Detailed Overview of Commercial Banks in Sri Lanka

Commercial banks in Sri Lanka play a crucial role in the country’s financial landscape. These institutions form the backbone of the banking sector, providing essential services to individuals, businesses, and the government. From the state-owned Bank of Ceylon to private local banks like Sampath Bank and foreign entities such as HSBC, Sri Lanka’s commercial banking scene is diverse and competitive.

The Central Bank of Sri Lanka oversees these financial institutions, ensuring their stability and compliance with regulations. This overview aims to explore the various types of commercial banks operating in Sri Lanka, including state-owned, private local, and foreign banks. It will delve into their roles, market positions, and contributions to the Sri Lankan economy. By examining key players like People’s Bank, Commercial Bank of Ceylon, and Standard Chartered Bank, readers will gain insights into the structure and dynamics of Sri Lanka’s banking sector.

State-owned Commercial Banks in Sri Lanka

State-owned commercial banks play a crucial role in Sri Lanka’s financial landscape, providing essential services to individuals, businesses, and government entities. These institutions form the backbone of the country’s banking sector, contributing significantly to economic growth and financial stability.

Bank of Ceylon

The Bank of Ceylon (BOC) stands as a pillar of Sri Lanka’s financial system. Founded in 1939, with Sir Ernest de Silva as its first chairman, BOC has a rich history intertwined with the nation’s journey to independence. The bank was ceremoniously opened on August 1, 1939, by Sir Andrew Caldecott, the then British governor of Ceylon.

BOC’s journey through the years reflects the changing political and economic landscape of Sri Lanka. In 1948, when Ceylon gained independence, the monetary authorities were transferred to the newly independent nation. The establishment of the Central Bank of Sri Lanka in 1949 marked a significant milestone, as it assumed responsibility for monetary policy and bank regulation.

A pivotal moment in BOC’s history came in 1961 when T. B. Ilangaratne, Minister of Commerce, Trade, Food and Shipping, oversaw the nationalization of the bank. This move aligned the bank more closely with national interests and development goals.

Today, BOC stands as a major commercial bank in Sri Lanka, with its iconic cylindrical building in Colombo serving as its head office. The bank’s extensive network includes:

• 651 branches
• 715 automated teller machines (ATMs)
• 159 CDMs
• 582 CRM network
• 15 regional loan centers

BOC’s reach extends beyond Sri Lanka’s borders, with an off-shore banking unit in Colombo and branches in Male, Chennai, and Seychelles, as well as a subsidiary in London.

As a state entity, BOC is committed to upholding high standards of corporate governance, business integrity, and professionalism. The bank has implemented a robust corporate governance framework that underpins ethical management practices, ensuring stakeholder integrity and long-term sustainability.

People’s Bank

People’s Bank, another key player in Sri Lanka’s state-owned banking sector, has its headquarters at 75, Sir Chittampalam A Gardiner Mawatha, Colombo 2. Established as the first domestic bank for the people, People’s Bank has shown remarkable growth despite strong competition from exchange banks and informal money lenders.

The bank offers a range of services tailored to meet the needs of various customer segments. For corporate and business customers, People’s Bank has introduced “People’s Web – Corporate,” a digital platform designed to deliver a seamless banking experience. This platform allows non-individual customers, including sole proprietors, partnerships, government organizations, NGOs, societies, and companies, to access and manage their accounts securely in one place.

Some of the key features of People’s Web – Corporate include:

• Business facilities inquiry
• Cheque services
• Fund transfer services within People’s Bank and interbank
• Utility bill payment services
• Fixed deposit services
• Loan services
• Remittance (Outward)
• Trade finance

People’s Bank’s leadership team includes experienced professionals such as Mr. Sujeewa Rajapakse, a Managing Partner of BDO Partners and a Fellow of The Institute of Chartered Accountants of Sri Lanka, and Mr. Kumar Gunawardana, who brings over 40 years of diverse banking experience to the board 6.

National Savings Bank

The National Savings Bank (NSB) completes the trio of major state-owned commercial banks in Sri Lanka 7. While specific details about NSB’s operations and services are not provided in the given information, it is understood that as a state-owned bank, NSB plays a significant role in promoting savings and providing financial services to the Sri Lankan public.

The banking sector in Sri Lanka, comprising Licensed Commercial Banks (LCBs) and Licensed Specialized Banks (LSBs), dominates the financial system and accounts for the highest share of total assets 8. These state-owned banks, along with their private counterparts, are crucial in providing liquidity to the entire economy and transforming the risk characteristics of assets.

Licensed Commercial Banks, including the state-owned institutions discussed, are particularly important due to their asset base and the magnitude of services provided. They play a critical role in maintaining the health of Sri Lanka’s financial system, especially the six largest LCBs, referred to as Systemically Important Banks (SIBs) .

In conclusion, state-owned commercial banks in Sri Lanka, namely the Bank of Ceylon, People’s Bank, and National Savings Bank, continue to be integral to the country’s financial infrastructure. Their extensive networks, diverse service offerings, and commitment to good governance practices contribute significantly to Sri Lanka’s economic development and financial stability.

