Sri Lanka, Malaysia establish Currency
The Central Bank of Sri Lanka (CBSL) has entered into a bilateral
currency swap agreement with the Bank Negara Malaysia (BNM- Malaysian
Central Bank) to prop up the country’s ailing foreign reserves, a highly
placed CBSL official confirmed to The Nation Economist.
“We held several rounds of discussions with the BNM during the last few
weeks and a Currency swap was agreed upon. The total amount of the swap
was US$ 200 million” the official said.
However, he declined to reveal the maturity period of the swap.
According to him, CBSL is planning to raise US$ 500 million alone from
currency swaps and is particularly looking at central banks in Southeast
“Though we go to the regional countries, the swaps will not be done in
the local currencies of those countries, but in US$ vs. LKR” he
However, it is yet to be known what the BNM intends doing with US$ 200
million worth of LKR, given the non-convertible nature of the LKR in
In Economics, a Currency swap is an arrangement in which, initially, two
parties exchange specific amounts of different currencies, and a series
of interest payments on the initial cash flows are exchanged.
Often, one party will pay a fixed interest rate, while another will pay
a floating exchange rate (though there may also be fixed-fixed and
floating-floating arrangements). At the maturity of the swap, the
principal amounts are exchanged back.
In the ‘Road Map for the Monetary and Financial Sector Policies for 2009
and beyond’ which was presented in January 2009, CBSL has proposed going
into Currency swaps and promoting Treasury Bonds and Bills among Sri
Though initial plans were to raise US$ 500 million from both strategies,
with the response, especially from the diaspora, the CBSL has become
more ambitious, as now they are aiming at US$ 1 billion at the end of
2009, according to the official.
Last week, The Nation Economist reported quoting two bank officials from
Sampath and People’s Bank, that a substantial amount of money has
already flowed into their NRFC and other foreign currency deposit
instruments, following the promotional work undertaken by the CBSL.
The Sri Lankan Government also has started a campaign to pay a bonus
interest in LKR on the interest paid by the licensed commercial banks,
National Savings Bank and Lankaputhra Development Bank on RFC and NRFC
accounts, with effect from February 1, 2009 to improve foreign
According to a press release issued by the CBSL last week, Sri Lanka’s
foreign reserves fell to US$ 1,753 million in December from US$ 2,030
million in November, which was sufficient to finance 1.5 months of
Gross official reserves with Asian Clearing Union (ACU) funds for
December were US$ 2,561 million, sufficient to finance 2.2 months of
In the early part of 2008, Sri Lanka’s foreign reserves were around US$
3.4 billion. But since mid-September 2008, they began decreasinging
Central Bank eases pressure on
Governor Ajith Nivard
Cabraal and Deputy Governor Ranee Jayamaha at the press
by Ravindra Dharmathilake)
By Azhar Razak
Central Bank says that they have decided to soften their stance on
Registered Finance Companies (RFC) by bringing down the minimum
liquidity reserve percentages. Last week, the Central Bank announced
that they will cut down the minimum statutory liquidity reserve
requirement for fixed deposits and saving deposits from 15 percent to 10
percent and from 20 percent to 15 percent respectively.
The Governor of the Central Bank, Ajith Nivard Cabraal told reporters
that consequent to the failure of certain unauthorised finance
businesses, and the effect of certain unfavourable international
developments, they observed a few stresses within some RFC’s and
Specialised Leasing Companies (SLCs) that are presently operating in the
‘We have seen a drop in deposits and also the reluctance by the public
to renew deposits in some finance companies following the recent
collapse of some finance firms. Therefore, we believe our assistance to
the existing firms at this point of time would ease the pressure and
bring about stability,’ Cabraal said.
The government, on the recommendation of the Central Bank also announced
that they have developed a policy support package to prevent a liquidity
crisis in the regulated financial and leasing sectors. As part of the
package, the government will offer four billion rupees in bonds and
guarantees to RFC’s and SLC’s that are struggling including a Rs. 2
billion credit facility against the sale of land. The Central Bank said
that the government has selected their own Lankaputhra Bank in
overseeing these activities.
