Economics

1. C.M.K.Liyanage
AG/2009/2786
1

2. Content page
1. Introduction 3
2. Classification of Bank 4
• Commercial Banks 5
• Savings Banks 14
• Merchant Banks 16
• Investment Banks 20
3. Central bank of SriLanka 21
4. The objectives of the Central bank 22
5. The Functions of the Central bank 23
6. Credit control by the Central bank 23
7. Exchange Rates 24
8. World Trade Organization 25
9. International Monetary Fund 26
10. References 27
Introduction
Banks in SriLanka
The banking sector is one of the most important sections of an economy of any
country. In the modern world all the financial systems are depending on the banking
sector. Now a days banks are not only play a role of loan supplier or money Deposit,
savings holder. Modern banks serve various kinds of services for their valuable
customers.
2

3. There are four major type of banking systems available in Sri Lanka under the
supervision of Central bank of Srilanka.
• Commercial Banks
• Merchant Banks
• Investment Banks
• Savings Banks
The central bank is the apex institution in the financial system of Sri Lanka.
There are 26 commercial banks in operation in the country. 10 of these are locally
incorporated and the balances are branches of foreign banks. Two of the local
commercial banks are state owned.
Merchant/ Investment Banks offer a wide array of services including
identification and financing of project, leasing, bill discounting, underwriting share
issues, margin trading facilities, loan syndication, bridging finance, participation in
project equity, other forms of project finance, managing private share issues
/placements, financial and management consultancy services etc. There are 10 such
banks in Sri Lanka at present.
The Savings Bank’s primary activities are accepting various savings deposits
from public, investing in government securities, and investing in long-term debt
instruments.
Commercial
Banks
Savings
Central
1. Classification of Banks Merchant
Banks Bank Banks
3
Investment
Banks

4. Commercial
Banks
State Owned
banks Private
Banks
4

5. • People’s bank • Sampath
Bank
• Bank Of
Ceylon • Commercial
Bank Of
Ceylon
• Hatton
National
Bank
A commercial bank is a type of financial
intermediary. Business Banking is another term • Seylan bank
for Commercial banks. This type of banks
provides checking accounts, savings accounts, and • Nation’s
money market accounts and that accepts time Trust Bank
deposits.
Many banks offer both commercial and retail • Union
banking services. But Commercial banking may also
Commercial
be seen as distinct from retail banking, which
involves the provision of financial services direct to Bank
consumers. In Srilanka all commercial bankes are
controlling under the supervision of Central Bank of • Pan Asia
Srilanka. Banking
Corperation
• NDB Bank
• DFCC Bank
5

6. The Functions of Commercial banks
Commercial banks engage in the following activities.
1. Accepting money on term deposit
2. Lending money by overdraft, installment loan, or other means
3. Providing documentary and standby letter of credit, guarantees, performance
bonds, securities underwriting commitments and other forms of off balance
sheet exposures
4. Safekeeping of documents and other items in safe deposit boxes
5. sale, distribution or brokerage, with or without advice, of insurance, unit
trusts and similar financial products as a “financial supermarket”
6. Cash management and treasury services
7. Merchant banking and private equity financing
8.
9. Traditionally, large commercial banks also underwrite bonds, and make
markets in currency, interest rates, and credit-related securities, but today
large commercial banks usually have an investment bank arm that is involved
in the mentioned activities.
10. processing of payments by way of telegraphic transfer, EFTPOS, internet
banking, or other means.
State Owned Commercial
Banks
There are two state owned Commercial banks in Srilanka. They are,
1. Peoples Bank
2. Bank of Ceylon
People’s Bank
Vision
To be the Bank of the aspiring People of Sri Lanka: empowering people
to become value creating, competitive and self-reliant.
6

