Sri Lanka's central bank set an asset accumulation target of 78 billion U.S. dollars by 2016 for domestic banks here on Wednesday, calling on them to increase their international presence.
Central Bank Governor Ajith Nivaard Cabraal told a banking director's symposium that there were too many small banks and finance companies in Sri Lanka and that it was time for larger companies to be formed as Sri Lanka is heading towards a 100- billion-U.S.-dollar economy.
At present, Sri Lanka has 21 banks and 58 finance companies but half the banks and nearly a third of the finance companies are small players.
"Maintaining sound macroeconomic fundamentals are not just the government's business, it's not only the central bank's business, it is your business as well," Cabraal told the movers and shakers of the banking world, emphasizing that it was not that he did not want them to take credit for hard work but to acknowledge it as a combined effort.
Dwelling extensively on the importance of an efficient, strategically positioned and internationally recognized banking sector, Cabraal was insistent on blending in with the larger goals of sectors such as tourism and the government's policies.
"We need to connect ourselves seamlessly to the real economy. We cannot diverse ourselves from the real economy. The financial sector survives because of the real economy. The real economy is given a boost because of the financial sector. Each one has an acute dependence on each other. We cannot talk about a 100-billion- dollar economy without a sound financial sector."
Currently, Sri Lanka has only two banks listed among the world' s top 1,000 banks -- one ranked 979th with an asset base of 8.4 million dollars and the other 983rd with 4 million dollars.
The five State banks account for 2.5 percent of the total asset base of 46.1 billion U.S. dollars, which is almost equivalent to 3 percent of that of the 10 foreign banks operating in the country.
As for the 58 finance companies, 90 percent of the asset base is held by just 28 companies.
Cabraal also called for reducing banking costs, diversified portfolios, financial deepening and improved asset quality.
He also advocated takeover of finance companies by banks and noted it happened constructively in foreign markets.
The governor said that the 1.5 billion U.S. dollars raised by banks this year on international capital markets was "good" but called for an increase.