‘Finance companies that are facing a problem of selling land in their
portfolio could transfer them to Lankaputhra Bank and get 2-year bonds
in return. The bonds could then be discounted in the secondary markets
to raise cash. Lankaputhra Bank will do its own valuation of the land
and give 67 percent of their value as bonds,’ Deputy Governor Ranee
Further she added that Lankaputhra Bank would also act as guarantors on
behalf of RFC’s and SLC’s to obtain funding from licensed banks.
‘In recent times, we have seen reluctance from some of the commercial
banks to lend to finance companies. The state has therefore decided to
assist them in obtaining credit and the amount of guarantees given could
be around 2.2 billion rupees,’ Jayamaha explained.
Finance and leasing companies have been operating in the economy of Sri
Lanka for many decades, and now account for about 9 per cent of the
financial sector. Although the sector is relatively smaller in magnitude
than the banking sector, its operations are spread throughout the
country, thereby having an effect on economic activity in all parts of
John Keells Ramon Roy IT venture profits
A top official of John Keells Holdings (JKH)
has confirmed to The Nation Economist that, the returns from JKH’s
Indian Business Process Outsourcing (BPO) venture were yet to
During April last year, JKH invested US$ 5.72 million for a 44% equity
stake in Quatrro F&A, the Indian-based Financial & Accounting (F&A)
business of the Quatrro group, headed by Raman Roy.
The official, who wished to remain anonymous, in an e-mail interview
with The Nation Economist said that, since the BPO business was still a
start up business, it would, hence, fetch the desired results only in
the medium terms.
“We had a 5-year Business plan with clear objectives. It was not
expected to make profits in the initial years. But, we remain confident
that, it will achieve its targets over the medium term,” the official
According to the Company, for the Financial year ended 2007/2008, JKH
had invested over Rs. 30 billion in the IT sector, which only yielded a
return of around 5%. The only other worst performing sectors for JKH
were city hotels and Sri Lankan resorts.
JKH currently owns BPO centres in Gurgaon, India and in Colombo. When
asked about JKH’s expansion plans in the BPO business, the official said
that, it would only depend on how the business develops.
‘The global financial crisis may well be an opportunity for the BPO
business and we are already seeing this from the inquiries we have been
getting recently,” the official further explained.
Quatrro, founded by Raman Roy, is a BPO company serving clients in North
America, Europe and Asia in Risk Management & Fraud, Finance &
Accounting, Market Research, Knowledge Services and Mortgage Processing.
Carsons gains Rs 1. 6 bn after divesture of stakes
By Santhush Fernando
Carsons Cumberbatch Group (CARS) gained over Rs. 1.6 bn by divesture of
its stakes in Union Assurance (UAL), Ceylon Cold Stores (CCS) and John
Keells PLC (JKL) last Friday.
John Keells Holdings PLC making a disclosure to the Colombo Stock
Exchange (CSE) announced that it has acquired on the CSE the following
stakes of Carsons Group in its associate & subsidiary companies for a
total consideration of Rs. 1,599,909,965:
JKH bought 13,864,965 shares (37%) of Union Assurance PLC at Rs. 72 per
share, while 4,361,311 shares (20.2%) of Ceylon Cold Stores PLC and
1,657,300 shares (10.9%) of John Keells PLC at Rs. 115 per share and at
Rs. 60 per share respectively.
Further to the above acquisitions, JKH’s shareholding in John Keells PLC
will increase to 86.9% & the John Keells Group shareholding in Union
Assurance PLC & Ceylon Cold Stores PLC will increase to 73.9% & 80.5%,
JKH will be making a mandatory offer for the remaining shares of Union
Assurance PLC not held by JKH under Section 31 of the Company Takeovers
& Mergers Code of 1995.
Carsons together with its subsidiaries, Ceylon Investment (CINV) and
Ceylon Guardian (GUAR), divested its stakes in Union Assurance, Ceylon
Cold Stores and John Keells PLC resulting major capital gains for the
CCS and JKL were accounted as long term investments in CARS group,
Ceylon Guardian group and Ceylon Investment Balance Sheets while Union
Assurance was accounted as a long term investment in Ceylon Guardian
group and Ceylon Investment, while in Carsons Group it was accounted as
The gains for Ceylon investment was around Rs.238.8mn (Rs.9.9 per
share), Ceylon Guardian group to be Rs.353.2mn (Rs.18.6 per share) and
Carsons Group to be Rs.650.5mn (Rs.106.4 per share).
