SL depositors more aware than before : CB Deputy Governor
View(s):Sri Lankan investors are more savvy and aware of the investment options now as opposed to two years ago, according to a senior Central Bank (CB) official.
“Two years ago, the local banks’ deposit mix was 40 per cent in savings deposits and 60 per cent fixed deposits. Now it’s changed to 30 and 70 per cent,” Ananda Silva, Deputy Governor CB told the Business Times on the sidelines of a media conference by Softlogic Finance last week in which he was the guest of honour. He said this shows that customers/investors are more aware than before of the better yield in fixed deposits and they want more out of their money.
He said that competition in the financial sector has increased alarmingly. “As an example, two years ago in the Maharagama area (which is where I come from) – there weren’t many banks and companies, but now they’re all there.” He said as a result of this intense competition, the industry margins have dropped.
He added that intensified competition has made it harder for banks to cross-subsidise and there was a need of consolidation within the financial sector. Sri Lanka’s banking sector and financial sector to have strong institutions which would be merged with each other to have that kind of ability to take Sri Lanka forward to the next level of development, he said.
He also noted that in the non bank financial institutions, the business model is somewhat homogeneous. “We need some critical mass – then only can you survive. This is why we want to consolidate this sector.”
Softlogic Finance which concluded the first ever medium term Cross Currency Swap by a NBFI with an Off-Shore counterpart, TCX when they completed a four year transaction for US$ 4.8 million said that this will enable the company to cover their interest rate risk exposure in respect of medium term lending products that include leasing and hire purchase contracts which form the bulk of business for the company.
TCX is a special purpose fund that provides OTC derivatives to hedge the currency and interest rate mismatch that is created in cross-border investments between international investors and local borrowers in frontier and less liquid emerging markets. The other key deals that Softlogic Finance has undertaken include IFC loan of $20 million to Asiri Hospitals, FMO and DEG Equity investment of $15 million in Asian Alliance Insurance, FMO loan of $10 million to Softlogic Finance, IFC loan of $10 million to Softlogic Leisure and Axis Equity Investment of $25 million with Asiri Hospitals.