7. Mission
For Customers
To take pride in providing an excellent service in the most caring,
responsive and professional manner.
For Owners
To generate benefits for the national economy whilst being independent
and commercially viable.
For Employees
To create opportunities for our employees to benefit from their high
performance by becoming value creating, skilled, self confident and
professional individuals who are also team players.
For Society
To support empowerment and sustainable development by contributing to
the upliftment of education, culture and environment island wid
Service Profile
Savings Products
• Harvest Savings Account
• Infants - Isuru Udana
• Minors - Sisu Udana
• Young Savers - YES
• All those who wish to make their dreams come true - Jana Jaya
• Ladies - Vanitha Vasana
• Senior Citizens - Parinatha
• For maximum benefits - People's Bank MAX
• Senior Citizens Pilgrimages - Vandana
• Teachers - Guru Setha
• Health Sector Employees - Suwa Sevana
• Regular Savers - Investment Savings
• General Purposes - Ordinary Savings A/c. (Single/joint)
• Institutions
o Co-operatives
o Partnerships
o Sole Proprietorship
o Limited Liability Companies
o Corporations
o Statutory Bodies
Current Accounts
7

8. • Personal Accounts - Individual
• Personal Accounts - Joint
• Business Accounts - Sole Proprietorship/ Partnership/ Limited Liability
Companies / Statutory Bodies
Loan Products
• Education - (Local to Abroad)
• Purchase of Vehicles
• Any Purpose Loan
• A comprehensive Housing Loan Scheme - Jaya Nivasa
• Consumer Durables from Selected Reputed Companies
• Purchase of Vehicles
• PALS for Professionals
• Waidyasiri Loans
• Suwa Sevana Loan Scheme for Health Sector Employees
• Guru Setha Loan Scheme for Teachers
• Big Buy Scheme for Govt. / Corp/ Statutory Board Employees
• Loan Scheme for members of local Government
• Loan Scheme for Telecom Employees
• Pensioners Loans
• Loan/ Over draft against deposits
• Videshika - Loan scheme for Employees Abroad
• Business Loans - Tourism/ Commercial
• Loans - Vanitha Vasana
• Swarna Pradeepa
Other Services
• Money Transfer (Inter Branch)
• ATMs / Operation Facilities using Cards
• Credit Cards
• Slips - Funds Spreading
• International Money Transfers
Foreigen Currency Accounts
• Special Foreign Investment Deposit Account (SFIDA)
• NRFC Accounts
• NRFC Fixed
• RFC Accounts
• RFC Fixed
• RRFC
• RNNFC Accounts
• Sierra
• People's eRemittance
8

9. Bank Of Ceylon
Since in 1939, Bank of Ceylon play a major role in srilanka economy. It has,
• 305 Local Branches
• 03 foreign branches
• 325 ATM Machines
Vision
Bankers to the nation
Mission
Customers
Foster most rewarding relationship with trust and reliability for our
customers, exceeding their expectations.
Staff
We offer our staff, recognition and rewards to be the best team of achievers in
service excellence.
Owners
As per expectations of our owners, be a catalyst in national development, with
profitability.
Society
Extending banking service to larger society as a beneficial beacon in the
country.
Service Profile
Savings Accounts
• Ran Kekulu Children’s Savings
• 14+ Savings
• 18+ Savings
9

10. • Kantha Ran Ginum
• Ethera Thilina
• Ran Govi Thanapath
• Ranawiru Ran Ginum
Foreign Savings Accounts
• NRFC Savings
• NRFC Fixed Deposits
• RFC Savings
• RFC Fixed Deposits
• RNNFE
• Export Foreign Currency Accounts
Current accounts
Private Commercial Banks
In Srilanka
There are several private commercial banks in Srilanka. We can put all this
banks under same structure. Here we study only glance about two private banks.
1. Hatton National Bank
2. dfv
10

11. Hatton National Bank
In 1888, Hatton Bank commenced business in Sri Lanka's hill country station of
Hatton, to serve the flourishing tea industry that produced the country's most famous
export. Now a days it has 189 branches island wide.
Vision:
To be the acknowledged leader and chosen partner in providing financial solutions
through inspired people.
Mission:
Combining entrepreneurial spirit with empowered people and leading edge
technology to constantly exceed stakeholder expectations
Values:
11

