The Power toSimplify

National Development Bank PLC
Annual Report 2023

“Out of clutter, find simplicity.
From discord, find harmony.
In the middle of difficulty lies opportunity.”
Albert Einstein

Scan the QR code toread this report online

The Power to Simplify
In times of complexity, it’s only natural to seek life, simplified.
At NDB, we understand what our stakeholders need - and that’s why,amidst the clutter and chaos of today, we continuously strive towards
simplifying every aspect of their lives by empowering their futuresand integrating convenience and accessibility into their world.
Over the years, we have honed and crafted our skills and capabilities
to nurture a space for prosperity even through adversity. The year
under review was no exception, and this report outlines how wewere uniquely positioned to offer our stakeholders a sense of
tranquility and peace of mind in the midst of uncertainty and change.
Today, we extend the assurance of simplified, sustainable growthacross the vast network of people and partners that fall within
our sphere of impact - offering them the freedom to explore new
possibilities and map out the next stage in their journey of success.
NDB. Discover the Power to Simplify.
Ikebana is a centuries-old Japanese tradition that demonstrates thevalue of simplicity, balance and respect for nature. It loosely translates
to “making flowers come alive”, representing an innate need to seek
positivity, harmony, and growth in the midst of imperfection.

The Powerto Simplify…
Transactions…
Swiftly open a NDB account fromanywhere in the world via NDB NEOS
powered by virtual KYC. This convenient,secure solution reduces the environmental
footprint owing to less emissions.

Systems…
NDB utilises the latest version of the core banking platform,
which has powered the Bank’s potential for greater
digitalisation of its processes and swifter services to customers.
The significance lies in the Bank’s ability to generateconsiderable efficiencies across the organisation and drive
marked improvements in decision-making capabilities.

Processes…
The Bank continues to deploy Robotic Process Automation(RPA) and workflow solutions. At present, approximately
90 mundane and resource-intensive internal processes havebeen automated, translating into faster turnaround times
for customers, while saving time for relationship managers
to invest in deeper, meaningful customer relationships.

…Financing
NDB has served as a pioneering lead syndicate facility
arranger for large projects, thereby simplifying
the sourcing of funds among customers. The Bank
has extended its facilitation beyond immediatecustomers in order to serve their customers.

…Businesses
NEOSBIZ for SMEs is the first of its kind in Sri Lanka andoffers a range of features originally considered unattainable
on a digital platform. The convenience and accessibility ofthe mobile app eliminates the need for fixed infrastructure,
thereby saving costs and valuable time that can bechannelled into business development.

…Lives�

NDB has integrated some distinct
product features/ propositions
that offer customers simplicity
and convenience; In 2023, 40%of total leasing facilities wereapproved within 1 day�Credit card installment payment plans are in effect, so purchasing is simplified�

Integrated e-statements for a customer’s total portfolio with the Bank, thereby
replacing multiple paper statements with convenience�Customers can deposit money into the cash recycle machines without the debitcard in hand�

Customers can obtain a debit card instantly over the counter from any branch of
the Bank, regardless of the location at which the account was opened

CONTENTS

Overview
Our Approach to Reporting 6
Awards and Recognition 9
About Us 10
Our Stands 11
Performance Highlights 12
Value Creation Highlights 13
Annual Report of the Board of
Directors on the Affairs of the
National Development Bank PLC 14

Leadership
Reflections from the Chair,
Board of Directors 16
Chief Executive Officer’s Review 18
Board of Directors 22
The Leadership Team 30
Senior Management 33
Group Subsidiary Leadership Team 37

Operating Landscape &Strategy
Operating Environment 40
A Futuristic and Agile Strategy 43
Delivering Our Strategy 44
Stakeholder Engagement 47
Material Matters 50
Value Transformation Process 52

16

Reflections fromthe Chair,
Board of Directors

18

Chief Executive
Officer’s
Review

22 50 52
Board ofDirectors

Material
Matters

Value
Transformation
Process

Management Discussion& Analysis

Financial Statements

Financial Capital 56
Performance of Business Lines 60
Performance ofGroup Companies 71
Digital Capital 75
Manufactured Capital 78
Human Capital 80
Intellectual Capital 88
Social and Relationship Capital 90
Natural Capital 97
Our ESG Agenda 102
Way Forward/
Prepared for the Road Ahead 104
Independent Assurance Report on
Integrated Reporting 105
Independent Assurance Report on
Sustainability Reporting 106

Table of Contents 164

Risk Management &Corporate GovernanceRisk Management Overview 108
Corporate Governance 110
Compliance Disclosures 128
Directors’ Interests inContracts with the
National Development Bank PLC 137
Nominations and GovernanceCommittee Report 139
Human Resources andRemuneration Committee Reportv142
Integrated Risk Management
Committee Report 144
Audit Committee Report 147
Related Party Transactions Review
Committee Report 149
Strategic Issues Committee Report 151
Credit Committee Report 152
Digital Transformation
Committee Report 153
Discretionary and Capital
Expenditure Committee Report 155
Statement of Directors’ Responsibilities
for Financial Reporting 156
Directors’ Statement on Internal
Control over Financial Reporting 157
Responsibility Statement of the
Chief Executive Officer andVice President - Finance 159
Independent Assurance Report 160

56 110147
Capitals
ReportCorporate
Governance
Audit
Committee
ReportFinancial Calendar 2023/2024 163
Financial Performance 165
Independent Auditors’ Report 166
Statement of Profit or Loss 169
Statement of Comprehensive Income 170
Statement of Financial Position 171
Statement of Changes in Equity 172
Statement of Cash Flows 174
Notes to the Financial Statements 176
Compliance with Disclosure
Requirements of theCentral Bank of Sri Lanka 291

Supplementary Information
Key Events 295
Awards & Accolades 2023 296
Corporate Governance 298
Risk Management 337
Investor Relations 367
Branch Network 384
Network of Group Companies 387
Correspondent Relationships 387
GRI Content Index 388
SASB Indices 392
Glossary of Financial andBanking Terms 397
Notice of Meeting 403
Corporate Information 404
Form of Proxy 405

163
Financial
Performance

337
367

Risk
Management

Investor
RelationsMade initial steps towardpossible early adoption of
IFRS S1 and IFRS S2Our Approach
to Reporting

Adoption of SASB Standards- Industry Standard forInvestment Banking &Brokerage

Our Evolution in
Reporting

Adoption of the new GRI
Standards (2021)

Awards/ assessments to beheld during 2024

Having embarked on a journeyof integrated thinking andreporting as far back as in 2013,
National Development Bank
PLC continues to be a pioneer in
corporate reporting, continuouslyaligning its reporting practices toemerging global developments incorporate reporting to improve
the relevance, readability andcredibility of information. Whilst
bringing significant benefits
in terms of better resource
allocation, greater accountability
and enhanced shareholder
relations, our commitment
to reporting excellence also
continues to be recognised both
locally and internationally as
evidenced from the numerous
awards and accolades we havereceived over the years.
Our reporting journey thus far
has been marked by significant
improvements introduced year-onyear as depicted here. In an
ever- evolving operating context
with increasing complexities, wehave also been committed tomaking our banking solutions
simpler, which in turn is strongly
replicated in our reporting anddisclosures. Such simplicity in
our reporting has enabled thenumerous stakeholders to connect
with our Report, and thereby
connect with us more seamlessly.
National Development Bank PLC

External recognition Highlights

Strengthened disclosures on
Way Forward given external
turbulences

Towards
Simplicity
and Clarity

6

Reportingevolution

Obtained external assurance on
Integrated Reporting
Adoption of SASB Standards Industry Standard forCommercial Banks
Initial steps towards aligning with
the Task Force on Climate Related
Financial Disclosures (TCFD)

CA Sri Lanka - TAGS Awards
2022 Gold award winner - Private
Banks sector
CMA Excellence in
Integrated Reporting Awards
2022 - Best Integrated
Report - Banking Sector

CMA Excellence in Integrated
Reporting Awards 2020
Winner Ten Best Integrated Reports

Annual Report 2023

Best Integrated Report Banking Sector

CA Sri Lanka - TAGS Awards
2023 - Silver award winner Private Banks sector
Adoption of new GRI Standard:
GRI 207 Tax
Dedicated chapter on
Digital Capital

SAFA Best Presented Annual
Report Awards - Joint Winner –Integrated Reporting
CA Sri Lanka - 56th Annual
Report Awards - Gold Award Integrated Reporting:
Best Disclosure on CapitalManagement

Adoption of Gender Parity
Reporting Framework of
CA Sri Lanka
Inclusion of Quantitative
Disclosures on stakeholder
value creation

REPORT NAVIGATION GUIDEABOUT OUR 2023 INTEGRATED ANNUAL REPORTIn keeping with the principle of connectivityof information, we have used the following
navigation icons across the report to highlightthe interconnectivity of our value creation
process.

The Power to Simplify is our eleventh
Integrated Annual Report, and presents
a fair and comprehensive account of ourperformance, progress made towards thestrategic priorities and connectivity withstakeholders. 2023 was a year of recoveryof the Sri Lankan economy with many ofthe economic indicators improving post theeconomic crisis of 2022. This Report, among
other things focuses on the impactful role
played by us, in supporting this revival whilstdelivering value to all our stakeholders.
Salient features of the Report are as
follows. There is no material restatement of
information published in last year’s report.

Capitals

Reporting Boundaries

IMPROVEMENTS TO OUR 2023 REPORTThe Report covers the operations of National
Development Bank PLC (“NDB” or “the Bank”)
and its group companies (collectively referred
to as “the Group”). The financial information
presented in this Report represents
consolidated information unless otherwise
stated. The non-financial information relates
mostly to the Bank as it accounts for 99% of
the Group’s assets and revenue.

The seven Guiding Principles of theInternational <IR> Framework of the Value
Reporting Foundation underpin the preparationand presentation of our integrated report,
informing the content of the report and how
information is presented. We strive to improveon each of these principles each year andintroduced the following improvements in thisyear’s Report.

Enhanced Reporting
Reporting Period
The Group adopts an annual reporting
cycle for both its financial and sustainability
reporting and this Report builds on ourprevious Annual Report for the financial year
ended 31 December 2022. The Report covers
the period from 01 January to 31 December
2023 and includes material information up
to the date of Board approval on 20 February
2024.

