aim of making large profit? by finan­ BEGINNING AND 25 YEARS OF PROGRESS cing big industry". PEOPLE'S BANK BEGINNINGS AND 25 YEARS OF PROGRESS Clarence Fernando The Commission also noted that the Bank had not given any financial or other assistance to any approved Mr Clarence Fernando was a former Editor, Ceylon Daily News and Reuters Correspondent in Sri Lanka and for several decades has been a regular commentator on Sri Lankan events. society or cultivation committee during the period under review. In­ deed no society had been approved by The People's Bank, which began clusion (para 203) was "The People's formal order of the Minister to receive bi siness in unpretentious "hole-i--the Bank has carried out the intention of such assistance under the provisions of wall" offices in the Y.M.B.A. building the framers of the Act that the com­ the Act, nor had any assistance been and in Duke Street in Colombo's Fort mercial business of the Bankshouldbe rendered by the Bank to cultivation 25 years ago, can pat itself on its back used as a source for financing the committees, according to the evidence modestly on the giant strides it has co-operative sector". placed before the Commission by taken to become the largest and most officers of the Bank. influential bank in the Island handling However, the general conclusion over 60 percent of all Sri Lanka's the Commission reached on an overall "To that extent at least, it must be commercial bank customers including review of the position on its first term held that the Bank has failed to carry peasants, workers, industrialists,, pri­ of reference, that is the extent to out in full the purposes as set out in vate and public organisations, coope­ which the Bank has, during its first Section 4 of the Act, ie. to provide ratives and state corporations. four years, carried out or failed to financial and other assistance to co­ carry out the purposes for which it has operative societies so as to develop Today from its elegant 15-storeyed been established- was:"While the ex­ the co-operative movement in Ceylon; building on the banks of the Beira tent to which the purposes of the to extend rural facilities in rural areas, Lake in Sir Ch'ttampalam Gardiner People's Bank cannot be determined and, in particular, furnish financial and" Mawatha, which puts to shame some with any mathematical exactness, in other assistance to approved societies, of the high-rise monstrosities that are the first two years it is apparent that cultivation committees, and other mushrooming around it, the People's they were enthusiastically borne in persons engaged in, or intending to Bank takes its business to the people mind by the Board of Directors and engage in a small-scale agricultural, in all parts of the country through a the General Manager, but thereafter industrial or business undertaking in network of 300 bank branches, and in the process of expansion they such areas; and generally to promote over 900 branches of rural banks, the tended to be lost sight of, and the the economic development of rural largest network operated by £ny bank powers conferred on the Bank to areas". in the country. transact commercial banking business in order to carry out the purposes The People's Bank ' commenced Of course, the trek to the Bank's became the dominant objective rather operations in July 1961. It "'as Headquarters building-in Sir Chittam- than the purposes in themselves. A <>st9bl;shed under the People's Bank palam Gardiner Mawatha in 1977 runs more balanced view of the scope and Act No. 29 of 1961 by dissolving from the crowded offices in the powers of the Bank appears to be now assets and liabilities of the Co-opra- YMBA building and Duke Street prevalent". tive Federal Bank. through its offices in Rutnam's buil­ ding in Union Place from 1962 and the The Commission also made the Conception of the Bank G.C.S.U. building in Sir Chittampalam point that in the second Annual Re­ Befo'e '">ne goes further to talk Gardienr Mawatha from 1965. The port of the Directors for the year about the new bank, it behoves one to trek has been long and arduous for, in ending 30 September, 1963, it was ask why the Co-operative Federal the formative years, the Bank had to reported that small industries, Bank was liquidated. go through a scorching purgatory of especially those that were just begin­ Philip Gunawardena the MEP fire when it had to face a Public ning to find their feet, were given faci­ leader, who was Minister of Agricul­ Commission of Inquiry, appointed by lities, having in mind the role they had ture in the cabinet'of Prime Minister Governor-General, William Gopallawa to play in the economy. It will be Solomn Dias Bandaranaike, provides in 1965, on