Business

Rupee liquidity in banks ‘different from normal’: Central Bank

Published

4 years ago

2022/06/16

By Sanath Nanayakkare

With the spike in policy interest rates, rupee liquidity in the banks is different from what is normal, Yvette Fernando, deputy governor of the Central Bank said at a webinar hosted by the Centre for Banking Studies of the Central Bank.

“According to the reports we have received, the current rupee liquidity in the banks has not caused any distress to their daily transactions. However, in an increased rate environment, sometimes customers switch banks to get higher rates and some even opt to use their deposits to purchase Treasury Bills that earn them higher yields. This is normal when there’s a significant change in interest rates. You know that banks take deposits from customers and invest these funds in various ways to help the growth of the economy, while assuring security and reward to depositors. However, when such significant changes are made to the exchange rate policy and interest rates, banks feel the impacts of these policy decisions on their investment decisions.”

She made these remarks in response to a question from the audience whether the lifting of the fixed exchange rate regime and eye-popping numbers in interest rates could destabilize the banking system.

Elaborating on this particular concern among the public, she said, “Even before the most recent interest rate hike and flexible exchange rate policy, banks encountered stress due to lack of foreign currency in the past 12-18 months. Their foreign remittances base declined and their foreign inflows dropped after Sri Lanka’s credit ratings were downgraded by international ratings agencies. Under such circumstances, the banks had to make loan repayments. New loans couldn’t be taken and existing loans could not be renewed. Some banks were inconvenienced in inter-bank settlements as their foreign inflows were inadequate. The Bank of Ceylon and People’s Bank that provide substantial funds to finance the import of fuel, LP gas, medicines and other essential commodities also felt a significant impact as a result of these developments. That situation led the two state banks to collaborate with other banks to facilitate the critical shipments where the Central Bank also intervened when necessary.”

“Now, the most recent interest rate hike and exchange rate policy have had an even more significant impact on the banks’ assets and responsibilities. However, the capital and liquidity buffers of the banks are at optimal levels and have helped them to operate resiliently despite the impact on their rupee liquidity.”

The deputy governor went on to say that if the need arises to support the banking system with rupee liquidity, the Central Bank can do so within the regulatory provisions made available to it.

“We have the ability to intervene and provide that facilitation within that lawful framework. We are always prepared to do that. Even the Monetary Board of the Central Bank is aware of this situation,” she said.

“We recently allowed the banks to operate within a new space of facilitated prudential requirements in line with their assets and responsibilities. I believe that within a short period of time, the adjustments in the macroeconomic framework and measures taken by the government and the central bank will help boost foreign reserves and significantly ease these inconveniences. Thus the banks will be able to operate just as in normal conditions. This will take about a month or two to materialize. Of course, to achieve that, confidence in the Sri Lankan economy needs to be restored. A program with the IMF will help restore that confidence which in turn should revive the foreign exchange market, creating a more comfortable situation for banks to operate,” she said.

Meanwhile, Prime Minister Ranil Wickramasinghe said on Tuesday that Sri Lanka doesn’t have any rupee income, and by the end of the year the rupee crisis would be solved with the introduction of taxes.

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Business

Middle East tensions may hit tourism and energy sectors

Published

6 hours ago

2026/03/17

Sahan Weerasooriya

Tourists admiring nature’s abundance in Sri Lanka.

Escalating geopolitical tensions in the Middle East involving Iran are beginning to raise concerns here, with analysts warning that the fallout could affect not only the island’s tourism industry but also its energy sector.

Tourism stakeholders say the first signs of a slowdown in visitor arrivals have begun to emerge as airlines and travel operators adjust to disruptions across key Middle Eastern aviation corridors.

According to Harsha Suriyapperuma, Chairman of the Sri Lanka Tourism Development Authority, the current tensions could temporarily influence travel flows mainly due to disruptions affecting major transit hubs in the Gulf region.

A significant share of travellers heading to Sri Lanka from Europe and other long-haul destinations transit through aviation hubs such as Dubai, Doha and Abu Dhabi.

Industry analysts say that when geopolitical tensions escalate in the Middle East, airlines often revise flight paths, cancel services or adjust schedules due to security concerns and airspace restrictions, which can slow tourism flows to destinations like Sri Lanka.

According to a Tourism industry leader, global travel demand is highly sensitive to geopolitical developments affecting major aviation corridors.

He noted that disruptions to Middle Eastern airspace could result in longer travel routes, higher airline operating costs and increased airfares, which may influence the travel decisions of tourists planning long-haul holidays.

At the same time, economists and energy analysts warn that the conflict could also create ripple effects in global energy markets.