Financial Capital

FC

Digital Capital

DC

Manufactured Capital

MC

Human Capital

HCIntellectual CapitalIC

Social and Relationship CapitalSC

Natural Capital

NC

Strategic Priorities

Strategic focus and future orientation

Customer Solutions

 Inclusion of a dedicated section “Prepared
for the Road Ahead”
 Forward looking statements found acrossthe Report are cross-referenced with forease of reference

Business Focus

Digital & Data as Transformers

Connectivity of information

 Use of navigation icons across the Report
to demonstrate inter-connectivity
between Strategy and Outcomes

Organisational Realignment

Materiality

Assurance
We adopt a combined assurance model inensuring the integrity and accuracy of ourreporting, which includes assurance fromour management, internal audit and external
auditors. Messrs. Ernst & Young provided
external assurance on our consolidated
financial statements and provided a limited
assurance on our Integrated Reporting
practices and GRI Reporting.
Our Approach to Reporting Linking of material matters to relevant GRI
and SASB indicator

Empowered Staff

Conciseness Improved conciseness with a greater
focus on materiality

Further References
Outlook and Way Forward

Reliability and completeness Initial steps towards aligning with IFRS
S1 and S2 sustainability related financial
disclosures

Page Reference

National Development Bank PLC

Annual Report 2023

7

REPORTING GUIDELINESFORWARD LOOKING STATEMENTS

Our reporting is fully compliant with all applicable regulations. We also endeavour to enhancesame with the adoption of voluntary best practice reporting frameworks. Credibility is establishedthrough both internal and external assurances. The full set of reporting guidelines adopted in the
preparation of this Report is as set out below.

Our Report includes forward-looking
statements, which discuss the Group’s futureorientation including strategic aspirations,
opportunities, risks and potential impacts on
the business model, performance and financial
stability. Forward looking statements arereferenced with the icon for ease of reference.
Forward looking statements are presented
throughout the report, particularly in thefollowing sections;

Reporting Frameworks and Guidelines
Strategic focus and future orientationy Sri Lanka Accounting Standards issued by
the Institute of Chartered Accountants of
Sri Lanka

Voluntaryy Integrated Reporting Framework of theValue Reporting Foundationy Directions issued by the Central Bank of
Sri Lanka on SLFRS 9y “Guidelines for Presentation of Annual
Reports” issued by the Institute ofChartered Accountants of Sri Lankay Relevant directions/ circulars issued onreporting formats by the Central Bank of
Sri Lankay Non-Financial Reporting Guideline
issued by the Institute of Chartered
Accountants of Sri Lankay Companies Act No. 7 of 2007 (as amended)y Global Reporting Initiative (GRI)
Standards - 2023

y Listing Rules of Colombo Stock Exchangey The Bank’s Internal Audit function
y Robust framework of internal controls
y Reporting to the Board Audit
Committee and Board of Directors

y Independent Auditors’ Report by Messrs.
Ernst and Young

Corporate Governancey Banking Act Direction No. 11 of 2007(as amended)

16

Chief Executive Officer’s Review

18

Our Operating Environment

40

A Futuristic and Agile Strategy

43y Gender Parity Reporting Framework of
the Institute of Chartered Accountants of
Sri Lanka

Our ESG Agenda

102

Risk Management337

y Sustainable Development Goals (SDGs)

Way Forward/ Prepared for theRoad Ahead

104

Internal Assurancey Reporting to the Board Integrated Risk
Management Committee and Board of
Directors and related reviews

y Environmental and Social Management
System (ESMS)y Listing Rules Requirements of the Colombo
Stock Exchange, including the new
Corporate Governance Rules issued in 2023
Voluntaryy Code of Best Practice on Corporate
Governance issued by the Institute ofChartered Accountants of Sri Lanka (2023)
Internal Assurancey Robust governance frameworks in fullalignment with regulatory requirements

National Development Bank PLC

Reflections from the Chair,
Board of Directors

y Assessment of non-financial informationby the Corporate Sustainability function

Regulatoryy Factual Finding Report submitted by
Messrs. Ernst and Young in relation
to compliance with the Banking
Act Direction No. 11 of 2007 on
Corporate Governance (as amended)11

y Guide on communicating sustainability
issued by the Colombo Stock Exchange

External Assurance

External Assurance

Our Stands

y Sustainability Accounting Standards
Board (SASB) Standards

Internal Assurance

8

Integrated report

External Assurancey Independent Assurance on Integrated
Reporting by Messrs. Ernst and Youngy Independent Assurance on GRI
Reporting by Messrs. Ernst and YoungFEEDBACK
We welcome your suggestions andcomments on further improving
the readability and relevance of ourReport. Kindly direct your feedback toVice President - Company Secretary
and/or Vice President - Finance(page 404).

Annual Report 2023

Our Approach to Reporting

Forward-looking statements and forecasts
pertaining to the Group’s financial performance,
position and operations involve an elementof uncertainty given exposure to external
conditions; this could lead to actual results
differing from the stated projections. These
forward-looking statements have not beenreviewed by the Group’s auditor.

BOARD RESPONSIBILITY STATEMENTNDB’s Board of Directors is ultimately
responsible for ensuring the integrity of thisReport. We hereby confirm that the 2023
Report addresses all relevant material mattersand fairly represents the Group’s integrated
performance. The Board also confirms that
the Report has been prepared in accordancewith the requirements of the <IR> Framework.
The Report is approved and authorised for
publication.
Signed on behalf of the Board,

Ms. Shehani Ranasinghe
Company Secretary
20 February 2024

Awards and Recognition

The Per fec t Standard
Our accolades span wide-ranging achievements related todigitisation, service excellence, a rewarding and engaging
workplace, corporate social responsibility and corporate
reporting to name a few, thereby affirming the organisation’s
positive impact across its diverse stakeholder groups.
This is reflected in the NDB Group collectively winningover 90 awards during 2023.
We are proud to announce that NDB was decorated as theMost Awarded Corporate in Sri Lanka 2022 by LMD for thesecond consecutive year – a clear indicator of the Bank’s
commitment to continuous improvement, and its holistic
approach towards achieving excellence in every sphere.

Refer pages 296-297 for full list of awards.

National Development Bank PLC

Annual Report 2023

9About Us

NDB, The Future is Banking on Us
Established in 1979 as one of the two pioneering development banks in the country,
NDB has over the years gradually expanded its value proposition and is today aleading listed commercial bank in Sri Lanka. NDB together with its subsidiaries
engaged in capital market services collectively offer the entire gamut of integrated
financial solutions to retail, SME and corporate customers across the island.
The Bank’s journey of growth has been underpinned by an ambitious strategy
revolving around customer centricity, digitalisation, diversification and operational
excellence that continues to create sustainable value to all its multiple stakeholders.

Our Value Proposition
Shareholders

Customers

Employees

Suppliers andBusiness Partners

Government andRegulators

Consistent returns andstable growth

Customer centric,
innovative financial
solutions

A dynamic, inspiringand purposeful place
to work

Strong and reliable
partnerships thatgenerate mutual value

Stability of the financial
sector and support
to national economic
growthCommunity
empowerment throughfinancial inclusion

Group Net Asset
Value per Share

Consistently highcustomer satisfaction rate

A growing network of over
300 registered suppliers

Capital ratios well above
statutory requirements

LKR 186.43

4.9/5.0

EDGE Certification forwork place gender equity
since 2018

Strong presence outside
the Western Province
with 13 branches locatedwithin the economicallydisadvantaged areas

Contribution to fiscal
revenue via tax payments

Community

There were no significant changes made to the operations of the Bank during the year.

A unique financial services power house
The NDB Group is iconic for the one-stop financial services destination it offers through the Bank and the collective of subsidiary companies.
Whilst the Bank offers full-spectrum universal banking, the full suite of capital market services are offered by the capital market cluster groupcompanies as follows.
Group Company

Relationship with NDBCompany Profile

Industry Standing

NDB Capital
Holdings Limited

Subsidiary with 99.9%
shareholding

Full service investmentbanking group

Leader in the regional capital markets

NDB Investment
Bank Limited

Subsidiary with 99.9%
shareholding

A Corporate Finance Advisor
licensed by Securities andExchange Commission of
Sri Lanka

Provide services in debt and equity structuring anddistribution, M&A and corporate advisory.
The only Financial Institution in Sri Lanka to win theprestigious Euromoney Award for 12 consecutive
years as ”Sri Lanka’s Best Investment Bank”

NDB WealthManagement
Limited

Subsidiary with 99.9%
shareholding

Wealth Management solutions
provider, offering new andinnovative investment options toinvestors

Sri Lanka’s largest private sector fundmanagement company with Assets underManagement exceeding LKR 300 Bn

NDB Securities(Pvt) Limited

Subsidiary with 99.9%
shareholding

A leading stock-broker

Commands a healthy market share with a sticky
retail following

NDB Capital
Limited(Bangladesh)

Subsidiary with direct holdingof 41.8% and indirect holdingof 42.4% through NDB
Investment Bank Limited

Full-fledged merchant bank

One of the leading investment banks in
Bangladesh

NDB ZephyrPartners Limited(Mauritius)

Subsidiary with 60.0%
shareholding

NDB Zephyr Partners Limited
Manages a pioneering private equity fund
(Mauritius) is a leading Private
dedicated to investing in small and mid-sized
Equity Fund Manager in Sri Lanka businesses seeking expansion capital in Sri Lanka.
The Emerald Sri Lanka Fund investors consists ofleading global DFIs including IFC, DEG and FMO

Additionally, the Group comprises a property management arm
Development
Holdings(Pvt) Limited

10

National Development Bank PLC

Subsidiary with 58.7%
shareholding

Annual Report 2023

Property management

State of the art high rise corporate premises withmodern facilities in the heart of Colombo

Our Stands
As a leading financial institution in
the country, we are conscious of thesignificant impact we can have on the
future trajectory of our economy.
We are therefore taking a stand on
several key opportunities we thinkmatter the most and taking tangible
action to capitalise on them thereby
propel growth and prosperity.

Women Empowerment

Digital DrivePowering SMEs and exports
SMEs and exporters have long been abeneficiary of NDB’s patronage. As the country
emerges from a deep economic crisis including
a foreign exchange crisis, the significance indriving innovative, competitive and value addedexports have been more pronounced thanever. We are committed to delivering curated
support to our SME clients including exporters
harnessing multiple strengths that the Bank
enjoys over decades in this sphere such as close
ties with international lending agencies forconcessionary rated funds, collaborations withstate and private sector experts for knowledge
and technical-know-how sharing and opening
up market opportunities.

As the country gradually aligns towards acashless society, we are driving digitisationof the banking sector with ground-breaking
innovations. NDB’s NEOS digital banking
platform offers convenient, secure and speedytransaction platforms to individuals, SMEs andcorporates alike. We are progressively shifting
more transactions facilitated to digital modes
and continue to make investments for a better
customer experience.

Women empowerment is a strategic imperative
for sustainable development with far reachingpositive impact on not just women but
families, wider communities, and societies
as a whole. At NDB, Banking on Women,
the dedicated pillar of the Bank’s strategy istranslated in to impactful support to women
via the proposition NDB Araliya and flagshipinitiative Sri Lanka Vanithabhimana. We arecommitted to driving women empowerment byoffering these financial products and services
together with advisory that cater to the specificneeds of women, identified in three distinct
categories of home makers, salaried womenand entrepreneurs.