12. Tre
asur
e
prof
essi
onal
&
pers
onal
inte
grit
y at
all
tim
es
De
mo
nstr
ate
mut
ual
resp
ect
in
all
our
inte
ract
ions
Pas
sion
ate
in
ever
ythi
ng
we
do
Co
mm
itte 12

13. Service Profile
• Savings Accounts
• Current Deposits
• Borrowing funds (housing,Education,Leasing,Credit cards)
• e-banking
• Project financing
• Treasurery Services
• Rural credit
• Micro finance
SEYLAN Bank
Seylan bank is a Bank with a Heart which established in 1987 as a Public Limited
Liability Company. The theme of Bank is Just, Fair and Consistent.
Vision
"To be the leading financial solutions provider that delivers exceptional value to
stakeholders"
Mission
"To exceed customer expectations by providing competitively priced superior services
through speedy and multiple delivery channels,
whilst rewarding staff through recognition and empowerment; being a responsible
13

14. corporate citizen; adopting environmental friendly
practices and adding superior value to shareholders"
Values
• High ethical and professional conduct
• Passion for excellence
• Courage to adapt to chang
• Continuous improvement
• Mutual respect and trust
• Building lasting relationships
Service Profile
• Savings Accounts
• Current Deposits
• Borrowing funds (housing, Education, Leasing, Credit cards)
• e-banking
• Seylan Leasing
• Palm top banking
• Foreign currency exchange
14

15. Savings Banks
State Owned Banks
• National savings Bank
A savings bank is a financial institution whose primary purpose is accepting savings
deposits. It may also perform some other functions.In some countries, savings banks were
created on public initiative, while in others, socially committed individuals created
foundations to put in place the necessary infrastructure. In Srilanka all Savings banks are
controlling under the supervision of Central Bank of Srilanka.
Functions
• The savings bank serves the man of small earnings and without capital by
providing a safe place to keep his savings and an experienced agency for
investing them so as to yield him an income.
• The savings of the average wage-earner are usually not large enough to admit
of his investing in bonds, mortgages, and other forms of investment open to
the man of means, nor is the man of small income qualified by experience in
such matters to select a safe and profitable investment.
• But the savings bank takes these small savings of scores of individuals, which
collectively amount to very considerable sums, and invests them for the
depositors in such ways as to insure safety and a fair return.
15

16. • It thus encourages among the masses habits of thrift and industry, and
accumulates for productive uses money which otherwise would lie idle or be
squandered in unwise expenditures. From the standpoint of the employment of
funds also there is a wide difference between savings banks and commercial
banks.
• The function of the savings bank is primarily that of investment, while the
commercial bank makes advances to business concerns for current needs. The
savings bank invests the depositor's savings to bring profit to him; the
commercial bank loans its credit to make profit for itself. The savings bank
exists for the saver; the commercial bank for the borrower.
National savings Bank
National Savings Bank (NSB), is a state-owned savings bank in Sri Lanka. It
was incorporated in Ceylon by the National Savings Bank Act No. 30 of 1971 and was
granted the status of the Licensed Specialized Bank in terms of the Banking Act No.
30 of 1988.
It has 126 branches, 14 Postal Banking Branches, 21 NSB Piyasa and a
Savings Shop.It also carries out postal banking with the cooperation of 642 post
offices and 3,408 sub-post offices of the Sri Lanka Post.
Service Profile
• Deposit products
• Foreign Currency Accounts
• Loans & Advances
• Card products
• Online banking
• Foreign Remittences
16

17. Merchant Banks
Merchant Bank of
SriLanka
Merchant banks
In banking, a merchant bank is a financial institution primarily engaged in
offering financial services and advice to corporations and to wealthy individuals.
The term can also be used to describe the private equity activities of banking
The chief distinction between an investment bank and a merchant bank is that a
merchant bank invests its own capital in a client company whereas an investment bank
purely distributes (and trades) the securities of that company in its capital raising role.
Both merchant banks and investment banks provide fee based corporate advisory
services, including in relation to mergers and acquisitions. In Srilanka all Merchants banks are
controlling under the supervision of Central Bank of Srilanka.
Functions
• Primarily Merchant Banks are involved in International finance and long-term
loans for multinational corporations and governments.
• They provide both finance (credit) and underwriting (insurance).
• Portfolio management
• Leasing
• Loan syndication
• Project finance
17

