{"id":248184,"date":"2026-07-24T15:50:15","date_gmt":"2026-07-24T10:20:15","guid":{"rendered":"https:\/\/www.colombotelegraph.com\/?p=248184"},"modified":"2026-07-24T15:50:15","modified_gmt":"2026-07-24T10:20:15","slug":"have-our-state-banks-lost-their-original-purpose-a-call-to-restore-their-developmental-mission","status":"publish","type":"post","link":"https:\/\/www.colombotelegraph.com\/index.php\/have-our-state-banks-lost-their-original-purpose-a-call-to-restore-their-developmental-mission\/","title":{"rendered":"Have Our State Banks Lost Their Original Purpose? A Call to Restore Their Developmental Mission"},"content":{"rendered":"

By Rusiripala Tennakoon<\/a> –<\/strong><\/p>\n

\"\"

Rusiripala Tennakoon<\/p><\/div>\n

There are occasions when a nation must pause and examine whether its public institutions continue to serve the purposes for which they were originally created. This is particularly true of Sri Lanka\u2019s two principal State-owned banks\u2014the Bank of Ceylon and the People\u2019s Bank. Their impressive financial performance in recent years is undoubtedly commendable. Yet it also invites a more fundamental question: have these institutions gradually drifted away from the developmental mission that inspired their establishment?<\/p>\n

The Bank of Ceylon and the People\u2019s Bank were not established merely to function as commercial banks. They were the products of remarkable foresight on the part of our national leaders, who understood that economic development could not be left entirely to market forces. They envisioned banking institutions that would mobilise the nation\u2019s savings and channel them towards agriculture, industry, cooperatives, rural development, and other productive sectors that were essential to building an independent national economy.<\/p>\n

That vision was translated into reality through a series of innovative initiatives. Agricultural Service Centres, cooperative credit schemes, rural banking networks, concessionary lending, and specialised financial assistance to farmers, fishermen, small entrepreneurs, and rural industries became distinctive features of State banking. These programmes were not acts of charity. They were investments in national productivity and social progress. They enabled thousands of families to improve their livelihoods while contributing to the country\u2019s economic growth.<\/p>\n

The People\u2019s Bank, in particular, was created with a close and enduring relationship with the cooperative movement. The cooperative sector was expected to become a powerful partner in rural development, enabling producers and consumers to work together for mutual benefit. Likewise, the Agricultural Service Centres established under the Bank of Ceylon became important centres for assisting the farming community by providing financial services alongside agricultural support.<\/p>\n

Those institutions represented a philosophy of development that recognised the importance of decentralised decision-making. Their strength lay in their ability to reach almost every village, understand local conditions, and respond quickly to the needs of farmers and small producers. Development was brought to the people instead of expecting the people to come to distant administrative centres.<\/p>\n

Today, however, one cannot fail to observe that both State banks appear to have increasingly joined the race with private commercial banks, measuring success primarily through profitability, market share, and commercial expansion. There is nothing inherently wrong with profitability. Indeed, a State-owned bank must remain financially strong if it is to fulfil its responsibilities effectively. But profitability should be the means to achieve national development, not the ultimate purpose of the institution.<\/p>\n

The gradual shift in priorities has inevitably raised important questions. The cooperative movement no longer appears to occupy the central position it once enjoyed in the activities of the People\u2019s Bank. Many Agricultural Service Centres associated with the Bank of Ceylon, once symbols of agricultural development, are now identified more readily with pawning operations than with services that directly strengthen agricultural production. Whether this transformation has occurred consciously or gradually over time, it deserves careful national reflection.<\/p>\n

If institutions originally established to finance production increasingly depend upon lending against pledged jewellery, we must ask ourselves what message this conveys about the direction of our economy. Are we encouraging productive investment, or are we merely responding to financial distress?<\/p>\n

These questions assume even greater significance when viewed against the difficulties presently encountered by the Government in purchasing paddy, collecting agricultural produce, stabilising prices, and ensuring efficient distribution. These challenges dominate public discussion today. Yet they also remind us that Sri Lanka once possessed an institutional framework capable of supporting many of these very functions.<\/p>\n

The nationwide network of State banks, Agricultural Service Centres, and cooperative societies constituted an integrated system that connected producers directly with financial services, storage, marketing, and distribution. Because these institutions operated within relatively small communities, they were able to respond efficiently to local needs without the administrative complexities associated with highly centralised systems.<\/p>\n

Today, the Government often finds itself attempting to perform these tasks through large-scale administrative mechanisms that inevitably encounter logistical difficulties, delays, and high operational costs. Rather than constructing entirely new systems, would it not be wiser to revitalise the institutions that have already demonstrated their value?<\/p>\n

If the Bank of Ceylon were once again to strengthen its Agricultural Service Centres as genuine centres of agricultural development, and if the People\u2019s Bank were to renew its historic partnership with the cooperative movement, much of the burden presently borne by the Government could be shared by institutions specifically created for that purpose.<\/p>\n

The cooperative movement, with its extensive grassroots network extending throughout the country, possesses enormous potential to undertake procurement, storage, distribution, rural credit, and community-based marketing. Operating within smaller geographical areas, cooperative societies are often better placed to understand local conditions and respond more efficiently than large, centrally administered organisations. Their revival would not merely honour history; it would contribute directly to national food security, rural prosperity, and economic resilience.<\/p>\n

This broader perspective should also influence the manner in which the performance of State-owned banks is assessed. Every year, considerable attention is devoted to the impressive profits reported in their annual reports. Such achievements certainly deserve recognition. However, financial performance alone should never become the exclusive measure of success.<\/p>\n

The Treasury, as the representative of the people and the principal shareholder of these institutions, should require every State bank to demonstrate the extent of its contribution to national development. Alongside profits, annual reports should indicate how much credit has been extended to agriculture, how many small and medium enterprises have been supported, what assistance has been provided to the cooperative movement, how rural industries have benefited, how many young entrepreneurs have been assisted, and what measurable contribution has been made to employment generation and domestic production.<\/p>\n

These indicators would provide a far more complete picture of the true performance of a State-owned bank. After all, the people established these institutions not merely to maximise commercial returns but to maximise national progress.<\/p>\n

Our forefathers understood this truth with remarkable clarity. They created State banks not simply to compete with private banks but to perform those developmental functions that private commercial banking, by its very nature, could not always undertake. That original vision remains as relevant today as it was when these institutions first opened their doors.<\/p>\n

The time has therefore come to redefine the meaning of success for our State-owned banks. They should continue to be profitable, professionally managed, and financially resilient. But they should also be required to demonstrate, with equal clarity, the contribution they make towards achieving the nation\u2019s broader economic and social objectives.<\/p>\n

The true success of a State-owned bank lies not merely in the dividends it pays to the Treasury but also in the dividends it pays to the nation through productive investment, agricultural advancement, cooperative development, rural prosperity, employment creation, and inclusive economic growth.<\/p>\n

If Sri Lanka succeeds in restoring this balance between commercial excellence and public purpose, we will not simply strengthen two great financial institutions. We will revive the visionary ideals upon which they were founded and place them once again at the forefront of national development. That would be a tribute worthy of the statesmen who conceived them and a lasting investment in the country\u2019s future.<\/p>\n","protected":false},"excerpt":{"rendered":"

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