Green Economy

Financial Inclusivity
Financial inclusivity is a key driver of economic
development, income equality, and overall
well-being of individuals and communities.
We strive to create greater financial inclusivity
by improving access to finance among
underserved segments and promoting widespread financial literacy. Our digital banking
platform NDB NEOS and numerous financial
literacy programmes for target groups acrossmultiple strata in the society help drive
financial inclusivity.

Sri Lanka, like many other countries, isvulnerable to the impacts of climate change,
with significant implications on its economy.
As a leading lender to the nation, we arestrongly committed to the country’s efforts totransition to a greener economy by expanding
our sustainable finance portfolio andintegrating sustainability into all aspects of ouroperations. We also have a strong Environment
and Social Management System in place inensuring all our financing is channelled toresponsible ventures. Furthermore the Bankis exploring new avenues such as green bonds,
etc. to support expedite the national drive
towards a greener economy.

National Development Bank PLC

Annual Report 202311

Performance Highlights
BANK

For the year ended 31 December
Results for the Year (LKR Mn)
Gross income
Operating profit before tax on financial services
Taxation
Profit for the year
Profit attributable to equity holders of the parent
Gross dividends for the year *Assets and Liabilities (LKR Mn)
Deposits for customers
Gross loans and receivables
Total assets
Total equity (stated capital and reserves)
Profitability (%)
Net interest margin
Return on assets (before taxes)
Return on equity
Cost to income ratio
Asset Quality (%)
Impaired loans (stage 3) ratio
Impairment (stage 3) to stage 3 loans ratio
Impairment allowance as a % of gross loans and receivables
Investor Information (LKR)
Net asset value per share
Market value per share - as at 31 December
Earnings per share - basic/diluted
Price earnings (times)
Dividend per share *Dividend cover (times) *Dividend yield (%) *Market capitalisation (LKR Mn)
Total leverage (times)
Regulatory ratios (%)
Statutory liquid assets ratio:
Statutory Liquid Assets Ratio - Bank (Minimum Requirement - 20%)
Capital Adequacy Ratios (under Basel III Standards):
Common Equity Tier 1 Capital Ratio (Minimum Requirement - 7%)
Tier 1 Capital Ratio (Minimum Requirement - 8.5%)
Total Capital Ratio (Minimum Requirement - 12.5%)
Leverage ratio (Minimum requirement - 3%)
Liquidity Ratios (under Basel III Liquidity Standards):
Liquidity Coverage Ratio (%) - Rupee (Minimum Requirement - 100% (2022 - 90%))
Liquidity Coverage Ratio (%) - All Currency (Minimum Requirement - 100% (2022 - 90%))
Net Stable Funding Ratio (%) ( Minimum Requirement - 100% (2022 - 90%))

GROUP

2023

2022

Change
%

2023

2022

Change%132,326
10,096
4,725
5,370
5,370
-

109,902
2,036
(873)
2,909
2,909
950

20
396
641
85
85
-

134,473
10,904
5,046
5,858
5,759
-

111,552
2,672
(404)
3,076
3,009
950

21
308
1,349
90
91
-

615,644496,068
779,899
70,148672,314579,561
832,772
63,536

(8)
(14)
(6)
10

615,232
496,148786,959
74,471

671,713579,608
839,198
67,505

(8)
(14)
(6)
10

3.96
1.25
8.03
30.41

4.00
0.26
4.75
26.65

(1)
382
69
14

3.98
1.34
8.11
32.01

4.02
0.34
4.62
28.12

(1)
294
76
14

8.58
41.11
8.75

6.24
37.44
5.81

38
10
51

8.58
41.11
8.75

6.24
37.44
5.81

38
10
51

175.60
64.90
13.44
4.83
25,925
11.12

167.16
32.00
7.28
4.40
2.50
2.91
7.81
12,163
13.11

5
103
85
10
113
(15)

186.43
N/A
14.42
N/A
N/A
N/A
N/A
N/A
10.37

177.60
N/A
7.53
N/A
N/A
N/A
N/A
N/A
12.18

5
91
(15)

39.02

27.24

43

N/A

N/A

-

11.67
11.67
15.90
6.74

9.34
9.34
13.35
5.56

25
25
19
21

12.22
12.22
16.35
7.15

9.87
9.87
13.81
5.94

24
24
18
20

309.61228.58142.26297.08232.68130.87

4
(2)
9

N/A
N/A
N/A

N/A
N/A
N/A

-

* The Board of Directors will consider a declaration of dividends for the year 2023 in due course. Therefore, the Dividend Cover and Dividend Yield for the year 2023 are not disclosed.

FINANCIAL GOALS AND ACHIEVEMENTS
Financial Indicators - Bank
Return on assets (before taxes) (%)
Return on equity (%)
Growth in total operating income (%)
Cost to income ratio (%)
Growth in profit after tax (%)
Growth in total assets (%)
Capital Adequacy Ratios - Bank
Common Equity Tier 1 Capital Ratio - (Minimum requirement - 7.0% in 2023)
Total Tier 1 Capital Ratio - (Minimum requirement - 8.5% in 2023)
Total Capital Ratio - (Minimum requirement - 12.5% in 2023)

12

National Development Bank PLC

Annual Report 2023

GOALS

ACHIEVEMENTS
2023

2022

2021

2020

2019

Over 1.5%
Over 12%Over 15%
Below 40%
Over 10%
Below 15%

1.25
8.03
5.11
30.41
84.61
(6.35)

0.26
4.75
37.75
26.65
(54.28)
18.14

1.55
12.27
22.06
33.65
15.04
12.13

1.59
13.13
7.43
37.00
8.19
18.36

2.01
13.73
9.71
39.90
(7.87)
11.99

Over 9%Over 9%Over 13%

11.67
11.67
15.90

9.34
9.34
13.35

10.01
10.01
15.42

9.17
9.17
14.32

9.18
9.18
13.43

Value Creation Highlights
Human Capital

2,756

in
23 % Increase
digital platform

Total employees

LKR

Manufactured
CapitalDigital Capital

6.6 Bn

12 %Expenses to employees

78 %

LKR

Employee retention rate

113 Branches

Increase in NEOS basedtransaction value

10 Leasing Centres
LKR

3.1 BnProperty, Plant andEquipment

3.4 BnValue ofComputer Software

representation –24 % Female
Senior Management

623 No.
New recruits

LKR

39.3 Mn

Investment in training

55.4

Social and
Relationship Capital

Average training
hours/employee
Hours

4.9/ 5.0

Customer Satisfaction Rate

>570,000

Total followers in social media platforms>2,700Applicants in Sri Lanka
Vanithabhimana 3rd Edition

Natural CapitalIntellectual Capital

27,643 kg

40,457 m

Paper Consumption

Water consumption

5,879 MWh

5,510 tCO e

Energy consumption

Carbon footprint

3

2

LKR

9.2 BnBrand Equity

6.17 Years

Average length of employee service>90

No. of Awards and Accoladesreceived during the year (Group)

National Development Bank PLC

Annual Report 2023

13

Annual Report of the Board of Directors on the Affairs of the
National Development Bank PLC
A YEAR OF RECOVERY AND RESILIENCE
Following continuous external shocks
and complexities of many years, Sri Lanka
demonstrated its characteristic resilienceand embarked on a road to recovery in 2023.
Coordinated and well-timed policy decisions
throughout the year translated to tangible
improvement in the economy as indicatedin key macro-economic indicators such as
inflation, market interest rates, gross official
reserves and exchange rate. The banking sector
was better positioned in 2023 compared to theprior year, yet grappled with steep challenges
such as deteriorating asset quality, pressure on
margins and subdued loan growth due to lessthan optimum economic activity in the country.
The Board closely monitored these emerging
economic developments paying attention topotential implications on financial performance,stability and stakeholder value creation.
Together with such Board oversight, NDB
navigated the challenges through the year with
its usual agility and recalibrated its strategy toensure efficient pursuit of its goals. The freshly
revised mid-term strategy which was launchedin the second half of 2023 focuses on certain
critical performance aspects such as improving
net interest margins, enhancing asset qualityand driving transaction banking among
others whilst customer-centricity remained as
the overarching focus. A detailed discussion
on how the Bank’s mid-term strategy drove
business resilience through the year is found on
pages 43 to 46.
Resultantly, the Bank and the Group have beenable to post a notable financial performanceas reflected in a 308% increase in pre-tax
profitability to LKR 10.9 Bn at the Group level andresultant enhancement in a number of financial
KPIs. The Bank drove much effort in enhancing
stakeholder value creation, whilst being
empathetic to their unique needs and challenges
in the evolving operating context. Environment,
Social and Governance (ESG) aspects also
remained deeply integrated in all our actions,ably guided by the Bank’s robust policies andframeworks and swiftly operationalised throughwell-established procedures and knowledged
staff. The Management Discussion and Analysis
available through pages 54 to 101 provides a fullaccount of how the Bank delivered a balanced
performance marking a sound equilibrium
across all aspects.
14

National Development Bank PLC

ELEVENTH INTEGRATED ANNUALREPORT – THE POWER TO SIMPLIFY
The Board of Directors are pleased to present
to you, the Annual Report 2023 themed The
Power to Simplify, comprising the Audited
Financial Statements and Integrated Report for
the financial year ended 31 December 2023.
The former conforms to the requirements of theCompanies Act No. 07 of 2007 (as amended),
Banking Act No. 30 of 1988 (as amended)and the Directions issued thereunder, theListing Rules of the Colombo Stock Exchange(CSE) (as amended), other applicable laws
and regulations and recommended good
governance disclosures as ascertained by the
Bank. The same also discharges the obligationof the Board of Directors, as specified in the
Companies Act regarding preparing the
Financial Statements of the Group and theBank, which reflect a true and fair view of thefinancial position and performance of theGroup and the Bank.
The 2023 Annual Report marks the eleventh
year of our continually enhancing integrated
reporting journey. We made foray into
integrated reporting in 2013, by adopting theInternational <IR>Framework issued by theInternational Integrated Reporting Council(IIRC), now known as the Value Reporting
Foundation in our non-financial reporting.
This year too, in affirming the credibilityof our integrated reporting, we obtained
the independent assurance on same andthe assurance report by Messrs. Ernst &Young is available on page 105. This year’s
Report builds on the theme “The Power toSimplify” and focuses on how the Bank’svarious digitalisation and automation efforts,
together with customer-centric solutions have
simplified banking for our customers acrossvarious segments. The Board of Directors’
acknowledgement of its ultimate responsibility
towards ensuring the integrity of the Integrated
Report and its affirmation that the said Report
is a fair presentation of the NDB Group’s
integrated performance is set out on page 8.
The Bank has made every effort to preserve
the essence of the <IR> Framework, thereby
present clear, concise and relevant information,
and also simplified presentations for easycomprehension of diverse stakeholders who
refer the Report. Materiality through a doublelens approach, of “impact on the organisation”
and “impact on the Bank” has enabled us topresent the information with greater clarity

Annual Report 2023

and relevance. Stakeholder mapping, adoptionof seven Capitals as a structure for ourManagement Discussion and Analysis, etc. haveall contributed towards a sharper presentationof our Report, whilst enhancing comparability
across prior years, and also across peers.

