections, the public service, the national police, audit, human rights, bribery and corruption, finance, delimitation, and national procurement – without an explicit recommendation by the Council.
Moreover, a whole range of important officials – the Attorney-General, the Governor of the Central Bank, the Auditor General, the Inspector General of Police, the Ombudsman and the Secretary General of Parliament – could not be validly appointed unless the appointment had been approved by the Council on a recommendation made by the President.
IV. Vigilance the Key
These are landmark achievements, in restricting the scope for partisan political influence in the higher echelons of governance; they serve to reinforce public confidence in the integrity of institutions.
There is no room for complacency, however. The nation was witness to the unedifying spectacle of an incumbent President upbraiding the Constitutional Council, on the floor of Parliament, for purported interference with the performance of executive functions. The current controversy between the National Police Commission and the Acting Inspector General of Police has the potential to thwart the former in the exercise of its constitutional responsibilities. Institutional norms of independence and objectivity can hardly be swept away by exigencies of operational control.
V. Legislative Sovereignty and Judicial Oversight
My distinguished predecessor in the Office of Minister of Constitutional Affairs, the late Dr. Colvin R. de Silva, was a protean figure in constitution making. Unyielding in his insistence on sovereignty of the Legislature, he fiercely resisted, on grounds of principle, judicial surveillance of any kind over the legislative functions of Parliament.
The rationale for this view was set out by him pithily in an address to the United Nations Association of Ceylon in 1968: “Do we want a legislature that is sovereign, or do we not? That is the true question. If you say that the validity of a law has to be determined by anybody outside the law making body, then you are to that extent saying that your law making body is not completely the law making body”.
So unflinching was the architect of the Constitution of 1972 in his adherence to this conviction that, even when a Constitutional Court with limited functions had to be provided for, he insisted that the Secretary- General of Parliament must serve as the Registrar of the Court, and that its sittings had to be held not in Hulftsdorp but within the precincts of Parliament.
It is a matter for satisfaction that this view has not taken root in the constitutional traditions of our country. Instead,we have opted for adoption of justiciable fundamental rights as a restraint on the competence of Parliament, in the interest of protection of the citizenry. This is a measure of acknowledgement of the dangers of untrammelled power and the lure of temptation. Contemporary experience demonstrates the wisdom of this choice.
The idea itself is not unfamiliar to our legal culture. Although the Constitution Order-in-Council of 1948 made no explicit provision for judicial review, our courts showed no disinclination to embark on substantive judicial review of important legislation including the Citizenship Act of 1948, the Sinhala Only Act of 1956, and the Criminal Law (Special Provisions) Act of 1962. The latter statute was struck down in its entirety by the Judicial Committee of the Privy Council on the ground of repugnance to the basic scheme of the Constitution.
Judicial oversight of legislation, then, is a defining principle of our legal system. However, the manner of its application is exposed to legitimate criticism in two ways.
(a) The Content of Fundamental Rights
It is disappointing that only civil and political rights have been deemed worthy of entrenchment in our Constitution, to the rigid exclusion of economic,social and cultural rights.This approach, which continues to receive expression in Chapter III of the present Constitution, runs counter to current international recognition that the latter category of rights is of overriding importance,especially in the context of the developing world.
(b) Exclusion of Post-enactment Review
Judicial scrutiny of legislation is confined in our system to pre-enactment review. There is provision for gazetting of bills and for challenge by the public on the basis of conflict with constitutional provisions. The proposed legislation cannot be debated or passed in Parliament until the Determination of the Supreme Court is received by the Speaker. The Court is required to decide, within a stipulated period, whether the legislation, or any portion of it, contravenes the Constitution and, if so, whether a special majority (two-thirds of the total membership of the House) is sufficient to secure its enactment or whether endorsement by the People at a Referendum is needed, as well. Amendments required by the Court must be compulsorily included at the Committee Stage, as a condition of validity (Articles 78 and 121).
A serious lacuna has been laid bare by recent events. In an egregious affront to the mandatory constitutional scheme, the Government, during passage of the Online Safety Bill, secured enactment of the legislation at the Third Reading, without moving all of the Amendments insisted upon by the Court. This resulted in a Vote of No Confidence being moved by the Opposition against the Speaker for intentional violation of the Constitution.
There have been other instances of flagrant abuse of the legislative process. A Bill which, as presented to Parliament and adjudicated upon by the Supreme Court, dealt with representation of women in Provincial Councils, was fundamentally altered in content AFTER judicial scrutiny through extensive Amendments at the Committee stage, making it virtually impossible to hold Provincial Council elections at all.