Sri Lanka is heavily dependent on imported fuel, and any instability in the Middle East — particularly involving a major oil producer like Iran — could push global crude oil prices upward.

Energy sector sources said rising oil prices would increase the cost of fuel imports and place additional pressure on the country’s foreign exchange reserves.

Higher global oil prices could also raise operational costs in the power generation sector, particularly for thermal power plants operated by the Ceylon Electricity Board, which relies on fuel and coal imports to meet electricity demand.

Analysts say increased fuel costs could eventually translate into higher electricity generation costs and additional financial pressure on the national power utility.

The tourism sector had entered 2026 on a strong recovery trajectory after attracting more than two million visitors last year, with authorities targeting three million arrivals this year.

However, industry experts caution that prolonged geopolitical instability in the Middle East could slow the momentum of Sri Lanka’s tourism recovery while simultaneously creating new challenges for the country’s energy sector.

Despite these emerging risks, officials remain cautiously optimistic that the impact will be temporary if tensions in the region stabilise in the coming weeks.

They stress that Sri Lanka continues to be viewed internationally as a safe and attractive destination, while authorities are closely monitoring developments in global energy markets and aviation networks.

By Ifham Nizam

Business

NDB raises Sri Lanka’s largest Basel III-Compliant Thematic Bond

Published

6 hours ago

2026/03/17

Sahan Weerasooriya

Kelum Edirisinghe - Director, Chief Executive Officer

National Development Bank PLC (NDB/ the Bank) recently announced that it successfully raised LKR 16.0 billion through the issuance of Basel III-compliant Tier II Rated Unsecured Subordinated Redeemable GSS+ Bonds (the GSS+ Bonds), to be listed on the Colombo Stock Exchange (CSE). This issuance marks a major milestone in thematic fundraising within Sri Lanka’s capital markets landscape, signaling the country’s growing progress in the increasingly important segment of sustainable finance.

The GSS+ Bonds issue opened on 10 March 2026 and was oversubscribed within the same day, demonstrating strong demand from both retail and institutional investors. This response reaffirms the confidence investors place in NDB and its overall financial strength and stability. The issuance of the GSS+ Bonds reflects the Bank’s strong environmental and social considerations embedded in its lending practices. For many years, NDB has maintained a robust Environmental and Social Management System (ESMS) ensuring that funds are directed toward environmentally and socially responsible projects and causes.

NDB’s GSS+ Bonds will be deployed to finance eligible Green (including Blue), Social, Sustainability, and Sustainability-Linked projects, supporting environmentally responsible, socially impactful, and sustainable economic development.

Business

HNB General Insurance fastest in reaching LKR 11 Bn. revenue (GWP) within 10 years of operations

Published

6 hours ago

2026/03/17

Sahan Weerasooriya

Stuart Chapman - Chairman / Sithumina Jayasundara –CEO

HNB General Insurance Limited (HNBGI) announced its financial results for the year ended 31 December 2025, marking a milestone year of accelerated growth, strengthened financial resilience, and sustained business momentum.

The Company recorded a Gross Written Premium (GWP) of LKR 11.0 billion for 2025, reflecting a robust 21% growth compared to LKR 9.1 billion in 2024. This performance significantly outpaced the industry’s growth of 15%, demonstrating the Company’s strong competitive positioning, disciplined execution, and continued customer confidence. With this achievement, HNBGI becomes the first general insurer in Sri Lanka to reach the LKR 11 billion GWP milestone within ten years of operations. The Company also improved its market position, moving up to 6th place from 7th in Sri Lanka’s general insurance sector.

The Fire segment emerged as a standout contributor with a 27% growth, reaching LKR 2.4 billion, while the Motor portfolio grew by 25% to LKR 6.0 billion. Marine recorded a steady 16% increase to LKR 378 million, and the Miscellaneous segment contributed LKR 2.2 billion. The broad-based growth across segments reflects HNB General Insurance’s balanced portfolio, effective distribution reach, and strong customer confidence.

The Company demonstrated its unwavering commitment to customers through timely and efficient claims management, committing LKR 2.5 billion towards Ditwa cyclone-related claims. In addition, a further LKR 4.7 billion was paid in claims across all other segments during the year, underscoring the Company’s financial strength and reliability in times of need.

The Company’s financial strength further consolidated during the year, with Total Assets growing by a significant 31% to LKR 13.38 billion, while Funds Under Management increased by 9% to LKR 6.74 billion. The Capital Adequacy Ratio remained well above regulatory requirements at 190%, reflecting a solid capital base to support future growth.