APPROVAL AND SUBMISSION OF THE
REPORT TO RELEVANT STAKEHOLDERSThe Report was approved by the Board of
Directors on 20 February 2024. The requisite
number of copies of the Annual Report will
be submitted to the CSE and to the Sri Lanka
Accounting and Auditing Standards Monitoring
Board within the statutory deadlines, together
with a soft copy uploaded to the Bank’s
corporate website https://www.ndbbank.com
consequent to the release of same to the CSE.
In complying with good governance practices,
the Annual Report is released as soon as
possible after the end of the financial year andcompletion of the audit. In compliance with
the CSE Listing Rules, the Annual Report will
be distributed by way of a link shared with allshareholders and debenture holders – directing
them to the soft copy of the Annual Report
hosted on the aforementioned link, as well as
in the form of a printed report as and whenrequired.

WAY FORWARD
The Bank is well cognisant of the gradually
improving economic performance of thecountry, which nevertheless will continue
to pose certain challenges in the near term.
Pressure on loan repayments and net interest
margins and anticipated outcome of therestructuring of international sovereign bondsof the Government of Sri Lanka are somefactors that will be decisive for the banking
sector. The Board and the Management derive
guidance from the mid-term strategy that was
launched, which focuses on specific, shortand medium term target oriented strategic
initiatives. Enhancing shareholder returns
and integrating the interests of all other key
stakeholders, thereby driving sustainable value
created for them remain our key priority for2024 and beyond. As the country pursues anaccelerated and ambitious recovery and growth
agenda, NDB remains deeply committed to
deploying its expertise in supporting suchnational economic revival agenda, particularlyin the areas of SMEs, exporters, women’s market
segment and renewable energy generation.

STATEMENT OF EXTENT OF COMPLIANCE
WITH APPLICABLE STATUTES AND
GOOD GOVERNANCE DISCLOSURES
For a full account on the extent of compliancewith the requirements of Section 168 of
the Companies Act No. 07 of 2007 andamendments thereto, please refer pages 128 to129. For disclosures on Listing Rules, other laws,
rules and regulations and good governancestandards adopted by the Board, please referpages 110 to 138, which shall all be consideredas part and parcel of this Annual Report.
Noting that the Board of Directors carries out
several of its duties and responsibilities throughits Board subcommittees, please refer pages 139
to 155 for the activities carried out in 2023 interalia to ensure compliance with applicable laws,
rules and regulations.

Signed in accordance with a resolution adopted
by the Directors.

Mr. Sriyan Cooray
Chair, Board of Directors

Mr. Kelum Edirisinghe
Director/Chief Executive Officer

Mr. Bernard Sinniah
Director

Mr. Sujeewa Mudalige
Director

Directors, being aware of the need to be
updated and apprised of applicable laws, rules
and regulations and changes taking place,ensure that processes are in place to facilitateawareness and ensure compliance.

Mr. Kushan D’Alwis, PC
Director

NINETEENTH (19TH) ANNUAL GENERALMEETING

Ms. (Fay) Piyachatr Chetnakarnkul
Director

Accordingly the nineteenth (19th) Annual
General Meeting of the Bank will be held at
the DHPL Training Room, 3rd Floor, NDB – EDB
Tower, No 42, Nawam Mawatha, Colombo 2 ona date and time to be decided by the Boardof Directors and convened, which will bereflected in the Notice of Meeting sent to theshareholders. The Notice of Meeting is reflectedon page 403 in accordance with a resolution
adopted by the Directors. As required in termsof Section 168 (k) of the Companies Act No.
7 of 2007, the Board of Directors does hereby
acknowledge the contents of the Annual
Report.

Ms. Chandima Dilrukshi
Director

Ms. Kasturi Chellaraja
Director

Ms. Shweta Pandey
Director

Mr. Hasitha Premaratne
Director

Ms. Shehani Ranasinghe
Company Secretary

20 February 2024
Colombo

Annual Report of the Board of Directors on the Affairs of the
National Development Bank PLC

National Development Bank PLC

Annual Report 2023

15

Reflections from the Chair, Board of Directors

Sriyan Cooray
Chair, Board of Directors

During the year we strengthened ourrelationships with our customers,
employees and community, bystepping up our engagement efforts
to truly understand their requirements
and offer tailor-made support toassist them recover from the crisis.
The Remedial Management Unitestablished during the height of thecrisis continues to play an importantrole in identifying customers withpotential repayment pressures acrossbusiness segments and offering
customised financial and advisory
support. Meanwhile we continued toleverage technology to enhance thelevel of customer service across all ourcustomer touch points.

16

National Development Bank PLC

Dear Stakeholders,
In a year characterised by uncertainty and volatility,
NDB Group continued to demonstrate resilienceand strategic agility; proactively adapting its focus
not only to safeguard its financial stability but
also to deliver consistent value to its stakeholders.
Overcoming significant challenges during the year,
the Group recorded an impressive pre-tax profit
of LKR 10.9 Bn, a noteworthy achievement in achallenging operating environment. It is therefore
my pleasure and honour to present herewith ourIntegrated Annual Report and Financial Statements
for the year ended 31 December 2023.
An Economy on the Mend
Sri Lanka’s economy displayed tentative signsof recovery in 2023 with the economic reforms
programme implemented by the Sri Lankan
authorities yielding notable positive developments
particularly towards the latter part of the year. GDP
recorded a positive growth in the third and fourth
quarters of 2023, after six consecutive quartersof negative growth. Domestic inflation declined
significantly reaching single digits in July 2023
after historically high levels that prevailed in 2022 .
Foreign exchange liquidity pressures eased on theback of the approval of the International Monetary
Fund’s Extended Fund Facility (IMF-EFF) in MarchAnnual Report 2023

2023, a continuation of import restrictions andincreased inflows through export proceeds, workers’
remittances and tourist earnings. The gradual easingof liquidity conditions supported the appreciationof the Sri Lankan Rupee and a stabilisation of theexchange rate following significant volatility in 2022.
The successful finalisation of the Domestic Debt
Optimisation (DDO) in July 2023 was an importantmilestone achieved during the year. The dissipationof uncertainties surrounding the DDO helped toreduce the risk premia attached to interest rates.
This together with easing of policy rates by theCentral Bank of Sri Lanka (CBSL) since early June 2023
resulted in prime lending rates declining by over
15% during the year. The impact of these macroeconomic developments on the banking sector and
NDB in particular is more fully discussed in the Chief
Executive Officer’s Review on page 18.
The progress achieved thus far is commendable,
however sustaining this reform momentum is
critical in building stakeholder confidence required
to graduate from stabilisation to broad-based andsustainable growth. It is imperative therefore that inaddition to achieving macroeconomic stability, key
areas such as governance and transparency reforms,

fiscal discipline and debt optimisation should also
be treated as matters of priority. Policy consistency
and political commitment will be key in achieving
these goals.

statutory examination of licensed banks and stronger
corporate governance rules. We will continue toalign our internal practices with these developments,
whilst adopting best practices as well.

NDB’s Contribution to Recovery Efforts

Strengthening Stakeholder Relationships

The banking sector has always been a key catalyst
in national prosperity, and as the country emerges
from a deep setback, NDB as an important market
intermediary remains strongly committed tosupporting this recovery momentum. As discussed
in detail in the Chief Executive Officer’s Review
on page 18 the Bank stepped up its efforts toproactively support its customers recover fromthe crisis with customised financial and advisory
assistance. Meanwhile, as part of its broader efforts
to drive sustainable growth, the Bank continued
to leverage its capabilities, partnerships and wide
reach to support key sectors such as the SMEs andexports. Two key developments during the year
were a Memorandum of Understanding enteredinto with the Ceylon Chamber of Commerce and the
Bank becoming a Participating Financial Institution(PFI) of the National Credit Guarantee Institution
to facilitate and expedite the development of thesectors. We also carried out a series of webinars
to boost and expand operation of SMEs across Sri
Lanka in partnership with the International FinanceCorporation (IFC). These together with our ongoing
partnerships with multi-lateral agencies continue todrive growth in these vital sectors.

The value generation for our shareholders enhanced
during the year, with sound financial performance.
The Group posted a post-tax profit of LKR 5.9 Bn, an
impressive year-on-year growth of 90% reflecting thetrue potential of NDB. Resultantly Return on average
shareholder funds and Earnings per share improved
to 8.11% and LKR 14.42 respectively. A more detailed
account of the financial performance is found in
the Chief Executive Officer’s Review on page 18.
During the year, we strengthened our relationships
with our customers, employees and community,
by stepping up our engagement efforts to truly
understand their requirements and offer tailor-madesupport to assist them recover from the crisis. The
Remedial Management Unit established during theheight of the crisis continues to play an importantrole in identifying customers with potential
repayment pressures across business segments andoffering customised financial and advisory support.
Meanwhile, we continued to leverage technology
to enhance the level of customer service across all
our customer touch points. Multiple engagement
mechanisms are in place to address employee
concerns and maintain continuous dialogue. Whilecontinuing engagement via virtual platforms, we
increased physical engagement activities during
the year, which helped motivate employees andstrengthen morale amidst uncertain economic andsocial conditions. We also enhanced financial andnon-financial benefits to employees in response toongoing financial pressures faced by employees. Our
holistic Corporate Sustainability agenda meanwhile
continued to strengthen our relationships with thewider community through meaningful strategicinterventions aimed at promoting entrepreneurship,conserving the environment, channeling support
to segments with special needs and empowering
women among others.

