By Ishara Gamage
Ceylon Finance Today: Sri Lankan bankers may find alternative ways to overcome their leasing restrictions, which was proposed in the 2016 budget, analysts said. "Instead of giving direct leases they can utilize similar services as Vehicle or personal loans," they said.
Speaking to Ceylon FT, Fitch Rating Country Head Maninda Wickramasinghe said that those proposals may dampen banks' profits, but it is good for the leasing industry.
"We are now studying the real outcome of these banks' leasing restrictions, most leasing companies now become finance companies", he added.
Meanwhile, Finance Ministry Secretary Dr.R.H.S. Samaratunga said that main purpose of that proposal was to develop the leasing industry as a separate industry.
"Like other industries, we must give incentives to the leasing industry to grow. What I feel is due to competition among its members, customers can apply for low rate leases," he said.
"We have to stop this culture and let banks focus on their core business", he said.
When asked whether banks' subsidiaries are allowed to do lease business, he said that they will issue a final circular after proper evaluation of the industry.
Budget 2016 proposed that banks should cease engaging in leasing business from 01 June 2016.
Analysts at Bartleet Religare Securities (BRS) said, "We believe this proposal would be a serious challenge not only to banks, but to the consumer as well.
Ceylon Finance Today: Sri Lankan bankers may find alternative ways to overcome their leasing restrictions, which was proposed in the 2016 budget, analysts said. "Instead of giving direct leases they can utilize similar services as Vehicle or personal loans," they said.
Speaking to Ceylon FT, Fitch Rating Country Head Maninda Wickramasinghe said that those proposals may dampen banks' profits, but it is good for the leasing industry.
"We are now studying the real outcome of these banks' leasing restrictions, most leasing companies now become finance companies", he added.
Meanwhile, Finance Ministry Secretary Dr.R.H.S. Samaratunga said that main purpose of that proposal was to develop the leasing industry as a separate industry.
"Like other industries, we must give incentives to the leasing industry to grow. What I feel is due to competition among its members, customers can apply for low rate leases," he said.
Samaratunga said most Sri Lankan banks use their low cost funds to give lucrative leases which give them large profit margins.
"We have to stop this culture and let banks focus on their core business", he said.
When asked whether banks' subsidiaries are allowed to do lease business, he said that they will issue a final circular after proper evaluation of the industry.
Budget 2016 proposed that banks should cease engaging in leasing business from 01 June 2016.
Analysts at Bartleet Religare Securities (BRS) said, "We believe this proposal would be a serious challenge not only to banks, but to the consumer as well.
Motor leasing in particular is preferred way to drive loan book growth due to (1) attractive yields, (2) asset backed, (3) active second hand market (4) good asset quality as domestic banks refrain providing facilities to the subprime market. "We believe almost all banks would see a serious volume impact from this policy decision, as the sector's median exposure to leasing stood at 8% by end September 2015. NTB, in particular would need a change in strategic direction as the bank's loan book concentration to leasing is as high as 24%," analysts said.
They noted that finance companies would be the clear winners/beneficiaries of this proposal, growing in both volumes and margins, although from a consumer's point of view, this will restrict access to low leasing advance rates, as banks generally quote low rates due to their access to low cost funds.
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They noted that finance companies would be the clear winners/beneficiaries of this proposal, growing in both volumes and margins, although from a consumer's point of view, this will restrict access to low leasing advance rates, as banks generally quote low rates due to their access to low cost funds.
www.ceylontoday.lk
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