Until now, only two state banks have announced reductions in interest rates.
Most private banks are adopting a "wait and see" attitude on interest rates, but more reductions are on the way.
The next month should see most banks announcing at least a one per cent cut in the interest rates...
Whenever an institution is privatised, there are allegations of hanky-panky. First it was about cement and now the rumours are about sugar.
So much so that someone has suggested that all details pertaining to the privatisation of state ventures - tenders called, bids received, procedure followed - be made public as a matter of routine.
The bosses are agreeable; so the proposal may see the light of day...
At least one bank dabbling in commerce thought we wouldn't win the World Cup.
So, they took out advertisements in newspapers on the day after the match which said, "it's all right folks, even if you didn't win the cup, you played very well...."
When the match finished late Sunday night the provincial editions of the newspaper had already been dispatched. The best strategy was to insert an advertisement the next day saying "we're sorry"!
Vanik Incorporation Limited (VANIK) will launch on March 25, (for the first time in the Sri Lankan Capital Market) a public debenture issue, quoted on the Colombo Stock Exchange (CSE) a company release states. The total issue of Rs. 600 million will be issued at the face value of Rs. 100/- each. The minimum investment is Rs. 10,000/- and thereafter in multiples of Rs. 1,000/-. The debenture is issued for a three year period and offers 20% interest per annum, paid quarterly. Hence, the effective yield amounts to 21.55% per annum, which happens to be the highest interest rate in the country at present, the release states.
The principal advantages of VANIK debentures are:
* Enables investors to lock into a high interest rate for a three year period. VANIK Debentures offer a longer investment period and pays higher interest than Bank Fixed Deposits and Treasury Bills.
* Quotation on the CSE provides investors the opportunity to convert their investment into cash at any given time.
* Provides investors the opportunity to realise a capital gain on disposal of Debentures on the CSE.
* Unlike whit a share an investor can avoid realising a capital loss by merely holding Debentures until maturity. Upon maturity, VANIK will repay the par value of Rs. 100/- to all Debenture holders.
* Investors may use the Debentures as collateral when seeking bank loans.
* A low minimum investment of Rs. 10,000/- to encourage participation of small investors.
* Regular (quarterly) interest payments.
Bank and finance company fixed deposits usually carry a penalty or a loss of interest, if the investor withdraws the investment early. Although treasury bills have high liquidity they offer short investment periods, exposing investors to fluctuating interest rates upon re-investment. Bank CDs offer long investment periods but pay low interest while offering poor liquidity as with fixed deposits. VANIK debentures offer all these benefits; a higher interest rate, long investment period, high liquidity, a small investment outlay, the possibility of a capital gain and low risk all at the same time, the release states.
The VANIK debenture price will not fluctuate like the share prices on the CSE because it is driven mainly by the movement of relative market interest rates. This movement too will be extremely limited in comparison to the share price movements. Either way if an investor holds the VANIK debenture until maturity, investor will get all the money back and will not be effected by price fluctuations. This is an assurance shares cannot offer, the release adds.
In a bid to promote debt instruments in Sri Lanka, the Government has exempted debentures from Stamp Duty in its 1996 budget.
VANIK is a listed company at the CSE and its main international shareholders are Commonwealth Development Corporation of the UK and Asian Finance Investment Corporation (an affiliate to the Asian Development Bank) in Manila. At present 33% of the shareholding of VANIK belongs to foreign institutions and individual investors. VANIK has offered its shares to the public in November 1993 and it has been subscribed over 22 times and at the very first day of trading at the CSE, it traded five times the issue price.
In May 1994 VANIK acquired LB Finance Limited, a long established and reputed finance company in Sri Lanka. VANIK also opened its first branch in Kandy in July 1995. Its first international venture Vanik Bangladesh Limited is expected to commence operations soon.
Despite 1995 being considered a difficult year for the investment banking sector VANIK registered a consolidated net profit after tax figure of Rs. 100.5 million.
VANIK has embarked on an informative advertising campaign in all languages across all media to approach a broader nation wide public. Unlike all other earlier Public Share Issues which has been basically confined to Colombo, VANIK is taking the marketing of the Debenture to the outstations. VANIK has selected Anuradhapura instead of Colombo to launch this issue. A marketing seminar is scheduled to be opened along with the launching of the issue today, at 3.30 p.m., at the Central Bank Auditorium at Anuradhapura. VANIK also has planned similar marketing seminars for investors in eight outstation centres like, Galle, Matara, Ratnapura, Kandy, Nuwara Eliya, Kurunegala, Badulla and Negombo.
The VANIK debenture issue opens on March 25, 1996 and is expected to be popular especially at a time when market interest rates are low.
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