Strong Governance
NDB’s strong governance frameworks proved
invaluable as it navigated the complexities of theoperating environment. The Board continued
to closely monitor emerging macro-economic,
regulatory, political and social developments tounderstand the impact of these evolving dynamics
on the financial performance of the Groupand develop appropriate responses to protect
stakeholder interests. Key areas of Board focus during
the year included overseeing the Bank’s response to
the financial crisis, particularly the implementationof the Bank’s mid-term strategy, reviewing progresson the Bank’s digitalisation drive, providing guidanceon risk management and compliance and enhancing
the employee value proposition amidst risinglevels of talent migration. We remain committed
to strengthening our governance structures
among other initiatives. In compliance with CBSL
directions, we established a Board subcommittee on
Discretionary and Capital Expenditure to consider
the necessity, urgency and the relevance of thediscretionary expenses and the capital expenditure
projects as per the subcommittee charter andapprove expenditure which are in line with theBank’s strategic objectives.
We are heartened by efforts being taken to improvegovernance at industry level including greater
autonomy and accountability to the CBSL throughthe Banking (Special Provisions) Act, intensified
Reflections from the Chair, Board of Directors

Way Forward
We are encouraged by the significant progressachieved in the Government’s macroeconomic
stabilisation programme and are confident that
the Sri Lankan economy is converging on a path ofrecovery and growth. We are however cognisantof persisting risks and challenges in the short-term
including the impact on borrower repayment
capacities due to higher taxes; and will therefore
tread with caution prioritising portfolio quality overcredit growth in the coming year.
Our long-term sights are firmly set on redefining thefuture of banking, in line with our brand promiseof “The future is banking on us”. Technology willcontinue to be the game-changer in the industry
and we will therefore continue to introduce
transformative technologies to elevate the banking

experience. Meanwhile, with ESG factors increasingly
seen as indicators of long-term sustainability and risk
management by investors, customers, and regulators
alike, we will continue to align our operation with
CBSL’s Roadmap for Sustainable Finance in Sri Lanka
by embedding ESG considerations into all our
strategic and operational decisions.
Ongoing developments in the regulatory landscapeincluding proposed amendments to the Banking
Act and the CBSL’s bank recapitalisation plan will
also have a significant bearing on the future of theindustry. We will therefore continue to engage
closely with policy makers to ensure the successful
implementation of these policy measures.
Acknowledgements
In conclusion, I would like to express my deep
appreciation to my colleagues on the Board fortheir continued support and counsel during
these challenging times. On behalf of the Board,
I congratulate the Group’s leadership team andacknowledge their untiring efforts which haveenabled delivery of results amidst numerous
challenges. I also take this opportunity to extend
my gratitude and appreciation to the officials of the
CBSL, our valuable customers, business partners andall other stakeholders who have been an integral
part of the Bank’s success story.
A special note of appreciation is extended to
the former CEO Mr. Dimantha Seneviratne who
moved from his role on 31 January 2024. Under histransformational leadership, the Bank underwent
significant strategic evolution to become the fourthlargest listed bank in Sri Lanka. He was instrumental
in forging a partnership with the NorwegianInvestment Fund for developing countries (Norfund)as NDB’s anchor investor whose capital infusion as
well as continuing transfer of strategic expertise
across numerous critical areas stand the Bank ingood stead. Dimantha’s visionary efforts to transform
NDB from being a conventional bank to one thatis digi-savvy, customer centric and future focusedhave placed us well to embark on the next stage of
growth. On behalf of the Bank, I thank him for his
untiring efforts and wish him all the very best in all
his future endeavours.
Finally, I wish to warmly welcome onboard
Mr. Kelum Edirisinghe who assumed duties as CEO
from 01 February 2024. I, together with the Board lookforward to working with him in the coming years.

Sriyan Cooray
Chair, Board of Directors
20 February 2024
Colombo

National Development Bank PLC

Annual Report 2023

17

Chief Executive Officer’s Review

Dimantha Seneviratne
Director/Chief Executive Officer

Having re-calibrated our strategy inresponse to extraordinary challenges
that prevailed during the last
two years, we continued to drivestability and resilience both in ourown operations and by extension the
country’s financial system throughtactical changes aimed at preserving
portfolio quality, focus on interest
margins and shifting from an asset
driven business to a transaction
driven business to enhance fee
income and optimise costs.

18

National Development Bank PLC

Dear Stakeholders
Your Bank performed exceptionally well during
the year, recording impressive growth on all
fronts, especially on profitability, sound liquidity
and capital adequacy despite the uncertainties
that prevailed. Facilitating this performance was
our multi-pronged response aimed at building
resilience within the organisation and across our
stakeholder groups.
Operating Context
Notwithstanding the impressive recovery
momentum witnessed during the year, the banking
sector continued to be impacted by the spillover
effects of the recent economic crisis. Appetite
for credit remained subdued throughout muchof the year amidst the tight monetary policy
stance adopted until the second half of 2023 andcontinued inflationary pressures. Meanwhile the
combined impact of the economic contraction,high inflation and tax adjustments continued to
impact debt repayment capacities of households
and businesses, leading to rising non-performing
loans and higher levels of default risk across thebanking sector.

Annual Report 2023

Despite an improvement in overall sector
profitability, attributable mainly to the reduction
in new impairment, net interest income (NII)
continued to be negatively impacted by lower
credit growth and the decline in interest rates. As aresult, industry net interest margins continued to bepressured throughout the year.
Encouragingly, however, signs of improvement
were observed towards the fourth quarter of theyear; credit growth witnessed a gradual increase
with the easing of policy rates by the Central
Bank of Sri Lanka (CBSL) since June 2023 andsome stabilisation of credit risk was witnessed
as indicated by the slowdown in the increase ofStage 3 Loans during the second half of the year.
The acute shortages of foreign currency liquidity
witnessed in 2022 also eased off in 2023, enablingbanks to resume foreign currency transactions andtrading operations. Meanwhile, pressures on capital
buffers also reduced during the year with sector
capital adequacy improving considerably as aresult of the decline in risk weighted assets and theappreciation of the Sri Lankan Rupee.

Navigating Economic Headwinds
Having re-calibrated our strategy in response to
extraordinary challenges that prevailed during
the last two years, we continued to drive stability
and resilience both in our own operations and byextension the country’s financial system throughtactical changes aimed at preserving portfolio
quality, focus on interest margins and shifting froman asset driven business to a transaction driven
business to enhance fee income and optimise
costs. Steady progress was achieved during the year
in each of these focus areas as summarised below.
Preserving Portfolio Quality
Preserving portfolio quality was a key focus
during the year amidst continued pressure on
repayment capacities and deteriorating credit
quality. Our efforts to preserve portfolio quality
revolved around proactively identifying portfolio
stresses and supporting our customers throughfinancial difficulties. The Remedial Management
Unit established in 2022 played a critical role inthese efforts by offering tailor-made solutions andadvisory services to address financial difficulties.
We also enhanced our monitoring capabilities,
and leveraging data analytics capabilities tosegment the portfolio based on risk levels andclose monitoring and client servicing accordingly.
Enhanced underwriting standards and more risk
and capital efficient lending meanwhile enabled
the Bank to maintain portfolio quality whilepursuing cautious growth in relatively low risk
segments.
Focused approach in NIMs
The year saw decisive and strategic action taken
to improve Net Interest Margin (NIM), and the Bank
was able to report a NIM of 3.96% amidst sharp
downward adjustments to both lending rates
and investment yields. This is testament to ourconcerted efforts in enhancing interest margins,an area with considerable upside potential.
Transaction Banking drive
The Bank embarked on a concerted transaction
drive to enhance fee income and CASA whileachieving a broader objective of supporting the
economy as it regained momentum, particularly
on trade related services. Ongoing enhancements
to our digital platforms including the newly
introduced NEOS Corporate Platform have also
helped provide a safe and seamless mode fortransactions. Meanwhile, dedicated Transaction
Banking coordinators were also appointed atregional level to work closely with SME clients, coordinate and drive transaction business.

Chief Executive Officer’s Review

Digitalisation Drive

Effective cost management
Sustained efforts to effectively manage costs
enabled us to achieve one of the lowest cost to
income ratios within the industry, in turn positively
impacting profitability. Targeted efforts to reduce
operational expenses through process automation,
efficiency gains and optimisation of human capitalenabled us to curtail the increase in operating costs
to 20%, despite inflationary pressure and rising fueland energy costs during the year. Digitalisation andRobotic Process Automation (RPA) have been key
enablers of our cost optimisation drive delivering
multiple benefits in terms of improved operational
efficiencies, lower paper usage and energy
consumption.
A Resilient Financial Performance
Proactive and swift strategic realignment enabled
us to successfully navigate a complex environment
as reflected in the resilient performance both atGroup as well as Bank level.
Total operating income of the Bank increased
by 5% to LKR 44.9 Bn during the year supported
by focused efforts to enhance NII and fee-based
income. Despite a moderation of credit growthand sharp decline in interest rates, NII increased by
4% during the year. The Bank’s transaction banking
drive meanwhile resulted in an impressive 14%
growth in fee-based income. Improved earnings
and a decline in impairment charges compared to2022, positively impacted profitability of the Bank
which witnessed a 396% increase at pre-tax levels
during the year to LKR 10.1 Bn. Reflecting improved
performance of the Bank and Group Companies,
Group pre-tax profit increased by 308% to
LKR 10.9 Bn compared to LKR 2.7 Bn in 2022.
The Group’s total assets decreased by 6% to
LKR 787.0 Bn in 2023. Gross loans followed a similar
trend closing in at LKR 496.1 Bn, with a year on year
contraction of 14%, owing to combined effects
of a moderation in credit growth, more prudent
approach to lending amidst subdued demandconditions and deteriorating asset quality. Total
deposits meanwhile witnessed a contraction of 8%,
closing in at LKR 615.6 Bn. Balance sheet contraction
was also on account of the appreciation of the Sri
Lankan Rupee, which drove down the value of
foreign currency loans and deposits.
Prudent measures adopted in balance sheet
management enabled the Group to maintainsound liquidity and capital adequacy. The
consolidated Statutory Liquid Asset Ratio at 39.02%
was well above the regulatory minimum of 20%.
Shareholders’ equity meanwhile increased by
10% and capitalisation levels remained well above
regulatory minimum with Tier 1 and Total Capital
Adequacy ratios at 12.22% and 16.35% respectively
as at 31 December 2023.

As elaborated under Effective Cost Management
initiatives above, we continued to derive substantial
and sustainable benefits by deploying digital
capabilities in our internal processes. Automations
continued through the year led by qualified anddedicated staff towards this end. Simultaneously,
our customer-centric and convenience defining
digital platforms accelerated their features,
benefited by the new core banking system version
we migrated to during the year, and now caters
to all our customer segments of retail, businessbanking and corporate through respective
dedicated platforms under the NEOS proposition.
The efforts are well reflected in the increasing
portion of transactions that are shifting from a
conventional bank branch to a digital mode.
Creating a Future Ready Team
Building a motivated, creative, and productive
team by empowering employees and fostering aculture of innovation is a key long-term objective
as we move into a new era of customer-centricbanking. We continued with our leadershipdevelopment initiatives during the year launchinga talent identification programme aimed atbuilding a strong leadership team for the future.
The programme involved identifying key talentand offering targeted training and development
programmes to groom individuals for the next levelof leadership.
Increased levels of skilled migration from thecountry continued to impact the banking sector
as a whole and NDB was no exception. As part ofour efforts to address this growing challenge weundertook a re-sizing exercise to optimise available
resources by re-purposing roles and upskilling
employees to take on additional responsibilities.
The exercise ensured that there were no
redundancies whilst providing exciting newopportunities for our existing employees. Empathic
to the continued financial pressures faced by our
employees, we conducted a Bank specific salarysurvey in 4Q 2023 and based on findings, further
salary and benefit revisions were implemented
from February 2024 onwards. Other support suchas interest free Economic Relief Loans were alsooffered to employees based on their tenure ofservice.