18. • Issue management
Merchant Bank of SriLanka
Merchant Bank of Sri Lanka PLC [MBSL] is a public quoted company with
limited liability incorporated on 4th March 1982, listed on the Colombo Stock
Exchange.
Service Profile
• Trade Finance
• Leasing
• Corporate Advisory Services
• Capital Market Activities
• Fund Management
• Corporate Secretarial & Legal
Development Banks
A Development bank is a national or regional financial institution designed to
provide medium- and long-term capital for productive investment, often accompanied
by technical assistance
Development Banks or Development Finance Institutions as these are
normally called in the financial world are a post World War II phenomenon. Their
establishment in Africa, Asia and other developing countries in most cases coincided
with the attainment of independence.
18

19. Functions
 Provision of Capital to Industries, which can play role in economic
development.
 Lends money to small scale industries.
 Services of Mutual Funds
 Funds raising schemes for development companies.
 Project advicing services
 Project Management
National Development Bank
VISION
A World-class SriLankan bank
MISSION
To be dominant in the financial services sector, creating superior long-term
shareholder value and contributing to economic development in Sri Lanka by
exploiting regional opportunities and delivering innovative solutions with 'best in
industry' service excellence through an inspired team
VALUES
Integrity
We believe in truth, justice and fairplay, above all else.
Care
We will never lose the human touch. We will care for our colleagues, our customers,
our community and our environment.
Passion
We will embrace challenges with passion and aggressively pursue our goals
Teamwork
We will work together as a team, supporting each other, respecting every individual
and drawing strength from our diversity.
Service
We will always strive for excellence in serving our internal and external customers,
through professionalism, innovation and creativity
Service Profile
19

20. • Privilege Banking
• Savings Accounts
• Current Accounts
• Minors' Accounts
• Foreign Currency Accts.
• SFIDA
• Fixed Deposits
• eZ Pay
• Leasing
• Loan Schemes
• Safe Deposit Lockers
• VISA Debit Card
• Western Union
• Bancassuranc
Corporate Services
• Project Loans
• Working Capital Finance
• Trade Services
• Leasing
• Cash Management
• Treasury Products
• Bancassurance
• Commercial Markets
20

21. Investment Banks
An investment bank is a financial institution that assists corporations and
governments in raising capital by underwriting and acting as the agent in the issuance
of securities. An investment bank also assists companies involved in mergers and
acquisitions, derivatives, etc. Further it provides ancillary services such as market
making and the trading of derivatives, fixed income instruments, foreign exchange,
commodity, and equity securities.
Unlike commercial banks and retail banks, investment banks do not take
deposits.
To provide investment banking services in the United States an advisor must
be a licensed broker-dealer. The advisor is subject to Securities & Exchange
Commission (SEC) (FINRA) regulation[1]. Until 1999, the United States maintained a
separation between investment banking and commercial banks. Other industrialized
countries, including G7 countries, have not maintained this separation historically.
Trading securities for cash or securities (i.e., facilitating transactions, market-making),
or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the
"sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public
who consumed the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components. In
Srilanka all investments bankes are controlling under the supervision of Central Bank of
Srilanka.
21