Deliberate manipulation of this kind, enabling subversion of constitutional procedures, goes without remedy because of the unqualified exclusion of post-enactment review. This derives from the conclusive bar imposed by Article 80 (3) of the Constitution: “When a Bill becomes law upon the certificate of the Speaker, no court or tribunal shall inquire into, pronounce upon or in any manner call in question the validity of such Act on any ground whatsoever”.
In the overall reform envisaged in the near future, this anomaly calls for urgent attention as a key issue.
VI The Public Service: Neutrality or Control?
Provision for an enabling environment for public officials to fulfil their responsibilities in a spirit of independence, without fear or favour, is generally considered an essential feature of a robust democracy.
However, this has not been looked upon as elf-evident at every stage of our constitutional history. On the contrary, political control of the public service has been sanctified as a cardinal virtue, and its cultivation assiduously promoted.
Root and branch opposition to the idea of a public service beyond the reach of political authority is exemplified by the Constitution of 1972, the sheet anchor of which was the principle that “The National State Assembly is the supreme instrument of State power of the Republic” (Article 5). Political control of the public service was held to be a necessary corollary.
This found expression in the emphatic statement that “The Cabinet of Ministers shall have the power of appointment, transfer, dismissal and disciplinary control of all State officers” (Article 106 (2)). For the exercise of this power, it was declared that the Cabinet “shall be answerable to the National State Assembly” (Article 106 (1)).
The State Services Advisory Board consisting of 3 persons appointed by the President, as its designation made clear, was no more than an advisory body. This, indeed, was true even of the Judicial Services Advisory Board set up under the Constitution of 1972: “The appointment of judges shall be made by the Cabinet of Ministers after receiving the recommendation of the Judicial Services Advisory Board” (Article 126). This Board was required to send a list, but the Cabinet had full power to appoint persons not on the list, with the reasons applicable tabled in the National State Assembly.
The Legislature, then, with the Cabinet as its delegate, became under the Constitution of 1972 the clearly identified source of authority over all State officers including judicial officers. The seed had been sown; and an abundant harvest was reaped in succeeding years.
Happily, our constitutional values took a different trajectory, leaving this tradition behind. The aborted Constitution Bill, which I presented to Parliament as Minister of Constitutional Affairs on behalf of President Chandrika Kumaratunga in August 2000, sought to reverse this trend frontally.
Making a radical departure from the policy stance of political control over the public service, the present Constitution provides unequivocally that this authority “shall be vested in the Public Service Commission” (article 55 (3)). An exception is made in the case of Heads of Department, in relation to whom the corresponding power is vested in the Cabinet of Ministers (Article 55 (2)). The power of appointment of Heads of the Army, Navy and Air Force is placed in the hands of the President (Article 61E). These are reasonable exceptions.
VII Precept vs. Example
Laws, skilfully crafted, do not furnish cast-iron guarantees. They simply provide a conducive environment for persons of goodwill and competence to fulfil their public duties, unencumbered by pressure: the rest is up to individual conscience. Constitutional provisions confer security of tenure on judges, prevent reduction of salary and other benefits during their tenure of office and protect them against attacks harmful to the dignity of their office.
The Lawyers’ Collective, comprising public-spirited members of the legal profession, pointed out last week the danger of judges, upon retirement, accepting lucrative appointments within the gift of the government in power. Public perception is the overriding factor in this field. To be remiss is to invite debilitating weakness and to risk erosion of confidence in the foundations of a functioning democracy.
Opinion
Resolution of grief, not retribution

Ahamed Kathrada, friend and advisor to Nelson Mandela said of Robben Island, where Mandela was imprisoned for close to 30 years, that “While we will not forget the brutality of apartheid, we will not want Robben Island to be a monument to our hardship and suffering.”
Similarly, we do not want our beloved country to be a monument to our suffering. As Kathrada said, we want our country to be a symbol of the triumph of the human spirit against the forces of evil, a triumph of courage and determination over human frailty and weakness. Managing the painful history of this country should be focused on achieving this objective.
Emotions, such as sadness, worry, anger and in some cases, hatred, festering in our society over the past forty years appear now to be reaching boiling point.
Considering my professional background and knowledge of the mind, I am not surprised by that.
Violence is wrong no matter which side it comes from and regardless of its source. However, the bitter truth that emerges when examining the history of the past forty years, even when looking at it from the best possible angle, is that the foundation of the immoral, illegal and violent politics established took root in Sri Lanka, after 1977.
Actions and counteractions of the negative political culture including violence then established, brought nothing but destruction to Sri Lanka.
The bitter truth is that our collective conscience, sensitivities and actions as a nation, are shaped and coloured by this ongoing aggression and violence that equally affected both the South and the North.
The specific period of terror of 1987 – 1989 was focused mainly in the South. Accepting the fact that the majority of those who suffered during this period were Sinhala Buddhists is merely stating the reality; it is not approaching the problem from a narrow, racist or religious perspective.