National Development Bank PLC

Annual Report 2023

19

Prioritising Climate Action
Climate Action is a key focus area in NDB’s
sustainability agenda, and the Bank remains
focused on reducing its own Carbon footprint
whilst actively supporting the transition to a
low-carbon economy through its lending andinvestment activities. We continue to work inclose partnership with the Sri Lanka Climate Fund(SLCF) to understand our carbon footprint andtake tangible steps towards achieving our goal of
net zero emissions. A major initiative implemented
towards this end in 2023 was the commencementof solarisation of the Bank’s key premises in Nawam
Mawatha and Dharmapala Mawatha in Colombo.
With NDB Kandana branch already powered bysolar energy, the Bank will expand this initiative tothe rest of the branch network as well. Marking animportant step in the country’s green economy
journey, NDB also entered into a Memorandumof Understanding with the Global Green GrowthInstitute (GGGI) during the year to build capacityand develop a robust framework to mobilise
sustainable funding including Green Bonds.
Also supporting our climate action goals is thenumber of biodiversity conservation and natural
ecosystem preservation projects that we continue
to undertake as part of our Corporate Sustainability
efforts. More details of these projects can be foundin our Natural Capital Report on page 97.
Awards and Accolades
The Bank continued to receive a multitude ofawards and accolades during the year of over 80
in total, reflecting its continued commitment toexcellence in all aspects of its operation. NDB was
ranked as the Most Awarded Corporate in
Sri Lanka for 2022, for the second consecutive year
by LMD Annual Rankings whilst other highlights
include being awarded the Best Innovation &Transformation - Sri Lanka by Global Finance
USA and the Best Corporate Bank in Sri Lanka by
Asiamoney in their Best Bank Awards 2023. We draw
much motivation from such external endorsements
and continue to the raise the bar for better
performance.
Way Forward
With critical economic indicators such as interest
rate, exchange rate and inflation showing signs ofstabilisation, we are optimistic that the worst of thefinancial crisis is behind us and that the economy
is well on its way towards recovery. The effects
of monetary policy easing are starting to show
results as indicative from the upward momentum
in private sector credit during the last quarter of2023. This recovery momentum, while encouraging
is largely dependent on policy consistency andpolitical commitment. As the country gears up
for elections during the year, we urge policy
makers and those in authority to prioritise policy
consistency and economic stability to ensure thecountry’s recovery momentum. The outcomeof international debt structuring efforts will also
have a significant bearing on the banking sector’srecovery trajectory.

20

National Development Bank PLC

From an organisation point of view, we remain
firmly committed to delivering sound returns to ourshareholders and sustainable value to all our otherstakeholders including customers, employees andbusiness partners. Preserving capital and portfolio quality
whilst driving profitability with a sharper focus on net
interest margin management, fee-based income growthand cost rationalisation will remain priorities in the shortterm. Meanwhile, we will continue to forge ahead with
our digitalisation efforts, women’s empowerment and
ESG initiatives as we gradually shift gears from recovery
mode to growth mode.
Acknowledgements
As I reflect back on my seven years at the helm of thisprestigious institution, I take immense pride on ourcollective efforts to transform NDB into what it is today.
NDB today is customer-centric, agile, digitally focusedbank that continues to push the boundaries of banking.
Strategic interventions during the period have placed it
on a firm trajectory of growth which will in turn enable
it to meaningfully contribute to the socio-economic
progress of Sri Lanka.
As I relinquish my duties as CEO, I wish to take thisopportunity to place on record my deep appreciation
to the incumbent and past Chairmen and the Boardof Directors for their valuable counsel throughout mytenure as CEO. I also extend my sincere appreciation to
The Leadership Team and all our employees for theirconsistent support and commitment. It has been aprivilege to lead such a dynamic, resilient and passionate
group of individuals. A special note of appreciation
also goes out to Ms. Suvendrini Muthukumarana
our outgoing Chief Financial Officer and Mr. Deepal
Akuretiyagama outgoing Chief Operating Officer, for theirrespective commitment and years of invaluable service
to the Bank. I also extend my thanks to the Governor andofficials of the Central Bank of Sri Lanka as well as the Sri
Lanka Banks’ Association for their continued support.
Last but not least, I wish to thank our valued customers,
shareholders, business partners and other stakeholders
for their continued loyalty.
Looking ahead, I am confident that NDB will reachgreater heights under the strong stewardship of theincoming CEO Mr. Kelum Edirisinghe. He will be ably
supported by the recently appointed Deputy CEO
Mr. K.V. Vinoj who brings with him a wealth of knowledge
and insights gathered over his long spanning career at
NDB.
As NDB enters a new chapter in its illustrious journey,
I wish the Bank, The Leadership Team and employees
every success in the future.

Dimantha Seneviratne
Director/ Chief Executive Officer
31 January 2024
Colombo

Annual Report 2023

Chief Executive Officer’s Review

Leadership TeamA Holistic Commitment
Our core fundamentals guide our operations, enabling us to drive sustainability,
efficiency, and people-centricity - bringing to life the future, simplified.
While ikebana is diverse in its iterations, the practice relies on a unifying thread of seven principles that encompass andguide the practitioner’s approach towards minimalism and simplicity.

Board of Directors

SeatedMr. Sriyan Cooray - Chair, Board of Directors - Non-Executive Independent Director

Standing (Left to Right)
Ms. Shehani Ranasinghe - Company Secretary, Mr. Bernard Sinniah - Non-Executive Non-Independent Director,
Mr. Sujeewa Mudalige - Non-Executive Independent Director,
Ms. (Fay) Piyachatr Chetnakarnkul - Non-Executive Non-Independent Director

22

National Development Bank PLC

Annual Report 2023

Seated (Left to Right)
Mr. Dimantha Seneviratne - Former Chief Executive Officer - Executive Non-Independent Director,
Mr. Kelum Edirisinghe - Chief Executive Officer - Executive Non-Independent Director

Standing (Left to Right)
Mr. Hasitha Premaratne - Non-Executive Independent Director, Mr. Kushan D’Alwis, PC - Non-Executive Independent Director,
Ms. Kasturi Chellaraja - Non-Executive Independent Director, Ms. Shweta Pandey - Non- Executive Independent Director,
Ms. Chandima Dilrukshi - Non-Executive Non-Independent Director
National Development Bank PLC

Annual Report 2023

23

MR. SRIYAN COORAY / Chair, Board of Directors / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

10 August 201809 April 2021

5 years 4 months

Skills and experience

Concurrent appointments

Mr. Sriyan Cooray was appointed as the Chairman of the Bank on 01 July 2022.

Director - Orient Finance PLC

An accomplished banker with 28 years of experience at HSBC, Mr. Cooray has served in a wide rangeof areas ranging from Finance, Operations, Compliance, Administration and Retail Banking at HSBC
and retired from HSBC - Sri Lanka and Maldives as the Chief Operating Officer in May 2018. He alsofunctioned in the position of Acting CEO over the last 10 years at HSBC.

As at 31 December 2023 Mr. Cooray
holds office as Director in a total
number of 2 Companies(including the Bank)

Prior to joining HSBC, Mr. Cooray was Financial Controller of Speville M & W Ltd (1987 -1990) and prior
to that engaged with KPMG Ford Rhodes Thornton & Company, Chartered Accountants.
Mr. Cooray is a fellow of the Chartered Institute of Management Accountants, UK.

MR. BERNARD SINNIAH / Non-Executive Non-Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

28 March 201930 March 2022

4 years 9 months

Skills and experience

Concurrent appointments

A veteran banker, Mr. Sinniah retired in 2018 as Managing Director of Citibank and Global Headof FX Corporate Sales and e-FX Solutions after 38 illustrious years of service, having started his
career at Citibank Colombo, then moving to Citibank Australia, and ending his career basedout of London.

Director Transact Lanka (Pvt) Ltd, Codevus (Pvt)
Ltd, Youcan (UK), Knightsbridge eCommerce (Pvt)
Ltd, SenzAgro (Pvt) Ltd, Arogya Life Systems Inc.
(US), Mintpay (Pvt) Ltd and several subsidiaries of
the Bank. He is also the Founder and Director of
Flag Forum Guarantee Limited.

Mr. Sinniah holds a Masters in Applied Finance (Macquarie University, Australia). He has also
added to his proficiency, knowledge on Digital Transformation Strategies, conducted by theJudge Business School – University of Cambridge – UK and further on Digital Transformation,
Strategies for Success, conducted by the MIT Sloan School of Management.

As at 31 December 2023 Mr. Sinniah holds officeas Director in a total number of 15 Companies(including the Bank and group companies)

MR. SUJEEWA MUDALIGE / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

06 January 2020

30 March 2022

3 years 11 months

Skills and experience

Concurrent appointments

Mr. Mudalige counts over 34 years of experience as a Chartered Accountant. His qualifications are
FCA (ICA - SL), FCMA (CIMA – UK), FCCA (ACCA – UK) and FCPA (CPA – Australia).

Non-Executive Chairman of Mercantile
Services Provident Society (MSPS). He
is also an Non-Executive Independent
Director at CIC Holdings PLC, CIC Feeds
group, NSBM Green University, Link
Natural Products Limited, Sherwood
Capital and Mahindra Ideal Finance Ltd.
He was appointed as a Commissioner of
the Securities and Exchange Commission
Sri Lanka in March 2023. He is also a
committee member of the Ceylon
Chamber of Commerce.

Mr. Mudalige has vast experience as an Audit Committee Chair in both public and private sector
organisations. He is a past President of ICASL and has been a member of the Council of ICASL andof the governing board of CIMA UK, Sri Lanka Division, a Commission member of the Securities
and Exchange Commission of Sri Lanka and held several such other positions locally and globallyduring the span of his career.
Mr. Mudalige was an Non-Executive Independent director of Hatton National Bank PLC (HNB)
from 2012 to 2019 and was a Chair and member of several of its board subcommittees during his
tenure with HNB. He was also the Deputy Chairman of the Financial System Stability Consultative
Committee of the CBSL and a member of the Advisory Committee to advise the National
Economic Council and the Advisory Committee for Revival of Failed Licensed Finance Companies.
Mr. Mudalige was the Managing Partner of PwC, Sri Lanka and a director of its related companies
up until 31 October 2023.