Private Local Commercial Banks

Private local commercial banks play a significant role in Sri Lanka’s financial sector, offering a wide range of services and contributing to the country’s economic growth. Among these institutions, three banks stand out for their performance and market presence: Commercial Bank of Ceylon, Hatton National Bank, and Sampath Bank.

Commercial Bank of Ceylon

The Commercial Bank of Ceylon has established itself as a leader in Sri Lanka’s banking industry. It has been recognized as the ‘Best Bank with good interest rate in Sri Lanka’ for an impressive 22 consecutive years by the US-based Global Finance magazine. This accolade highlights the bank’s commitment to providing a broad range of services, long-term reliability, and technological innovation.

As of December 31, 2023, Commercial Bank of Ceylon boasted impressive financial figures:

• Group assets: Rs 2.656 trillion
• Deposits: Rs 2.148 trillion
• Loan book: Rs 1.296 trillion
• Gross income: Rs 341.566 billion

These figures solidify its position as the largest private sector bank in Sri Lanka. The bank has also emerged as the biggest supporter of home builders in the country, achieving market leadership in the ‘Home Loan’ segment.

Commercial Bank of Ceylon‘s commitment to environmental, social, and governance (ESG) practices has been recognized internationally. It was named ‘Sri Lanka’s Best Bank for ESG’ at the 2024 Euromoney Awards for Excellence . Furthermore, it became the first Sri Lankan bank to sign the Partnership for Carbon Accounting Financials (PCAF), demonstrating its dedication to assessing and disclosing greenhouse gas emissions from its loans and investments .

Hatton National Bank

Hatton National Bank (HNB) has been at the forefront of digital transformation in Sri Lanka’s banking sector. With a history spanning 135 years, HNB has successfully navigated the challenges of digitalization, positioning itself to help revive and reshape the Sri Lankan economy .

HNB’s digital transformation journey, which began in 2013, has been implemented in four stages:

• Creating a sense of urgency and board mandate
• Driving a Hub and Spoke Model
• Driving Digital Products across business segments
• Driving Centralization, Automation, Process Improvement, and Outsourcing initiatives

This digital push has resulted in significant improvements in productivity and efficiency. For instance, over 50% of fixed deposits at HNB were opened digitally on the HNB digital banking app in the past year. The bank has also seen exponential growth in the total volume and value of digital transactions on its banking app and payment app/wallet (Solo) .

HNB’s focus on digital capability has made it easier to drive digital adoption among both staff and customers. This shift has allowed branch team members to spend more time educating customers about suitable banking products when they visit.

Sampath Bank

While specific information about Sampath Bank is limited in the provided key points, it is worth noting that Fitch Ratings views Sampath Bank’s intrinsic credit profile to be closer to that of state-owned banks like Bank of Ceylon and People’s Bank, primarily due to weaker financial profiles in terms of asset quality, profitability, and capitalization .

In conclusion, private local commercial banks in Sri Lanka, particularly Commercial Bank of Ceylon and Hatton National Bank, have demonstrated strong performance and a commitment to innovation and digital transformation. These institutions continue to play a crucial role in shaping the country’s financial landscape and supporting economic growth.

Foreign Commercial Banks Operating in Sri Lanka

Sri Lanka’s banking sector includes several prominent foreign commercial banks that have established a strong presence in the country. These institutions bring international expertise and global networks to the local financial landscape, offering a wide range of services to both individual and corporate clients.

Standard Chartered Bank

Standard Chartered Bank has a significant presence in Sri Lanka, offering a comprehensive range of banking services to individual and corporate clients. The bank’s operations in the country are centered at 37, York Street, Colombo 1 5. Standard Chartered provides various account options, including savings accounts, current accounts, and fixed deposit accounts, catering to different financial needs and goals .

For individual customers, Standard Chartered offers several credit card options, including:

• Sri Lankan Airlines Standard Chartered Platinum Card
• Standard Chartered Priority Banking Visa Infinite Credit Card
• Visa Signature Card
• Rewards Credit Card

These cards come with various benefits, such as travel privileges, rewards programs, and lifestyle perks tailored to different customer segments.

The bank also provides personal and home loans to help customers realize their dreams and secure property investments . For those looking to grow their wealth, Standard Chartered offers investment options such as foreign currency transactions, secured wealth lending, and fixed income investments .

Standard Chartered has embraced digital banking, providing customers with convenient access to their accounts and services through:

• SC Mobile App
• Online Banking
• Phone Banking
• ATMs & Branches
• Leasing Calculator

HSBC

The Hongkong & Shanghai Banking Corporation Ltd (HSBC) is another major player in Sri Lanka’s foreign banking sector. HSBC’s main office is located at 24, Sir Baron Jayatilake Mawatha, Colombo 1 5. As a global banking giant, HSBC brings its international expertise to the Sri Lankan market, offering a range of services to both local and expatriate customers.

