RDB merges with LDB amidst protest by employees
Sri Lanka will soon establish a much stronger and larger state bank to cater to the needs of small and medium scale enterprises by merging the Regional Development Bank (RDB) with Lankaputhra Development Bank (LDB).
The Cabinet of Ministers has given approval to establish the “Lanka Enterprise Development Bank” by merging the two banks soon on a budget proposal made in 2016, a senior official of the Ministry of Public Enterprise and Kandy City Development confirmed.
In order to strengthen the capital base to meet the Basel III provisions, capital of Rs. 2.5 billion has been infused to RDB by the Treasury, he added.
RDB is the only development bank functioning in the island, he said adding that its merger with LDB will pave the way towards achieving rapid inclusive and sustainable growth in the country, he revealed.
The country’s six regional development banks were merged into a single RDB in 2010, as a measure to empower and uplift the lives of all Sri Lankans with a special focus on the SME sector.
The six regional banks, which were amalgamated were, Rajarata, Ruhuna, Wayamba, Uva, Kandurata and Sabaragamuwa Development Banks. The new entity has an island-wide network of 268 branches, he said, adding that the RDB maintains 2 to 3 per cent growth at present.
However the management and staff of the RDB have protested against the merger with LDB as the authorities want to maintain the merged entity as Lanka Development Bank, a trade union leader at RDB said.
The Committee on Public Enterprises (COPE) has found several malpractices being allegedly carried out by the top management of Lankaputhra Bank and it has written off millions of rupees in bad loans.
Around Rs.1.6 billion is to be collected which were given under the instructions of the previous government the report revealed.
Under this set up, the RDB will face severe financial crisis if the merger with LDB materialises, the employees warned adding that they will resort to work to rule campaign to prevent the LDB from taking over the management of the RDB.
However at the recent RDB board meeting, it has been agreed to maintain the merged entity as RDB and to appoint LDB Chairman Sujith Kariyawasam as its new chairman.
Measures will be taken to increase the critical mass (capital and asset bases) to strengthen the viability and resilience as well as capabilities, including capacity to innovate the new entity.
Operational effectiveness will also be enhanced by reducing overheads, particularly through branch rationalisation which served to reduce spreads.
In the rationalisation process, there won’t be ‘forcible retrenchment’ of any staff member while a Voluntary Redundancy Schemes (VRS) will be offered, the official said.