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| Wednesday, 21 May 2003 |
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Letters | |
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Minister of Finance, K. N. Choksy, hit the nail on the head when he said recently that our Banks make too much profit. He went as far as to state that a one per cent return on turn over was a very satisfactory return for a bank. No doubt our bankers will disagree with him. Banks are among the highest profit makers in our country, bar the state owned banks whose financial results are affected by bureaucratic lassitude and political machinations. Does it surprise anyone that despite the gloomy economic environment of the recent past and the uncertainty of the present, banks keep raking in increasing profits year after year? Banks occupy that enviable niche in the business sector in Sri Lanka where high profits are guaranteed, come what may. There are several reasons for this enviable situation which do not require any major cerebral output to divine. The Central Bank of Sri Lanka is the Bankers best friend. Their regulatory policies and measures are weighted in favour of the Banks rather than the clients. The recent collapse of a pramunent, er, I mean prominent bank in Colombo had a catastrophic effect on hundreds of investors who were literally shell shocked to find their hard earned savings vaporized. The fact that this particular Bank, with its peculiar practices introduced by directors of dubious rectitude, carried on for so long is condemnation enough. Political patronage is another factor, but this type of favour is spread throughout the business community in equal measure. The ultimate blame must lie with the Ministry of Finance which has condoned sharp and questionable practices adopted by banks in their routine dealings with their customers. Banks, quite naturally, make their profits by lending money on interest. We customers all concede this. But have we seen the great disparity in interest rates charged by banks in Sri Lanka as compared with those in other countries? The interest rates prevailing in our country can only be described as crippling, even now, though the Ministry of Finance has woken up to the horror of high interest rates foisted on the public, who have no option but to take it - to their great detriment. However, if one wishes to invest money one would normally get about 50% of this rate. Then again project funds from International lending consortiums and donor agencies which are granted at minimal interest rates are channelled through our banks to would-be entrepreneurs at extortionate rates, after having, secured the loans with lethal mortgages. This is Money for the proverbial jam! It is absolutely disgusting and discouraging that the Government overlooks this profiteering on the part of the banks. Banks are supposed to be honourable and only charge a just commission and not look upon such assignments with open avarice. Have you ever applied for a loan? Here, I refer to the normal Citizen Perera and not the rich. In Sri Lanka it is axiomatic that the quantum of the loan approved is directly proportional to one's assets and the red tape, inversely so. The ordinary citizen who entertains entrepreneurial aspirations or wishes to build a home will be fettered to the bank(s) in various ways. This is, of course, provided he complies with the reams of red tape, some of which are redundant, which guarantee water tight security for the Banks. This explains why when the rich default on their loans, the Banks write off the losses, and in the case of the poor they end up in prison or at Kanatta - if their families can afford it! As someone said, quite aptly, if you owe the Bank 10,000, it is your responsibility, but if you owe the Bank 10,000,000, it is the bank's responsibility. Most of the local entrepreneurs fail due to the excessive cost of financed capital and they end up losing equity and most of their assets. The newspapers are full of 'parate' action notices filed by Banks and financial institutions. Every business has a risk component, but in the case of the banks in Sri Lanka this risk is only limited to unsecured loans granted via political patronage, but as for Citizen Perera, he always coughs up. Now take the matter of costs of a successful loan application. Everything is passed on to the client. There are so many fees - for example: 1. Application form fees The banks incur no expenditure in these 'bilateral' transactions and charge heavy interest thereafter. A look at personal banking reveals a similar situation. If a given account's balance falls below an arbitrarily fixed minimum, account maintenance/ledger fees are charged. But do they credit interest if this amount is exceeded? The interest charged on a temporary overdraft can bring about apoplexy in the unsuspecting individual, on discovering that he is being systematically deprived of hard earned money. This type of insidious amercement of customers nets the banks a tidy incidental income. I say insidious because Citizen Perera normally looks upon banks as institutions of unimpeachable rectitude and accept such manipulations of their accounts without question. A look at Fortunes 500 shows that the best Banks do make up to 13% profit after tax, but some of our banks exceed 20%!! In a Socialist Democracy such as Sri Lanka, such profit levels should be anathema. In general most of the leading banks in the world have single digit profit margins and the examples given below are not representative of the sector, being the best performers in the Banking Sector. 