HSBC Premier, the bank’s premium banking service, provides dedicated assistance from experts on investing in Sri Lanka. For those looking to maximize their inward remittances, HSBC offers a Special Deposit Account with exclusive rates and higher flexibility 2.

Some key features of HSBC’s Special Deposit Account include:

• Preferential rates for deposits placed on 6 and 12-month maturity tenures
• Can be opened and maintained in any designated foreign currency or in Sri Lankan Rupees
• May be held as joint accounts if all parties meet the eligibility criteria
• Freely convertible and repatriable abroad upon maturity

For international investors, HSBC offers the Inward Investment Account (IIA), which allows eligible individuals to trade with the Colombo Stock Exchange. The IIA is available to:

• Non-nationals, resident in or outside Sri Lanka
• Sri Lankan dual citizens, resident in or outside Sri Lanka
• Sri Lankan nationals with Permanent Residency status or citizenship in another country
• Sri Lankan citizens employed abroad, resident outside Sri Lanka (excluding emigrants)

HSBC’s global presence in over 64 countries and territories, combined with its 150-year history, positions it as a leading international bank in Sri Lanka .

Citibank

Citibank, N.A. has been operating in Sri Lanka since 1979, with its main office located at 65C, Dharmapala Mawatha, Colombo 7 . The bank combines its global experience with a strong local footprint to offer innovative solutions to clients in Sri Lanka .

Citibank’s services in Sri Lanka primarily focus on corporate banking, including:

• Corporate finance
• Working capital finance solutions
• Trade services
• Cash management
• Treasury and risk management solutions

The bank’s Institutional Clients Group serves companies, governments, and institutional investors, providing advice on strategic objectives and financial solutions. Citibank’s transaction services offer integrated treasury and trade solutions, as well as securities and fund services to multinational corporations, financial institutions, and the public sector 6.

Citibank’s deep roots in Sri Lanka have allowed it to tailor its global product range to fit local requirements. By specializing in corporate banking, Citibank has distinguished itself from competitors by offering clients customized solutions rather than standardized products.

As of December 31, 2023, Citibank, N.A. Sri Lanka Branch was rated ‘AAA (lka)’ by Fitch Ratings Lanka Ltd., reflecting its strong financial position in the country.

These foreign commercial banks play a crucial role in Sri Lanka’s financial sector, bringing international best practices, innovative products, and global networks to serve both local and international clients.

Conclusion

The commercial banking sector in Sri Lanka has a significant influence on the country’s financial landscape. From state-owned giants like Bank of Ceylon and People’s Bank to private local powerhouses such as Commercial Bank of Ceylon and Hatton National Bank, and international players like Standard Chartered and HSBC, these institutions form a diverse and competitive environment. Their commitment to innovation, digital transformation, and customer service has helped to shape a robust banking system that caters to a wide range of needs.

Looking ahead, the future of commercial banking in Sri Lanka seems poised for further growth and evolution. The ongoing digital revolution in banking services, coupled with a focus on sustainability and ESG practices, suggests a banking sector that’s adapting to meet the changing demands of customers and the economy. As these banks continue to refine their strategies and expand their offerings, they’re likely to play an even more crucial role in driving economic development and financial inclusion across the country.

FAQs

1. What is the Commercial Bank of Ceylon?
   The Commercial Bank of Ceylon PLC, commonly referred to as ComBank, is a privately owned licensed commercial bank in Sri Lanka. It has been incorporated as a public limited company and is listed on the Colombo Stock Exchange. It stands as the largest private bank in the country based on net worth and capital.
2. What functions do commercial banks serve in Sri Lanka?
   In Sri Lanka, commercial banks are integral to the financial system. They provide essential liquidity to the entire economy and modify the risk characteristics of assets. Additionally, these banks offer payment services that help facilitate financial transactions for various entities.
3. Can you list some of the commercial banks in Sri Lanka?
   Sri Lanka hosts several licensed commercial banks including Citibank NA, Union Bank of Colombo PLC, Amana Bank PLC, Bank of Ceylon, Commercial Bank of Ceylon PLC, Habib Bank Ltd, Hatton National Bank PLC, and the Hongkong & Shanghai Banking Corporation Ltd, among others.
4. How would you describe commercial banks?
   Commercial banks are financial institutions that manage the deposit and withdrawal of money for the public, provide loans for investment, and engage in other related financial activities. These banks operate with the primary goal of generating profit.

References
[1] – https://www.cbsl.gov.lk/en/financial-system/financial-system-stability/banking-sector
[2] – https://chambers.com/content/item/5577
[3] – https://www.combank.lk/history
[4] – https://en.wikipedia.org/wiki/Banking_in_Sri_Lanka
[5] – https://www.hnb.net/media-center/2023/uncovering-the-role-of-culture-and-mindset-in-driving-vibrant-digital-innovation-at-hnb
[6] – https://www.aba.org.tw/advocacy_1/aba-position-paper-on-hnbs-adoption-of-rpa-ai-to-reshape-its-banking-operations/
[7] – https://www.fitchratings.com/research/banks/top-rated-sri-lankan-banks-peer-review-2021-02-03-2021