The main income generation activity of the Bank is its lending operation. It has employed the capital funds of its shareholders as well as deposits mobilized from its depositors to engage in this exercise.

Therefore, it has cast a considerable responsibility on the Board of Directors of the Bank to employ these funds with the highest degree of prudence to ensure the safety of the funds and maximum profitability to the Bank.

The Board Credit Committee (BCC) is established to formulate the policies, strategies, and directions in the Bank’s credit operation and be the forerunner to the Board of Directors for it to take the necessary strategic decisions.

The membership of the Board Credit Committee comprised of five (05) Non- Executive Directors who meet at least 10 times annually to deliberate on issues under its purview:

Composition of the BCC

During the year 2022, the following Directors served on the BCC:

• Mr Prasanna Premaratna - Chairman (BCC), Independent, Non- Executive Director
• Mr Thusantha Wijemanna - Independent, Non-Executive Director
• Mr Naveendra Sooriyarachchi - Non- Independent, Non-Executive Director
• Mr B.R.A.Bandara – Non Independent, Non Executive Director (appointed to the BCC w.e.f. 24.06.2022)
• Mr Romani De Silva - Non – Independent , Non -Executive Director (appointed to the BCC w.e.f 24.06.2022)

Ms.Dinithi Ratnayake , Chairperson served as a member of the BCC till 24.06.2022. Mr.Lionel Thilakarathne Non-Independent , Non-Executive Director served as a member of the BCC until he retired from the Board on 30.05.2022, and Mr.Prabhash Subasinghe Non-Independent , Non-Executive Director served as a member of the BCC until he resigned from the Committee w.e.f.21.01.2022. We take this opportunity to place on record the committees appreciation for the valuable services rendered by Ms.Dinithi Ratnayake, Mr.S.Lionel Thilakarathne and Mr.Prabhash Subasinghe as members of the committee.

Company Secretary is functioning as the Secretary of the Committee. Chief Executive Officer, Deputy Chief Executive Officer, Head of Credit, Head of Collection and Recoveries, shall attend the Meetings and Chief Risk Officer, Head of Co-operative Development, Head of Legal, Head of SME, Deputy Head of Credit, Head of Co-operative Credit Assessment Unit shall attend the Meetings by invitation to assist them and to provide expert knowledge on different areas of issues.

The main areas falling under the purview of the Board Credit Committee are as follows and it is empowered to:

• Formulate the Credit Policy and Recovery Policy of the Bank and review and recommend timely changes for the approval of the Board of Directors
• Monitor the credit growth/ performance of the Bank vis-à-vis the annual budget forecasts and the previous year performance
• Analytically appraise credit proposals and recommend to the Board of Directors for approval
• Evaluate the market potential due to the prevailing economic crisis in the country together with inherent risks attached and provide appropriate guidelines
• Monitor the interest rate behavior the market and the internal and external factors affecting such fluctuations
• Monitor the portfolio mix to ensure sectoral exposure, collateral diversification, term diversification, and lending to priority sectors
• Provide relevant directions to ensure adherence to statutory and regulatory compliance requirements
• Ascertain the quality of the credit portfolio by monitoring credit collections and delinquent loan recoveries
• Evaluate and afford interest concessions where appropriate, for full and final settlements of hard-core loans and write-offs of loan capitals whenever it deems necessary and recommend to the Board of Directors
• Apart from the aforesaid, the Board Credit Committee has the prerogative to call for any other information or special report relating to the Credit Operation of the Bank, if it deems necessary for its scrutiny

Committee Meetings of BCC

The Committee met Thirteen (13) times, during the year under review to discuss the normal scope of work and the proceedings of the Committee meetings have been reported to the Board of Directors.

During the meetings held in 2022 the Committee carried out following activities:

• Reviewed and agreed on the revised Terms of Reference of the Committee and recommended for approval of the Board of Directors
• Reviewed and approved credit proposals comprising new facilities, annual review of revolving facilities, changes to terms and conditions of facilities already approved and interest rate concessions given to past due facilities
• Reviewed the progress of Recovery Department on the implementation of action plans approved by Board Credit Committee on handling of non- performing loan facilities
• Reviewed the Top 20 Watch List Customers and Top 20 NPL Customers List and advised the Management on recoveries
• Reviewed performance of pawning, Activation of Inactivate Accounts, SME & Business Banking Pipelines
• Reviewed the Top 25 loan customer details and advised the Management
• Reviewed ALCO meeting minutes and giving special focus on the changes in the lending rates.
• Establishment of the Remedial Management and Revival Unit within the bank and approved the process and the procedure manual of the unit and reviewed the progress of that unit on a monthly basis.
• Reviewed the proposed transfer pricing policy and recommended improvements.
• Reviewed the Banks tariff structure
• Quarterly review the Auction properties but possession to be taken and advised the management on the steps to be taken.
• Strengthen the Screening process of accepting the guarantors especially for the personal loans.
• Revised existing supply chain projects and advised for the necessary improvement.
• Reviewed the impact of tax increase in the Bank’s loan portfolio.

For and on behalf of the Board Credit Committee,

Prasanna Premaratna
Chairman
Board Credit Committee

12 April 2023
Colombo, Sri Lanka