Sri Lanka's largest bank, thegovernment-owned Bank of Ceylon, plans to adopt a more
aggressive and selective interest rate policy to reduce excess
liquidity, estimated at some 500 mln rupees, and enlarge the
country's export manufacturing base, the bank's new chairman
Nimal Sandaratne told Reuters in an interview.
    The bank aims to reduce terms for prime customers and is
holding talks with the Export Development Board on details to
be announced later, he said.
    Sandaratne was head of research at the Central Bank of
Ceylon, the nation's central bank, until January.
    A Swiss-based non-governmental group, which Sandaratne
declined to identify, has agreed in principal to guarantee
export credits, he said, but refused to elaborate further.
    The bank may also consider more actively participating in
the foreign exchange markets in light of its substantial
non-resident foreign currency holdings of about 473 mln rupees,
or about 70 pct of the total market, he said.
    Sandaratne said the bank may sell 60 pct of its shares in
its wholly-owned subsidiary, Merchant Bank of Sri Lanka Ltd.
    The Asian Development Bank and a foreign bank operating
here have already expressed interests in acquiring a stake in
MBSL, Sandaratne said.
    He tentatively estimated the Bank of Ceylon's net profits
for calendar 1986 at 163 mln rupees up from 133 mln the
previous year. The increase was eroded by increased provisions
for bad debts, he said. About 50 mln was written off and 17 mln
allotted for general provisions, he added.
 REUTER
