Having identified the national requirement of safeguarding the limited amount of entrepreneurs of our country for stable economic growth, Bank of Ceylon has come up with the concept of Business Revival and Rehabilitation to strategically support the businesses who struggle to rise up amid the weakened economic setup prevailing in the country. Deputy General Manager, Recovery Provinces, Business Revival and Rehabilitation, M.R.N. Rohana Kumara of Bank of Ceylon explains how this concept emerged, its role, and the impact on economic revival of the Nation.
How did the concept of Business Revival emerge in the banking sector?
We know that the survival of a business depends on its ability to generate sufficient profit or maintain at least its break-even point in which its stakeholders are interested. Banks are the frontline stakeholders among those, to ensure that their investment is secured. Therefore, a set of strategies adopted by a loss-making business under the guidance of its financial partner is called Business Revival and Rehabilitation (BRR). Hence, this is not a total novel concept, instead it was in action on a case-by-case basis, mainly focusing on recovery.
But, due to the emergence of the Covid-19 pandemic, almost all the businesses were severely impacted and the timely requirement of adopting proper BRR strategies across the financial industry emerged as a national requirement.
On which basis will a client be served under this concept?
Apart from the general Credit Policy of the bank by which all lending activities are governed, there is a separate Business Revival and Rehabilitation Policy (BRRP) too, based on which the bank will recognise whom to revive. Accordingly, a customer engaged in a proper economic activity irrespective of the size and sector of business, with room for growth which is now categorised as a default, will be considered for revival. In simple terms, we serve from betel leaves sellers to the tea exporter to make sure that their businesses continue as they wish.
Is this only another recovery mechanism or how would you differentiate the ‘Recovery Mechanism’ from ‘Business Revival and Rehabilitation’?
Actually, there is a huge difference between the ‘Recovery Mechanism’ and Business Revival and Rehabilitation. Recovery mechanism leads either to end up the relationship maintained with the customer over periods or damages the relationship by closing many avenues that may be available to rejuvenate the banker-customer bond. This is due to the recovery strategies that focus on the bank’s profitability than the continuity of the business.
On the other hand, under BRR, recovery is obvious, as the business will operate under the guidance of the bank. Also, BRR is where the gratefulness of the banker is showcased by helping our valuable clients to who had immensely contributed the bank’s profit in the past. The most important fact under BRR is that the bank is not that concerned about its short-term profitability, instead extends the support to generate profit from the business concerned.
Can’t we transform all the Recovery units into Business Revival units?
No, that cannot be done. The banks will never encourage the wilful defaulters to play with public money. Having identified the capacity of a borrower to repay the money he/she had borrowed, the bank will make its fullest effort to recover what it has lent within the agreed terms and conditions. BRR will never provide room for any client who purposely delays or ignores repayment of money borrowed.
Can every loss-making business be revived? What sort of commitments are expected from the customer/ business for this to be successful?
Yes, it is possible as far as the client does not deviate from the business plan agreed by the bank and route its total cash flow for monitoring and evaluation purpose. Actually, not only revival, but also an excellent growth could be achieved with the utmost dedication of the client.
Do you think that we can only revive businesses? Can’t we revive the retail segment or individual borrowers?
No, a retail customer who has borrowed for consumption purposes cannot be revived. But, an individual whose purpose was to engage in any economic activity could be revived.
As usual, will the bank give priority to collateral when it comes to business revival also?
As far as the continuity of a business is concerned, cash flow is the deciding factor, which is also known as the primary way out of recovering a facility. Collateral is the secondary way out which is available to liquidate only in case of a default. Since a gradual improvement in the recovery is expected under the BRR process, routing of 100% cash flow through the unit takes precedence over collateral.
How would a severely impacted economy be supported by BRR than rigorous recovery?
It is a well-known fact that the economic growth of Sri Lanka was continuously hindered since the Easter Sunday Terrorist Attack in 2019, followed by the pandemic Covid-19 in 2020. At present, we are in a recessionary period where most of the micro and SME businesses are standing still. There is a long way to go for new businesses to emerge. Both direct and indirect employees engaged in these businesses had either lost their jobs or were affected by salary cuts. So, in an economic downturn, if the banks are to struggle for recovery, how would the economic agents engage in their businesses? If a potential business is left alone during a difficult period that has applied commonly for everyone, it would have to cease its operations. Because such a potential business with financial difficulties will rarely be catered to by another financial institution. Hence, the more you revive businesses, the quicker the economic revival would be.
As the strongest bank in the country to introduce the concept of ‘Business Revival and Rehabilitation,’ could you brief about its history and way forward?
Having identified the importance of reviving a business provided there is potential, Bank of Ceylon started focusing more actively on business revival in the aftermath of the Easter Sunday Attacks in 2019. However, the fully-fledged BRRU was established in 2021. Initially, the unit was centrally established to test the methodology. As we have witnessed the success of BRR within a short period of one year, as of 31 March 2022, we have established 14 Regional BRRUs across the country at our Regional Loan Centres (RLCs). This will be further expanded among the entire branch network of our bank by the end of 2022, enabling each and every business customer of our bank who struggles to stand on their feet and survive amid so many economic barriers.
Up to what extent has BoC contributed to the Sri Lankan economy through this novel concept?
We are really proud to mention that we have revived large-scale business customers so far by offering attractive and customised financial solutions to manage over Rs 30 billion worth of credit facilities. This amount has resulted in safeguarding approximately 5,000 and 10,000 direct and indirect employees. There is no argument that Bank of Ceylon has played an unbeatable role in reviving the country’s economy during the hardest period. If the bank struggled to recover money, where would these businesses have ended up, and how would the families who depended on these businesses met their basic needs? Can the Government alone look after people or is it practical to extend donations continuously? Actually, as bankers, it is our responsibility to revive businesses as much as possible.
Wasn’t it a challenge during a pandemic that ruined the whole economy?
Yes, it was really challenging. As bankers, we prefer easy recovery and advancing. Both of these activities result in adding up attractive figures to the bank’s balance sheet. Yet, as the giant in the banking sector, if we do not initiate and lead the way in reviving businesses of our Nation, will the followers initiate. Now, we have set many examples for the industry. As bankers, we know that risk appetisers gain more return than risk-averse.
Funding an NPA customer is the real risk that a banker may take in his/her history. We know that Sri Lanka has a long way to go to achieve internationally-recognised economic stability. Along the path, we the bankers must hold the hand of our entrepreneurs as we are stronger than them under any circumstance. Proper prediction of day by day changing global economic and political scenarios are vital, same as other factors to successfully revive a business.
What sort of expertise do your staff possess?
The process involved with business revival is somewhat complex than the conventional credit process of the bank. The staff should be smart to spot the root cause of the present situation and propose suitable and customised solutions on time. Initially, at Bank of Ceylon, a small group of experts specially selected with the right attitude has been centrally located to cater to our entrepreneurs who have undergone severe financial difficulties due to various reasons. Each and every staff member coming under the BRRU is thorough with branch banking, corporate banking, capacity to maintain a healthy rapport with various internal and external parties and especially analytical skills. They go beyond the call of duty to brighten the future of their clients.
By a Special Correspondent