The different market segment served by foreign banks unlike most local banks
may be one reason that foreign banks are a little reluctant to venture into the
island's North-East, opines a senior industry official. Recently, the Governor
of the Central Bank had urged foreign banks operating in Sri Lanka to seek more
approvals to open branches in the North-East having received only a handful of
applications from them.
"Most foreign banks have a different market segment to cater to, and more
specifically it is the niche corporate customers that they generally target," a
senior
manager of Hong Kong & Shanghai Bank (HSBC) who did not wish to be quoted told
The Bottom Line.
Among the foreign banks that have opened branches in these provinces are HSBC
with a branch in Jaffna, Habib Bank in the East and the Indian Bank which is
planning to put up a branch in Jaffna.
"We do have a branch in Jaffna opened in February 2010, but we will never be a
local commercial bank with so many branches like the local banks," the manager
from HSBC said.
The HSBC manager elaborated that HSBC catered to a niche market in the
corporate sector. But they had put whatever weight in the Northern sector by
opening a branch in Jaffna not long after the war.
"Our branch has succeeded in so much as giving confidence to Jaffna investors
where HSBC was active in respect of personal banking," he said adding that in
fact "the East is on our agenda in the near future."
Meanwhile, another official from Standard Chartered Bank said that lack of
faith in borrowers in the region and other logistical challenges may also be
other reasons for the reluctance shown by foreign banks.
This manager said that Standard Chartered Bank primarily transacted overseas
dealings with customers or top clients. But where there was a strong corporate
base the bank did so cater like having opened in Hambantota which was a
potential area for banking.
The CEO of Standard Chartered Bank, Anirvan Ghosh Dastidar said: "Standard
Chartered Bank, Sri Lanka's consumer banking business is driven by a defined
participation model catering to key segments, given our product proposition and
global footprint. Our current distribution plans do include opening of branches
outside of the Western Province; we are also at this time, optimising our
operations in Colombo through relocation, upgrading and expansion of existing
branch premises."
A spokesperson of the Indian Bank when contacted by The Bottom Line said, "We
are not hesitant. In fact, we have earmarked to open a branch in the North.
Presently, we are in the process of putting the final touches to the building".
Commenting on the issue, the secretary general of the Sri Lanka Banks
Association, Upali De Silva reasoned out that foreign banks may be satisfied
with their share of healthy Colombo customers and are, therefore, not thinking
beyond to get involved in business in those regions where the government wants
them to contribute.
Meanwhile, several other foreign banks that The Bottom Line inquired regarding
opening branches in the North-East were tight lipped and not keen on commenting
on the subject.
According to a senior Central Bank official, so far only two foreign bank
branches each had been set up in the North and East respectively.
The official also said that several applications had been received specially by
Indian and Pakistani banks to set up branches in the two provinces while there
were only a handful of applications for approval from banks headquartered in
other countries.
"However, we are optimistic that more branches would be opened this year with
the buoyancy that prevails in the economy," he concluded positively.
Author:Srian Obeyesekere
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