the working and adminis­ observed • that from the latter half of the answer to this question in the draft tration of the Bank in its first four 1963, this objective seems to have Co-operative Development Bank Bill, years. The Commissioner's first con­ been displaced by the more ambitious which he presented to the government 28. ECONOMIC REVIEW JUNE/JULY, 1986. in April, 1959. produce, -for consumption expenditure I would therefore wish to see that this Commenting on that draft Bill he between harvests or for any other bank is so reconstituted as to be an makes these points: purposes, he was compelled to place efficient institution not only to himself at the tender mercies of attract deposits but also to seve their "One of the first and most impor­ greedy landlords, boutique keepers credit requirements. If you agree that tant problems which engaged my and professional money lenders. the Co-operative banking system needs attention when I took charge of the re-vitalization, officials of the Central Ministry of Agriculture was the prob­ It also showed that unless the Bank can meet officials of your lem of rural credit. peasant could be released from the Ministry to draw up the constitution clutches of these exploiters, all for a new bank to take over the Co­ schemes for village uplift and all plans operative Federal Bank and the Co- It was clear to me that from the for agricultural development were poperative Provincial and District outset that oroHuctivity of village doomed to failure. Banks". agriculture could never be substan­ tially increased unless we provided The experience of Japan and India In October 1956 the officials of *he adequate credit facilities in the rural had shown that the credit needs of Central Bank and the Ministry jointly areas. No purpose was served by rural farmers could best be met prepared a Memorandun setting out advisina the villane farmer to apply through a strong and efficient co-ope­ the proposed constitution of the new more liberal doses of fertilizer or to rative credit movement to make it Co-operative Bank together with its purchase improved agricultural imple­ H both efficient and effective. objects, powers and functions and in ments if we o not a* th° same time October 1957 it was considered by the provide him with the means with Which to do it. The proposed new islandwide net­ Cabinet and unanimously approved. A work of multi-purpose co-operatives, point of much significance is that the one of which was eventually to be Central Bank, in this Memorandun ore- The Ministry carried out a number established in every village of the sented to the Cabinet, had strongly of studies on the rural credit problem. Island, would provide a firm "foun­ urged that the new Bank should be a Another study was the survey of Rural dation" for the new cooperative "mixed Bank", which would under­ Indebtedness carried out at the re­ credit structure.At its apex had to be take "not only purely cooperative quest of the Ministry of Agriculture a strong and efficient new Co-opera­ banking functions but also the more bv the Department of Census and tive Bank. profitable functions of a commercial Statistics: 1 bank". It is for the purpose of establishing This survey revealed: But it was from around this stane such a Bank that the Co-operative (1) That fully 54 percent of all that the draft proposals for the setting Development Bank Bill, placed before up of the new Co-operative Develop­ village families were in debt; the cabinet in 1959, had been drafted. (2) that the total debts of the rural ment Bank ran into stiff opposition ' from the Finance Ministry, Lands population amounted to over The Central Bank working quite Ministry, and by sections of the press. Rs 500 million. indepedently of the Ministry of Agri­ The survey also revealed the start­ culture had come to this same con­ The Finance M:ni«ter took up the ling fact that of this debt only 2.6 per­ clusion, namely that the existing co­ position that the provision of credit cent was due to the aovernment anH operative credit organs in Ceylon were was his function and not the function 3,9 percent to the co-operative socie­ inefficient and inadequate and that of the Ministry of Agriculture, that the ties sponsored by the government. they should be completely reconsti­ establishment of a Co-operative De­ The remaining Heb+s were due to tuted. In fact on 29 May, 1956, the velopment Bank is totally unnecessary; private persons, the majoritv of whom Governor of the and that all the credit needs of the were landlords, boutique keeprs, itine­ rural .sector c»n be met adeqMaHy rant traders and prof»ss;onal money Governor of the Central Bank, Sir hy existing institutions like the Agri­ lenders.