Financial Times

NSB seeks changes in Act to diversify business
National Savings Bank, which saw a steep rise in profits last year, is seeking to amend the parliamentary Act under which it was set up, in an effort to diversify its investments and be more competitive in the business.

The bank is also upgrading its information technology on a priority basis and linking branches and ATMs in order to be on a better footing compared with private commercial banks, a senior company official said. NSB has sought Central Bank approval to introduce foreign currency banking to its customers. The request is under consideration.

NSB already has partial approval for foreign currency banking and is allowed to accept foreign currency deposits but with repayments in rupees. "We are also asking for changes and more flexibility in other areas such as investment," the official said. "Now we can't invest in the way we want without Treasury approval. We want to broaden our investment portfolio."

NSB, which was set up under an Act of Parliament in 1972, made a pre-tax profit of Rs 4.1 billion in the financial year ended December 31, 2003, up 74 percent from the year before, its chairman D.M. Swaminathan said in the annual report.

The bank mobilised Rs 26.6 billion in deposits last year - a growth of 20 percent in its deposit base to Rs Rs 161.1 billion from Rs 134.5 billion in end-2002.

Over 60 percent of deposits came from the Western province. Interest income rose to Rs 18.8 billion in 2003 from Rs 16.8 billion in 2002.The senior NSB official said over 80 percent of NSB's investment portfolio was invested in government securities and that the bank wants to diversify its investments. "We want to bring down our investments in government securities and diversify into other instruments - we want to shift the portfolio to shorter term investments," he said. This was because of the need to correct the mismatch between the bank's investments in long-term government bonds and its liabilities which are mostly short term deposits.

NSB has invested Rs 1.3 billion in the share market in 2003 and its equity portfolio performed well resulting in capital gains of Rs 475 million and dividends of Rs 72 million. The official said the bank's future priority is to improve its IT system and bring it up to a level comparable to other leading banks.

"We need to upgrade our IT in order to survive in the market," the official said. "In the first stage we will connect all branches to the network. Now the branches are computerised but they are standalone systems and not connected. Then we want to connect the ATM network so that customers can do transactions at any machine."

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