22. Central Bank Of SriLanka
The Central Bank of Ceylon was set up by the post independence Government
in recognition of the importance of an active monetary policy regime and a dynamic
financial sector to support and promote economic growth.
The Exter Report on the rationale and the legal framework for the Central
Bank was presented to the Government of Ceylon in November 1949 and led to its
formation. The Central Bank of Ceylon was established by the Monetary Law Act
(MLA) No.58 of 1949 and commenced operations on August 28, 1950. It was
renamed the Central Bank of Sri Lanka in 1985.
The Central Bank was given wide powers to administer and regulate the entire
money, banking and credit system of the country. The Central Bank was also given
the sole right and authority to issue currency and it also became the custodian of the
international reserves of the country.
The Vision
This vision statement clearly indicates that the Bank is deeply committed to
contributing to the prosperity of Sri Lanka
.
Mission
Maintaining economic and price stability and financial system stability to support
sustainable growth through policy stimulus, advice, commitment and excellence
The objectives of the Central Bank
(as specified in the MLA in 1949)
a ) The stabilization of domestic monetary values (maintenance of price
stability).
b ) The preservation of the par value or the stability of the exchange rate of
the
Sri Lankan Rupee (maintenance of exchange rate stability).
C )The promotion and maintenance of a high level of production,
employment and real income in Sri Lanka.
d ) The encouragement and promotion of the full development of the
productive
resources of Sri Lanka
22

23. The objectives of the Central Bank
(According to the modernization program in 2000)
1 The maintenance of economic and price stability
Price stability safeguards the value of the currency in terms of what it will
purchase at home and in terms of other currencies. Price stability or stable
prices means low inflation. Experience has shown that the economy
performs well when inflation is low and is expected to be low. Interest rates
are also low in these conditions. Such an environment allows an economy
to achieve its growth potential and fosters high employment. Free from the
disruptive effects of high and variable inflation, both consumers and
producers make economic decisions with confidence. Low inflation or price
stability fosters sustainable long-term economic growth and employment.
The Central Bank uses monetary policy measures to control inflation.
2 The maintenance of financial system stability
A stable financial system creates a favorable environment for depositors
and investors, encourages efficient financial intermediation and the
effective functioning of markets, and hence, promotes investment and
economic growth. Financial system stability means the effective
functioning of the financial system (financial institutions and markets) and
the absence of banking, currency and balance of payments crisis. Financial
instability is caused by bank failures, excessive asset price volatility, and
collapse of market liquidity or a disruption to the payments system.
Financial system stability requires a stable macro-economic environment,
effective regulatory framework, well organised financial markets, sound
financial institutions and safe and robust payments infrastructure. The
maintenance of financial stability entails the prevention, detection and
reduction of threats to the financial system as a whole, through the
surveillance of markets and financial institutions, oversight of the payments
system and crisis resolution.
23

24. Functions of the Central Bank
In order to achieve its core objectives as well as to discharge its responsibilities as
economic advisor and banker to, and agent of the GOSL, the CBSL undertakes the
following functions.
Core functions
Economic and Price Stability
Financial System Stability
Ancillary to core functions
Currency Issue and Management
Agency functions
The Central Bank of Sri Lanka undertakes the following four agency functions for the
Government of Sri Lanka.
Employees' Provident Fund Management
Foreign Exchange Management
Public Debt Management
Regional Development
Credit control by the Central Bank
The Central Bank discharges this role by establishing the required legal framework,
regulating and supervising key categories of financial institutions, maintaining
stability in key financial markets, overseeing the payments and settlements system,
acting as lender of last resort and by regular surveillance of the entire financial
system, including insurance and stock market activities.
24

25. Regulation and Supervision
•
•
•

•
Monitoring and Surveillance
•
•
•
•
F
i
n
a
25

26. • Deposits
• Loans
• Treasury Bills and Bonds
• Repurchase Agreements
• Commercial Paper
• Corporate Bonds and Debentures
• Asset-backed Securities
• Financial Leases
• Shares
• Financial Derivatives
Exchange Rates
In finance, the exchange rates (also known as the foreign-exchange rate,
forex rate or FX rate) between two currencies specifies how much one currency is
worth in terms of the other. It is the value of a foreign nation’s currency in terms of
the home nation’s currency.
The average rates of the following currencies quoted on that day by commercial banks
in Colombo for Telegraphic Transfers (TT) at 9.30 a.m. are as follows.
Daily Exchange Rates 07.07.2010
Currency Buying Rate (Rs.) Selling Rate (Rs.)
Dollar (USA) 112.6700 114.2000
170.0300
Pound (UK) 173.4000
Euro (EU) 141.4400 144.6600
26