24

National Development Bank PLC

Annual Report 2023

Board of Directors

As at 31 December 2023 Mr. Mudaligeholds office as Director in a total number of
07 Companies (including the Bank).

MR. KUSHAN D’ALWIS / President’s Counsel / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

06 July 2020

30 March 2023

3 years, 6 months

Skills and experience

Concurrent appointments

Mr. Kushan D’Alwis took oaths as an Attorney-at-Law in the year 1985 and is in active practice for over a periodof 37 years. He was conferred Silk and took oaths as President’s Counsel in November 2012. The areas of
specialisation of Mr. D’Alwis are civil, corporate, commercial and administrative law in both the Original andAppellate Courts. Further, he has been actively involved in alternate dispute resolution mechanisms such as
arbitrations, advising on corporate legal matters, regulatory frameworks, compliance requirements and legal
due diligence.

Director Ceylon Tobacco
Company PLC, Lanka Hospitals
Corporation PLC and Vurthiya
Lanka (Pvt) Ltd.

Mr. D’ Alwis was a Member of the Law Commission of Sri Lanka from 2011 to 2015. He was also a Memberof the Panel of Legal Advisers to the Tax Appeals Commission. He has served as a Member of the Public
Representations Committee on Constitutional Reform appointed by the Cabinet of Ministers. He has also
served as the Vice Chairman of the Civil Aviation Authority of Sri Lanka. Mr. D’Alwis served as the Chairmanof the Office of the National Unity and Reconciliation (ONUR) of Sri Lanka and was also a Director of theColombo Lotus Tower Management Company (Pvt) Ltd and a Member of the Financial System Stability
Consultative Committee of the Central Bank of Sri Lanka. He also served as a Member of the Board of
Investment of Sri Lanka. Mr. D’ Alwis served as a Member of the Committee appointed by His Excellency the
President to reformulate the guidelines with regard to the appointment of President’s Counsel. He was also a
Member of the Committee appointed by the Ministry of Defence to review the Issuance of Frequency Permits
for Television & Radio Broadcasting and related procedures.

As at 31 December 2023
Mr. D’Alwis holds office as
Director in a total number of
4 Companies (including theBank).

MS. (FAY) PIYACHATR CHETNAKARNKUL / Non-Executive Non-Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

25 May 2021

30 March 2023

2 years, 7 months* The appointment of Ms Chetnakarnkul was initially approved by the Shareholders of the Bank at the EGM held on 09 April 2021.

Skills and experience

Concurrent appointments

Ms. Chetnakarnkul carries with her knowledge and experience in Economics, Information
Technology and Investments. She joined the Board in 2021 to represent the interests of The
Norwegian Investment Fund for Developing Countries (NORFUND). Ms. Chetnakarnkul holds
a Master’s Degree in Arts – in Quantitative Methods and Economic Theory and Southeast Asia
Studies, School of Advanced International Studies (SAIS), Johns Hopkins University (Washington
D.C.) and a Bachelor’s Degree in Economics (International Programme) from Thammasat University,
Bangkok. She has also followed the Director Certification Programme (DCP 184, Board Training)of the Institute of Directors of Thailand (Bangkok) and a Fintech certification course at theMassachusetts Institute of Technology (MIT).

Ms. Chetnakarnkul, is the Investment
Director, Head of Asia Region (Bangkok,
Thailand) of the Norwegian Investment
Fund for Developing Countries(“NORFUND”).
As at 31 December 2023 Ms. Chetnakarnkul
holds office as Director in 1 Company (theBank)

As the Investment Director, Head of Asia Region of NORFUND, Ms. Chetnakarnkul has been
responsible for founding NORFUND’s Asia office and for building, leading, and managing
NORFUND’s investments in Asia. Prior to joining NORFUND, she worked at the International FinanceCorporation (IFC) / The World Bank Group. She was also a Director of Yoma Bank, Myanmar.

Board of Directors

National Development Bank PLC

Annual Report 2023

25

MS. CHANDIMA DILRUKSHI / Non-Executive Non-Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

21 June 2021

*N/A

2 years, 6 months

Skills and experience

Concurrent appointments

Ms. Chandima Dilrukshi is an officer of the Sri Lanka Accountants’ Service, with experience of over
20 years in the public service. She is presently working as a Director of the Department of PublicEnterprises under the Ministry of Finance, Economic Stabilisation and National Policies. Prior to that,
she worked as a Director at the Department of Fiscal Policy and has been, in her career, responsible
for monitoring State Owned Enterprises in the Banking, Insurance and Finance sector. Ms. Dilrukshi
has also represented the General Treasury on the Boards of Sri Lanka Export Credit Insurance
Corporation, Lankaputhra Development Bank Ltd, Sri Lanka Insurance Corporation Ltd and Litro
Gas Lanka Ltd. She has also been a Director on the Board of Directors of the Urban Development
Authority and Postgraduate Institute of Management. From 2018 - 2022, she has functioned as
the Finance Manager on an acting basis at the Rooftop Solar Power Generation Project, which isfunded by the Asian Development Bank.

Ms. Dilrukshi is a Director (non-board)of the Department of Public Enterprises.
She also serves as a visiting lecturer at
the Sri Lanka Institute of Development
Administration and represents numberof technical evaluation committees
and project committees to assist thestanding cabinet appointed procurement
committees including that of National
Water Supply & Drainage Board andMinistry of Fisheries, in addition to beinga member of the Council of the Instituteof Chartered Accountants of Sri Lanka,
currently.

She is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and holds a Special
Degree in Accountancy and Financial Management from the University of Sri Jayewardenepura,
Master of Business Administration from the International University of Japan, a Diploma in
Procurement and Contract Administration and a Diploma in Business Communication from theInstitute for Government Accounts and Finance.

As at 31 December 2023 Ms. Dilrukshi
holds office as Director in 1 Company(the Bank).

MS. KASTURI CHELLARAJA / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

03 October 2022

30 March 2023

1 Year 2 months

Skills and experience

Concurrent appointments

Counting over 20 years of service in the Hemas Group, Ms. Chellaraja is the Group Chief Executive
Officer of Hemas Holdings PLC. She has held many senior management positions, including Chief
Process Officer and Managing Director of the Hemas Transportation Sector. In 2016, Ms. Chellaraja
took over as Managing Director of Hemas Pharmaceuticals, Surgicals and Diagnostics, where she
was responsible for driving the company’s local and regional expansion. She also functioned as theManaging Director of Hemas Mobility Sector prior to being appointed as Group CEO in October
2020.

Ms. Chellaraja serves on the Boardsof several Hemas subsidiaries in thehealthcare, logistics and consumer sectors.
She is an active member of several industry
associations and currently serves on themain committee and the Board of the
Ceylon Chamber of Commerce and wasrecently appointed as a Council Member
for the UNICEF Sri Lanka Business Council.
She is also the Regional Champion for theWorld Bank for South Asia

Ms. Chellaraja is a Fellow of the Chartered Institute of Management Accountants, and alumni ofHarvard Business School.
She is also a past president of the Sri Lanka Chamber of the Pharmaceutical Industry and has also
served as a Council Member of the National Sports Council of Sri Lanka till March 2022 and on
the Board of SLID (Sri Lanka Institute of Directors), CIMA Sri Lanka and Board of the Lankan Angels
Network (LAN) – a leading start up eco system in Sri Lanka.
Ms. Chellaraja has been recognised as one of the twelve Top Women Change-Makers in the
country in 2019 by the Parliament of Sri Lanka and was also recognised as one of the ten ‘Wise
Women’ impactful leaders of Sri Lanka by the Ministry of Skills and Vocational Education in 2022.

26

National Development Bank PLC

Annual Report 2023

Board of Directors

As at 31 December 2023 Ms. Chellaraja
holds office as Director in a total number of
19 Companies (including the Bank)

MS. SHWETA PANDEY / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

28 April 2023

N/A

0 years, 8 months

Skills and experience

Concurrent appointments

Ms. Shweta Pandey was one of the founding team members and COO & Senior Vice President ofAirtel Payments Bank in India. She has also served as a Digital Finance Advisor to IFC/World Bank
Group clients in Sri Lanka & India on large scale digital transformation projects. She serves on theboard of Maha Agriculture Microfinance in Myanmar as IFC Nominee Director. Ms. Pandey is anadvisor to early stage social impact ventures in India. Her digital transformation drive, groundedknowledge in economics and management and varied experience in the Digital Financial Inclusion
space contributes towards her excellence. She is a corporate professional turned entrepreneur who
believes in building ideas into businesses at scale that directly contribute to the growth and impactof emerging sectors. Turning towards entrepreneurship post a successful career at NCR Corporation,
UK, in a global business role; Shweta has set-up Fintech ventures for expanding & delivering offinancial access, choice & control in India through YTS Solutions Ltd and Arthimpact Digital Loans(Pvt) Ltd.

Ms. Pandey serves as the Director/CEO of
Arthimpact Digital Loans Private Limited
and is the IFC Nominee Director at Maha
Micro Finance. As of January 2024
Ms. Pandey was appointed as a Director of
Trikuta Hills Essentials (Private) Limited.
As at 31 December 2023 Ms. Pandey holds
office as Director in a total number of 3
Companies (including the Bank).

Ms. Pandey holds a MBA from MIT Sloan School of Management - USA, a MSc in Economic
Management & Policy - UK and a BA (Economics) in India. She has received much praise for her workand has been honoured and recognised in the BW 40 Under 40 “Elite club 2022” by Business World.
She has been recognised by MIT Sloan School of Management as the Principal Innovative Leader of
the Future and awarded with the Influential Change Maker Award.

MR. HASITHA PREMARATNE / Non-Executive Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

15 June 2023

N/A

0 years, 6 months

Skills and experience

Concurrent appointments

Mr. Premaratne is the Managing Director of the Brandix Group and drives the overall strategy
and transformative journey of the company in Sri Lanka and overseas. Prior to taking up reigns as
Managing Director, Mr. Premaratne served as Group Finance Director and Chief Strategy Officer of
the Group, and sits as a Director on its subsidiaries and integrated ventures that include Teejay Lanka
PLC.

Mr. Premaratne serves as the Managing
Director of Brandix Group. He is also
Independent Director at John Keells Hotels
PLC and holds Directorship in the following
Companies namely; Best Pacific Textiles
Lanka (Pvt) Ltd, InQube Global (Pvt) Ltd,
Ocean Lanka (Pvt) Ltd, Teejay Lanka PLC,
Inspired Fashion Inc, Inspired Solutions
USA, Ocean Mauritius Limited, Quantum
Apparel Cambodia Ltd, Quantum Clothing
Group Limited (UK) and Teejay India Private
Limited.