Carson Cumberbatch & Company Limited, through its subsidiaries,
primarily operates two breweries and also owns oil palm plantations
covering approximately 70,000 hectares in Malaysia and Indonesia.
tipped to become SEC Chief
Dr.Gamini Wickremesinghe to step
Incumbent Chairman of Insurance Board of Sri Lanka (IBSL)
Udayasiri Kariyawasam is tipped to become the next Chairman of the
Securities and Exchange Commission (SEC) of Sri Lanka with the stepping
down of Dr. Gamini Wickremesinghe.
Udayasiri who was also the former Chairman of the Bank of Ceylon (BoC)
was to be appointed SEC Chairman and the present SEC Board members are
to tender their resignations shortly to make for the new Chairman, The
Nation Economist learns.
A charted accountant by profession, Udayasiri was appointed IBSL
Chairman eight months back, as Dr. Wickremesinghe had requested that he
be relieved from his duties due to increasing work commitments of SEC
and BoC, along with subsidiaries of the BoC group.
“My term of three years has ended and I did not request that my term be
renewed. We have been able to spearhead a lot of work during this
period. Anyone coming in can carry on the good work forward as we have a
well qualified staff to do the job. New Chairperson will have easy
access as the system is in place at SEC and functioning well.” Dr.
Gamini Wickremesinghe said.
“We have had good relationships with the Colombo Stock Exchange (CSE)
and all listed companies and meet their expectations. We have completed
much of what we could of our ten year Capital Market Development Master
Plan and the capacity building programme to meet its demands is in
place.” He said.
“We are all hopeful that the war will end soon and the SEC was geared to
meet the booming market once it picks up after the war. We have played a
proactive role in encouraging companies to be listed or if not at least
tune itself so that transformation into a quoted company would be
smooth. So I have done my duty to my nation” He added.
Dr. Wickremesinghe’s three year tenure at BoC is to lapse in mid 2010.
– no foreign investments in Indian Supermarkets
Foreign investments in Supermarket outlets are yet to open up in India
due to a restriction by the Indian government. At present, the
Government of India has restricted foreign entrants setting up
supermarket chains in India, although a major Sri Lankan retail
conglomerate has shown interest.
‘We do not have any plans to set up supermarkets in India owing to the
restriction presently imposed. However, following a very good reception
for our export volumes of Keells food products in India we have now a
sales team with a Chief Operating Officer on the ground in India
operating out of the key metros,’ a senior official from John Keells
Holdings (JKH) who wished to be anonymous told the Nation Economist.
The official was referring to the operations of John Keells Foods India
(Pvt) Ltd. (JKFI), a company set up in April last year to manufacture
and market meat products in India.
JKFI is a fully owned subsidiary of JKH and it is learnt that JKH also
owns a similar company in Mauritius.
Fonseka resigns from ComBank board
The Board of Commercial Bank of Ceylon PLC announced
that, the DFCC Bank nominee on its Board- Nihal Fonseka, had resigned on
the completion of nine years as a Director, as required by the Central
Bank of Sri Lanka.
In a disclosure made last Friday, the Bank said that A.N. Fonseka, under
Direction 3(2) (xi) of the Banking Act Directions No. 11 of 2007, had
relinquished his office.
A.N. Fonseka relinquished office as one of the Nominee Directors of DFCC
Bank on the Board of Commercial Bank of Ceylon PLC, on January 31 2009,
as already informed by the company, on completion of 9 years as a
Director in the Bank, as required by the Banking Act Direction on
Corporate Governance issued by the Monetary Board of the Central Bank of
Sri Lanka.” The statement said.
Ennore still on hold
Though local media reports suggest that John Keells
Holdings are likely to grab the Ennore project soon, a foreign media
report reveals that ambiguities in the Indian Union Government’s
policies have led to delays in the selection of the winning bidder for
the Ennore project. The Ennore project is presently put on hold, as one
of the bidders who were not short listed among the six selected to
undertake the project have sought court intervention. John Keells which
partnered with India’s Larsen and Tourbro Ltd (L & T) became one of the
six successful bidders mid last year.