27. Franc (Switzerland) 105.6300 108.1300
Dollar (Canada) 106.1500 108.7800
Dollar (Australia) 95.1000 97.6000
Dollar (Singapore) 80.7600 82.4900
Yen (Japan) 1.2819 1.3129
World Trade Organization
The World Trade Organization (WTO) is an organization that intends to
supervise and liberalize international trade.
The organization officially commenced on January 1, 1995 under the Marrakech
Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which
commenced in 1948.
The organization deals with regulation of trade between participating countries; it
provides a framework for negotiating and formalizing trade agreements, and a dispute
resolution process aimed at enforcing participants' adherence to WTO agreements
which are signed by representatives of member governments and ratified by their
parliaments.
Most of the issues that the WTO focuses on derive from previous trade negotiations,
especially from the Uruguay Round (1986-1994).
The WTO has 153 members, representing more than 97% of total world trade and 30
observers, most seeking membership.
The WTO is governed by a ministerial conference, meeting every two years; a
general council, which implements the conference's policy decisions and is
responsible for day-to-day administration; and a director-general, who is appointed by
the ministerial conference.
The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.
Functions of WTO
Among the various functions of the WTO, these are regarded by analysts as the most
important:
• It oversees the implementation, administration and operation of the covered
agreements.
• It provides a forum for negotiations and for settling disputes.
27

28. • Additionally, it is the WTO's duty to review and propagate the national trade
policies, and to ensure the coherence and transparency of trade policies
through surveillance in global economic policy-making.
• Another priority of the WTO is the assistance of developing, least-developed
and low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training.
• The WTO is also a center of economic research and analysis: regular
assessments of the global trade picture in its annual publications and research
reports on specific topics are produced by the organization
• ]
Finally, the WTO cooperates closely with the two other components of the
Bretton Woods system, the IMF and the World Bank.
International Monetary Fund
• The International Monetary Fund (IMF) is the international organization
that oversees the global financial system by following the macroeconomic
policies of its member countries, in particular those with an impact on
exchange rate and the balance of payments.
• At present number of registered countries with IMF are 182, operations in 110
countries with 2600 employees.
• It is an organization formed with a stated objective of stabilizing international
exchange rates and facilitating development through the enforcement of
liberalising economic policies on other countries as a condition for loans,
restructuring or aid.
• It also offers highly leveraged loans, mainly to poorer countries.
• Its headquarters are in Washington, D.C., United States.
• The International Monetary Fund was created in July 1944, originally with 45
members, with a goal to stabilize exchange rates and assist the reconstruction
of the world's international payment system.
• Countries contributed to a pool which could be borrowed from, on a temporary
basis, by countries with payment imbalances (Condon, 2007). The IMF was
important when it was first created because it helped the world stabilize the
economic system.
• The IMF works to improve the economies of its member countries.
Functions
• Developing fair and monitor currency exchange rates among all the countries.
28

29. • MF also provides short tem loans to its member countries so they could bring
their imbalanced payment system into balance.
• One more important function of IMF is to draw lending money model for
borrower countries. In this way IMF also acts as Debtor.
• IMF also provides Training and Technical assistance in the areas of finance
management system, Tax system, banking system development to its member
countries through its Monetary and Exchange Affairs Department, the Fiscal
Affairs Department, and the Bureau of Statistics.
• The Legal Department, the Bureau of Computing Services, and the area
departments also coordinate.
• IMF also helps to draw a systematic system for foreign transactions to take
place.
• It provides advice on microeconomic development.
References
http://en.wikipedia.org/wiki/List_of_banks_in_Sri_Lanka
www.answers.com
http://buildsrilanka.com/Banks.htm
http://www.cbsl.gov.lk/htm/english/05_fss/fss.html
http://www.sampath.lk/
http://www.business.com/directory/financial_services/banking/banking_institutions/c
ommercial_banks/sri_lanka/weblistings.asp
http://www.hnb.net/
29

30. http://www.peoplesbank.lk/
http://www.cbsl.gov.lk/
http://www.mbslbank.com/
http://www.ndbbank.com/
http://www.nsb.lk/
30