NDB Bank’s customer-centric, tech-driven strategy for stability and growth

Dimantha Seneviratne, Chief Executive Officer of National Development Bank PLC, discusses the economic challenges and their impact on businesses and the banking sector as well as NDB Bank’s customer-centric, tech-driven strategy toward becoming a catalyst for stability and growth.

For context for this interview, as a leading bank in Sri Lanka, what is the bank's outlook for the economy?

At this juncture, the outlook is dependent on several factors, primarily the level of assistance we would receive from the IMF and the timing. The assistance is imperative to build the confidence of the external sectors and counterparties in restarting credit facilities to Sri Lanka which is a prerequisite for international trade. While the economy has posted a strong and consistent export performance, it is noted according to data published by CBSL, that the growth is more price-driven than volume driven. Without an increase in volume, most entities would not be able to sustain operations as the volumes might get concentrated around a few players. The need for fiscal consolidation and an increase in government revenue will be a key pillar in getting the economy back on the rails. However, lower business volumes driven by high-interest rates and inflation will make this a tough balancing act, to stimulate the economy whilst keeping inflation at bay. We believe the economy will shrink further before it starts growing. The timing of this is heavily dependent on the political will to make the tough decisions.

How do you see the unfolding economic crisis impacting the banking sector? There are challenges around maintaining adequate capital buffers and liquidity, containing NPLs and generating growth amidst rising inflation and a falling currency. What are some of the factors that will shape the banking sector in the months (or year or two) ahead?

The banking sector is the nerve centre of the economy. Whilst every sector is impacted by the current situation, the banking sector is burdened with the disproportionate responsibility to ensure that the economy keeps ticking over and its eventual recovery. It’s a very challenging situation, as mentioned above, a very tough balancing act to execute. The Banking sector had been building capital reserves, called the capital conservation buffer, just for times like these. The CBSL has now allowed banks to draw down on these buffers up to 2.50% should the need arise. This will help the sector manage the impact on capital mainly stemming from the higher impairment provisions the Banks would have to make for ISBs and credit risk. The higher interest rates driven by inflationary pressures will put pressure on smaller companies which would require help in restructuring their debt to more sustainable levels. As the economy settles at a lower level determined by its balance of payment position, the availability of capital will determine how much the banking sector can grow.

I would say that the sector will seek to consolidate its position in the near term rather than seek growth. Sustaining and assisting its customers would take centre stage. At the same time steps to conserve and generate equity internally would be critical. Hence increase in efficiencies and cost management would be an important aspect of the sector. Increased digitisation internally and externally, internal organisational restructuring newer ways of working will see a more agile and lean banking sector in future.

How is NDB Bank positioned to confront the challenges and generate growth?

NDB is well positioned to meet the challenges of the situation driven by its V25 (Vision 2025) strategy which becomes more and more relevant each day as the principles are based on customer centricity. The Bank's strategy largely focuses on the economy's growth sectors and is disproportionately skewed toward the deployment of technology in all aspects of its operations. The strengthening and realignment of the organisation structures make it more efficient for NDB to make technology accessible to customers across its demographies.

As a leading private sector banking group with roots in development banking, what is your strategy around providing stability and growth opportunities for the economy?

Our development banking heritage actually drives our customer engagements. We have been instrumental in sustaining and developing key agricultural sectors such as the paddy value chain, tea growers etc and also on smart-agri initiatives. Our support to ensure that the essential commodities keep flowing into the country helps maintain economic and social stability. We have and are supporting renewable energy initiatives as see this as a key economic imperative for the future resilience of the economy. The drive to increase financial inclusion through our banking on women, Jayagamu Sri Lanka and digital initiatives continue unabated. ESG is an important aspect of everything we do and is not confined to customer engagement. It is a primary consideration when it comes to driving change in the operations of the Bank as well.

What is your strategy to deploy technology to reimagine the bank and secure the future for its clients?

The Bank's approach to technology is driven by client needs rather than what we think the client might need. This has been the formula for the outstanding success we have witnessed in our Mobile Banking propositions for both individual clients and SME clients. The NEOS Biz solution that was introduced recently caters to the needs of Small and Medium corporate the only such App introduced for Business Banking clients. The entrepreneurs in these companies are constantly on the move as they build their businesses, NDB enables them to conduct their business from where ever they are. Once our Core Banking upgrade is completed, the same enhanced convenience will be offered to our large corporates as well. The vKYC solution we launched has helped clients in different parts of the world seamlessly open accounts with us without coming to a branch, which was a great convenience at a time when travel is not what it used to be. Our embracing of technology is not limited to customer touchpoints but is applicable to back office operations including RPAs (Robotic Process Automation), workflows, BI tools etc which has helped improve efficiency and hence cost tremendously.

There are several other initiatives in the pipeline that would be launched at the appropriate time.?

This interview originally appeared in Echelon and Economy Next.