It should also be added that I myself was a victim of that terror.
The Sinhala Buddhist culture has a distinctive tradition process for alleviating the grief due to a death by holding awake: sharing the pain of loss with those closest to you, and engaging in religious activities specifically in remembrance of the dead person, a sequence of events including offering alms, that provides time to heal.
It is this cultural heritage of managing loss and grief that was taken away from those who lost their lives and their loved ones in 1987- 89. It is only those who have faced such unfortunate experiences who know the compulsion and pain left by that void, where there was no time to process loss and grief. It is time for introspection – for genuine reflection.
With this background as our legacy over multiple generations, we need to pay greater attention to guarding ourselves against the potential response of “identification with the aggressor.” Identification with the aggressor is an involuntary or sub-conscious psychological defence mechanism and a reaction to trauma where the victim who underwent the trauma identifies with and mimics the behaviour of the person who carries out the violence, as a psychological coping mechanism.
Such responses can be seen in, for example, children undergoing abuse, or young people undergoing ragging. The usual reaction one would expect is for the victim to refrain from abuse or ragging. However, contrary to that expectation, research has revealed that the victim displays behaviour similar to that of the person who abused or ragged him/her.
A clear understanding of how is this concept likely to impact the current political climate is critical at this juncture.
Wielding immense political power, politically less experienced and matured social strata may unknowingly become prone to treating their opponents in the same way that the oppressors of the past victimised them. Therefore, the leadership should be sensitive to the potential of former victims almost unknowingly impose past sufferings on current opponents. It is the responsibility of politically enlightened social strata to identify and prevent that situation in advance. It is a moral obligation of all political parties not just the ruling party.
I would like to share a personal experience in this context. Assistant superintended Senaka de Silva was the man who brutally tortured me at the torture camp at Chitra Road, Gampaha, run alongside the Batalanda torture camp.
After my release, I was working as the Head of the Emergency Treatment Unit at the Sri Jayewardenepura Hospital, when the former ASP de Silva brought his niece there for treatment, unaware that I worked there. He was disconcerted to see me and immediately turned back and walked away. I sent the security officer to bring that child back, admitted her to the hospital and did my best to treat her. The thought process and action that I followed that day is what I adhere to date as well. At the time I was only a specialist in family medicine, today, as a professor of psychiatry, I see these events from a much broader point of view.
The force of emotions arising due to pain or injustice can be destructive to society, but it is also possible to divert it into a force for good. For example, the lack of any post-election violence at the Presidential elections of 2024 indicated a commendable positive direction in social movements. Similarly, the dialogue arising around the Batalanda torture camp, too, should be constructive and forward thinking, so that we shall never again see such an immoral political culture in Sri Lanka.
Ahamed Kathrada, friend and advisor to Nelson Mandela said of Robben Island, where Mandela was imprisoned for close to 30 years, that “While we will not forget the brutality of apartheid, we will not want Robben Island to be a monument to our hardship and suffering.”
Similarly, we do not want our beloved country to be a monument to our suffering. As Kathrada said, we want our country to be a symbol of the triumph of the human spirit against the forces of evil, a triumph of courage and determination over human frailty and weakness. Managing the painful history of this country should be focused on achieving this objective.
This does not mean that we have to essentially follow the South African model of truth commission for reconciliation but we do it in a culturally sensitive way that suits us.
As a Nation we all need to understand that situations arise neither to laugh nor to weep, but to learn from past experience.
(The author of this article became a JVP activist as a student in 1977. He was the Secretary of the Human Rights organisation of Sri Lanka in late 1970s and early 1980s. He was known as the personal physician to the late leader of the JVP Rohana Wijeweera.
He was arrested and imprisoned in 1983, but later released without any charge. He was abducted in broard daylight on the 19 July 1988, held in captivity and tortured. He was released in 1990.
An internationally renowned academic, he is an Emeritus Professor of Global Mental Health at Kings College London and Emeritus Professor Keele University. He is also the Director, Institute for Research and Development in Health and Social care and the Chairman of the National Institute of Fundamental Studies.)
by Professor Athula Sumathipala
Opinion
Haphazard demolition in Nugegoda and deathtraps

The proposed expansion of the Kelani Valley railway line has prompted the squatters to demolish the buildings and the above photograph depicts the ad-hoc manner in which a building in the heart of Nugegoda town (No 39 Poorwarama Road) has been haphazardly demolished posing a risk to the general public. Residents say that the live electric wire has not been disconnected and the half-demolished structure is on the verge of collapse, causing inevitable fatal damages.
Over to the Railway Department, Kotte Municipality Ceylon Electricity Board and the Nugegoda Police.
Athula Ranasinghe,
Nugegoda.
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