By Rusiripala Tennakoon –

In times of economic strain, the moral authority of a government rests not only on the policies it announces but also on the example it sets. When a country emerges from a period of severe financial turbulence, public institutions are expected to demonstrate restraint, discipline and a sense of responsibility towards the citizens whose sacrifices helped steady the nation.

Sri Lanka today is attempting such a transition. The narrative of austerity, fiscal responsibility and prudent use of public resources has been repeatedly emphasised by the leadership of the country. Measures such as reducing non-essential expenditure, reviewing privileges and encouraging modest governance have been presented as necessary steps in rebuilding national credibility.

Such a message naturally resonates with the public. Citizens who endured inflation, taxation adjustments and the erosion of savings expect that those managing public institutions will embody the same spirit of restraint.

However, concerns have begun to surface regarding developments within certain State-owned banks that appear inconsistent with this broader national message.

Reports circulating among employees, pensioners and observers of the banking sector suggest that senior executives in some State banks continue to enjoy expanding privileges, including luxury vehicles, enhanced allowances and unprecedented bonuses even during a period when the country is officially advocating austerity.

If these reports are accurate, the issue is not merely one of financial prudence but of institutional credibility.

State banks occupy a unique position in Sri Lanka’s economic architecture. They are not purely commercial entities driven only by profit considerations. Historically they have also served as instruments of national development policy—supporting agriculture, rural credit programmes, small industry and national infrastructure. Their operations therefore carry an implicit public obligation.

The importance of governance in such institutions has been highlighted before. Only a few years ago one of the major State banks was summoned before the Parliamentary Committee on Public Enterprises (COPE) following observations made by the Auditor General regarding a controversial digitalisation project undertaken by the bank.

The project, initially estimated at around Rs. 800 million, reportedly escalated to well over the billion-rupee mark, accompanied by questions relating to procedural lapses, administrative shortcomings and weaknesses in oversight. During those proceedings, the then Chairman of the bank acknowledged before the Committee that the management had been “taken for a ride”.

That episode, which attracted considerable public attention at the time, served as a reminder of the scale of responsibility carried by those entrusted with managing public financial institutions.

It is against such a background that present developments raise legitimate questions. If senior executives in State banks are now expanding privileges for themselves while the wider public sector is being urged to practise restraint, the resulting perception gap could undermine institutional credibility.

Another aspect deserving attention is the nature of the profits currently reported by some banks.

In the past year, unusually high customs revenue collections resulted in exceptionally large Treasury balances being maintained in the accounts of State banks. Such deposits naturally provided the banks with substantial liquidity which could be invested in Treasury Bills, Government Bonds and other interest-bearing instruments.

While this would legitimately generate interest income for the banks, it also raises a reasonable policy question. To what extent do the profits now being celebrated reflect operational efficiency within the banks themselves, and to what extent are they the indirect consequence of unusually large government deposits and related financial flows?

Ironically, the Government itself may have been a major contributor to the interest income that boosted those profits.

For observers of public finance, such distinctions matter. Profits derived from genuine banking performance carry a different significance from profits arising primarily from macro-financial circumstances.

The issue becomes even more sensitive when viewed from the perspective of thousands of retired employees of these institutions.

Many pensioners of State banks recall that in 1998 one bank unilaterally altered the manner in which the variable Cost of Living Allowance (COLA) component was treated in pension calculations. According to pensioners’ representatives, this decision effectively removed a variable component that had previously been part of their monthly pension structure.

Over time, as the cost of living increased dramatically, the difference between what pensioners receive and what they might have received under the earlier formula widened significantly.

Those who retired more recently benefit from a much higher COLA structure applicable at the time of their retirement. In contrast, older pensioners continue to receive pensions based on the reduced formula introduced decades ago.

As a result, many senior pensioners argue that they have suffered a substantial loss over nearly three decades while the institution itself has benefited financially from the earlier decision.

This long-standing dispute continues to raise several unanswered questions. Why do the two State banks appear to follow different pension calculation approaches? And what measures, if any, are being considered to address the grievances of those affected by the earlier change?

These concerns highlight a broader point about institutional culture.

Institutions thrive not only through regulations but through values. A culture that emphasises responsibility, moderation and fairness strengthens public trust. Conversely, perceptions of excess or privilege can erode that trust rapidly.

For this reason it would be prudent for the relevant authorities to examine the present situation carefully and transparently. If the reports circulating are inaccurate or exaggerated, clarification should be provided. If they reflect genuine developments, appropriate explanations and policy alignment may be necessary.

Transparency remains the most effective antidote to suspicion.

There is also a broader governance issue that deserves attention: the clarity of public communication.

In recent months, citizens have observed multiple public statements from different officials on the same economic matters. While such engagement reflects openness, it can also lead to confusion when explanations differ or appear inconsistent.

In complex economic circumstances, clarity of communication becomes crucial. Markets, investors, public servants and ordinary citizens all rely on consistent signals from government.

It may therefore be useful for the Government to consider designating a clearly identified spokesperson or communication channel to explain major policy matters affecting the economy and public institutions. Such an approach would help ensure that the public receives coherent explanations rather than fragmented interpretations from multiple voices.

Effective communication is not merely a matter of public relations; it is an element of good governance.

Sri Lanka’s recovery process depends not only on economic measures but also on institutional credibility. Public institutions—including State banks—must remain aligned with the broader national ethos of responsibility, transparency and accountability.

The rebuilding of trust is a delicate undertaking. It requires discipline from leaders, fairness within institutions and clarity from those who communicate national policy.

In the end, the strength of a nation’s institutions is measured not by the privileges they enjoy, but by the confidence they inspire among the people they serve