1. Bank of America 12.9% Banks are among the highest profit makers in our country with profit margins going up to 21% while globally, the best performer, Bank of America has a profit margin of 12.9%. Our own LMD 50 reveals that there are no less than six banks and financial institutions in the top ten companies. Hardly any other business sector shows such healthy profit margins except for, perhaps, a tobacco company. The Surgeon General's warning on smoking could translate equally well with regard to banks. Banks are dangerous to national health - at least in the present context. The time has come for the Government to exercise a much more positive role in regulating banks and banking practices, if not dismantle, this enclave of financial power whose strangehold on our economy will spell disaster. The entrepreneur and the self employed will be sucked dry and discarded. Macro-Capitalism will rear its ugly head and swipe the plums of the rehabilitation process. There is a saying - even the road to hell is paved with good intentions - come, translate your good intentions to reality with speedy implementation. JOHN W. HARDENE, At every major railway station in our country, there are several platforms into which the trains call at. Of course, the platforms are identified by different numbers. But such numbers are merely marked on overhead boards with painted arrows pointing towards the respective platforms. But it is so difficult for a newcomer from the suburbs who is rather amazed at the numerous platforms. He fails to look up at the overhead boards and invariably gets into a panic to locate his platform announced over the public address system. I suggest, that each platform be marked with the respective number, towards the edge, with paint or preferably with cement. Such marking should be at every three metres distance and in one-foot-long figures. Should there be a platform with two edges, both such edges should be so marked. I am certain this method would serve the purpose. A. S. FERNANDO, When a man is born most of us in this part of the world believe that he or she brings along the life chart of destiny influenced by karma or God's will as some may call. Predestined reactive forces give you very little chance to pull away from your charted destiny. If criminals are made they are born to be so by destiny. The environment you are born and raised, compelling circumstances and genetic inheritance are facts governed by forces of destiny. This argument could be a strong case against serious punishment for crime. All religions cry out for love, mercy and compassion. The reason perhaps why some clergy and organizations oppose capital punishment. But religious activities have failed to curb the crime boom in Sri Lanka. Today the society enlarged, sophisticated and chronically complex will witness a festival of crime if punishment becomes a farce. It is already becoming so. It was only recently an accused condemned to death was full of smiles waving to friends as if going on a vacation to a star class hotel as shown over the T.V. Brutal killers and hired assassins born to kill have no iota of respect for others' rights or lives and society becomes safer without them. There can be no case of miscarriage of justice sentencing professional and habitual killers the main targets of capital punishment. Why should they be maintained in prison comfort at people's expense for they came back to kill. We should not forget the brutalities in the murders of Rita Jones, Hokandara massacres and horrendous crimes reported daily in the press and electronic media. Understandably organizations like J.V.P. whose strength lies in organized murders for political ends as experienced in the past and their political partners and politicians with 'goon' killer squads and self proclaimed arahaths living outside our crime infested social fabric will obviously oppose capital punishment. Ministers John Amaratunge and Milinda Moragoda should be strongly supported for their stand on capital punishment. But if we are to be civilized towards the uncivilized, let us go for the lethal injection as a more subtle and merciful method. Do not forget that the most hardened criminal fears nothing but only death which alone will save the others from him. A. SILVA, Death penalty - let there be a referendum This refers to Oscar E. V. Fernando's article (5.5.03) titled "Punishment for premeditated murder". Especially with the current wave of gruesome murders one hears almost on daily basis over the electronic media - a young and also learned lady confessed to me recently that this daily fare made her almost too frightened to watch TV any more - there can be no question but that the overwhelming majority of people in this country want the death penalty implemented. With the criminal justice system at a near shambles, particularly with political patronage just below the surface, the real application of the death penalty is the only kind of assurance that the ordinary person could ever have that it may not be his turn next. If as just mentioned, there is such a mass demand for the implementation of the death penalty, it is against fundamental democratic principle to thwart it. If legal principle is invoked, those invoking it ought to be told that this question is too serious a matter to be left to lawyers alone. As constitutional law authority, Dicey, once quoted David Hume, the philosopher with approval, "The opinion of the governed is the real foundation of all government". Therefore, let the authorities put this question to the verdict of the sovereign - the people of this country - by calling a referendum. The sooner, the better. S. COSTA, |
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