National Savings Bank (NSB), Sri Lanka’s main state-owned savings bank, is going ahead with a controversial US$1billion bond through HSBC Bank, after its chairman Sunil Sirisena was sacked for failing to heed a directive by the Treasury Secretary Dr. P.B. Jayasundera to expedite the process.In a surprise move, the services of Mr. Sirisena, a reputed administrative officer who retired and was appointed as chairman on 13th August 2012, was terminated without giving any reasons by the Finance Ministry this week.
A senior NSB official said Mr. Sirisena was reprimanded by the top Treasury official for the delay in carrying out some his earlier directives during his tenure of office. The former chairman may have had genuine reasons to be cautious without blindly following such orders as he has to protect the interests of around 17 million NSB customers countrywide, informed sources said.
On Thursday, new NSB chairperson W.A. Nalani was summoned by President Mahinda Rajapaksa along with Dr. Jayasundera and other officials where NSB matters and the bond issue was discussed.
Convener of the JVP-backed Inter-Company Trade Union, Wasantha Samarasinghe, said the government had decided to remove Mr. Sirisena, over the delay in the procurement of the loan, largely due to the difference of opinion among some board members.
The NSB cannot stand guarantee for such a loan, and the bank’s liability will go over the limit. By its statute it is required to invest 60 per cent of its assets in gilt-edged Government Securities such as Treasury Bills, Treasury Bonds and other government instruments, the sources revealed.
The Treasury is desperately in need of raising quick funds to tackle the balance of payment issue as well as to finance infrastructure development projects. An attempt to borrow the same amount ($1 billion) from the IMF did not materialize.
The government’s intention now is for the NSB to raise US$1 billion through the HSBC and to borrow it from the bank to tackle the current balance of payment crisis, the sources added.
The NSB official said the bank has to face unnecessary financial risk by resorting to foreign borrowing which is not its forte. Mr. Sirisena had to leave his post as he and some of the board directors expressed reluctance to go ahead with the deal as they don’t want to put 17 million customers in jeopardy, the official added.
Since assuming office last year, Mr. Sirisena has taken prompt action to tackle the NSB cadre issue while streamlining the administrative functions, the official revealed.
He had also resisted the granting of NSB loans under political influence while directing bank officials to speed up loan recoveries. Mr. Sirisena was also planning to take legal action against defaulters including top businessmen, politicians and big corporates.
The officials said that there is no need for the NSB to borrow in US dollars to issue housing and other rupee loans to Sri Lankan customers, adding that the $1billion bond is essentially to fund state projects.
The crisis at the bank comes just as it was recovering from the share market scam involving the purchase of The Finance Co (TFC) shares during the tenure of Pradeepa Kariyawasam, husband of the former chief justice Shirani Bandaranayake.