Being an Independent Director at John Keells Hotels PLC, he serves as Chairman of the Audit
Committee. Mr. Premaratne was also a Director at Bank of Ceylon, Sri Lanka’s largest state-ownedbank, chairing the Board Risk and Nominations Committees. He also served on the Board of CIMA
Sri Lanka, and the Sri Lanka Accounting and Auditing Standards Monitoring Board, and was a
Committee Member at the Ceylon Chamber of Commerce, Sri Lanka’s oldest and most august tradechamber.
Before joining Brandix, Mr. Premaratne was the Head of Research at HNB Stockbrokers (Private)
Limited. He brings a wealth of experience including over a decade of service as a lecturer for CIMA(UK), where he won ‘Tutor of the Year’ at the CIMA Global Financial Management Awards in 2009.
Mr. Premaratne was also engaged with the ACCA (UK) in Sri Lanka, India, Singapore and thePhilippines. He holds a MBA in International Finance and a BSc in Computer Science. He is a Fellow
Member of Chartered Institute of Management Accountants (CIMA - UK), Association of Chartered
Certified Accountants (ACCA-UK), and the Institute of Certified Management Accountants (CMA - SL).
He is also a Chartered Global Management Accountant (CGMA).

Board of Directors

As at 31 December 2023 Mr. Premaratne
holds office as Director in a total number of
20 Companies (including the Bank).

National Development Bank PLC

Annual Report 2023

27

MR. KELUM EDIRISINGHE / Chief Executive Officer / Executive Non-Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

Length of Service as a Director:

01 February 2024

N/A

New Appointment

Skills and experience

Concurrent appointments

Mr. Kelum Edirisinghe joined National Development Bank PLC after having completed 30 years
with HSBC Sri Lanka and Maldives, where he held several key senior management positions, thelast being as the Chief Risk Officer of HSBC Sri Lanka and Maldives where he also served as the
Chair of the Risk Committee. His banking experience at HSBC covers a variety of leadership roles inEnterprise-wide Risk Management, Commercial Banking, Fund Management, Debt Restructuring,
Financial Analysis and Branch Banking.

Mr. Edirisinghe serves as the Chairman/
Director of Development Holdings (Pvt)
Ltd with effect from 01 February 2024.
Mr. Edirisinghe was also appointed as a
Director of NDB Capital Holdings Limitedwith effect from 14 February 2024.

Mr. Edirisinghe holds a B.Sc. from the University of Manchester in association with The Chartered
Institute of Bankers and a Master of Business Administration from Edith Cowan University, Australia.
He also holds a Diploma in Financial Management from the Association of Chartered Certified
Accountants and a certification on Treasury and Foreign Exchange Operations from Central Bank of
Sri Lanka. Mr. Edirisinghe is a member of the Faculty Advisory Committee of the Centre for Banking
Studies of the Central Bank of Sri Lanka.

As at 20 February 2024 Mr. Edirisinghe
holds office as Director in a total number of
3 Companies (including the Bank).

MR. DIMANTHA SENEVIRATNE / Former Chief Executive Officer / Executive Non-Independent Director
Date of appointment:

Date of Last Re-election / Re-appointment as a Director:

01 January 2017

N/A

Length of Service as a Director: 7 years(Ceased to be a director w.e.f. 31 January 2024)

Skills and experience

Concurrent appointments

Mr. Dimantha Seneviratne, the former Chief Executive officer (CEO) of the Bank, counts 34 years in the banking
industry contributing his strong strategic focus and drive towards the success of NDB. Having held this position
for 7 years, he has transformed NDB as a customer centric and digital savvy, high performing entity. Prior tojoining the Bank he was the Director / CEO of Pan Asia Banking Corporation PLC (PABC) for 3 years and prior
to that, he spent 15 years with the HSBC Group, where he held key senior management positions including
Chief Risk Officer Post for Sri Lanka and Maldives, Bangladesh and Thailand where he was also responsible
for business growth, strategy and governance in those respective geographies as a member of the Country
Leadership Team.

As at 31 December 2023,
Mr. Seneviratne was also the
Chairman of Development
Holdings (Pvt) Ltd and a
Director of The American
Chamber of Commerce in Sri
Lanka and several subsidiariesof the Bank. He was alsoa Member of the Board ofManagement to the National
Credit Guarantee Institution
Limited and held office as
Director in a total number of 11
Companies (including the Bankand group companies).

Mr. Seneviratne commenced his banking career with Sampath Bank and has also served in Overseas Trust Bank,
Colombo Branch and Saudi British Bank, Saudi Arabia prior to joining HSBC.
Mr. Seneviratne is a Fellow Member of the Chartered Institute of Management Accountants – FCMA (UK),
CGMA and a Senior Fellow Member (SFIB) of the Institute of Bankers of Sri Lanka. He holds a MBA from the
Postgraduate Institute of Management, University of Sri Jayawardenapura, and BSc, from the same University.
He is also a Post Graduate Diploma holder in Computer System Design from the National Institute of Business
Management. He successfully completed the High Potential Leadership Programme at the Harvard Business
School, Boston, USA, in 2016.
He was the former Chairman of Sri Lanka Banks’ Association (Guarantee) Limited and a Past President of The
Association of Professional Bankers (APB) Sri Lanka, having held various positions in the Executive Council of
the APB for over a decade. He was also a Director of Lanka Clear (Pvt) Ltd and the Credit Information Bureau Sri Lanka.

28

National Development Bank PLC

Annual Report 2023

Board of Directors

As at 20 February 2024,
Mr. Seneviratne has
relinquished the above
positions.

MS. SHEHANI RANASINGHE / Company Secretary
Skills and experience

Concurrent appointments

Ms. Shehani Ranasinghe was appointed as the Company Secretary of the Bank in 2012. She wasformerly attached to the Legal Department of the Bank where she gained experience in corporatebanking and financial law, investment banking and legal advisory services during her career
spanning over 30 years with the Bank. She has also functioned as the Company Secretary of several
subsidiary companies of the Bank prior to her appointment as the Company Secretary of the Bank.
She is an Attorney-at-Law (Hons) of the Supreme Court of Sri Lanka, a Notary Public, Commissioner
for Oaths, Qualified Company Secretary and earned her Bachelor of Arts (Hons) degree from the
University of Colombo.

Board of Directors

None

National Development Bank PLC

Annual Report 2023

29

The Leadership Team

12

01

14

04

07

Mr. Kelum Edirisinghe

05

Director/ Chief Executive Officer
02

05

13

Mr. Deepal Akuretiyagama

18

03

09

Chief Operating Officer

Mr. Dimantha Seneviratne

06

Former Director/ Chief Executive Officer

09

08

Mr. Zeyan Hameed
Vice President - Branch Network
Management and Product Development

Mr. Niran MahawatteVice President - Treasury

10

Ms. Ruwani De Silva
Vice President - Audit

03

Mr. K V Vinoj

07

Deputy Chief Executive Officer
04

11

Ms. Ishani Palliyaguru

12

Ms. Shehani Ranasinghe
Vice President - Company Secretary

Mr. Sanjaya Perera
Senior Vice President Personal Banking and Customer
Experience30

Mr. Indika Ranaweera
Vice President - SME, Middle Market
and Business Banking

National Development Bank PLC

08

Vice President - Project Finance andCorporate Credit Control

Annual Report 2023

Ms. Melody Wickramanayake
Vice President - Legal

17

13

11

15

Mr. Lasantha Dasanayaka

02

16

Vice President - Human Resources
14

Mr. Indika Gunawardena

Mr. Bimal Perera
Vice President Strategy and Business Intelligence01

Mr. Alex Perera

20

19

Vice President - Risk/ Chief Risk Officer
17

Vice President - Information Technology/
Chief Information Officer
15

06

16

19

Mr. Darshana Jayasinghe
Assistant Vice President Head of Marketing

Mr. Damitha Silva
Assistant Vice President Product Lifecycle Management

18

10

20

Mr. Nilanga Gajaba
Assistant Vice President Centralised Recoveries

Mr. Chandima Kannangara
Assistant Vice President Compliance Officer

National Development Bank PLC

Annual Report 2023

31

01

08

Mr. Kelum Edirisinghe
Director/ Chief Executive Officer(Appointed w.e.f. 01 February 2024)
Please refer page 28 for the profile

02

03

19 years of experience09

Mr. K V Vinoj
Deputy Chief Executive Officer

Mr. Sanjaya Perera
Senior Vice President Personal Banking and Customer Experience
MBA (PIM - University of Sri Jayewardenepura),
Fellow Member (IBSL), Passed Finalist (AAT - UK)10

25 years of experience17

28 years of experience, including 22 years with NDB
1112

Ms. Melody Wickramanayake
Vice President - Legal

25 years of experience, including 6.5 years with NDB
18

Attorney-at-Law (Hons) of the Supreme Court of
Sri Lanka, Commissioner for Oaths and Qualified
Company Secretary

14

Mr. Niran MahawatteVice President - Treasury

19

31 years of experience, including 22 years with
NDB years
Mr. Indika Ranaweera
Vice President SME, Middle Market andBusiness Banking

24 years of experience, including 4 years with NDB
15

Mr. Bimal Perera
Vice President Strategy and Business Intelligence(Appointed w.e.f. 02 May 2023)

Mr. Darshana Jayasinghe
Assistant Vice President - Head of Marketing
Fellow Chartered Marketer (CIM - UK), MBS - Merit(University of Colombo), PG. Dip. in Marketing (CIM
- UK), B.Sc. in Marketing Management (Sp.) - FirstClass (University of Sri Jayewardenepura)

Mr. Indika Gunawardena
Vice President - Information Technology/
Chief Information Officer
FBCS (UK), CITP (UK), MCS (SL), FCPM(SL),ISO27001LA, CQI & IRCA certified ISO22301LA,
ITIL, VCP, OCP, CC(ISC2), MBA (University ofGloucestershire-UK), MBA (University of Mahatma
Gandhi), MSc InfoSec (Asia e University, Malaysia),
COCC (UK), Executive Dip in Leadership (Northern
Illinois University - USA), Dip. in Computer System
Design (NIBM), MCSE, MCSA, MCTS, MCITP

FCMA (UK), CGMA, B.Sc. (University of Colombo)

27 years of experience, including 25 years with NDB

31 years of experience, including 3 years with NDB

25 years of experience, including 4 years with NDB

34 years of banking experience, including 5 years
with NDB

MBA - Merit (University of Colombo), MFE - Merit(University of Colombo), PG Dip. in Business
Management (University of Colombo), B.Sc.
Engineering (Hons) (University of Moratuwa)

Mr. Lasantha Dasanayaka
Vice President - Human Resources
Fellow of the Chartered Professional Managers
of Sri Lanka (FCPM), Fellow Member (Cambridge
Association of Managers - UK), BBA (UNEM),
Certified HR Manager

Mr. Chandima Kannangara
Assistant Vice President Compliance Officer
CAMS (Association of Certified Anti Money
Laundering Specialists), MBA (University of
Honolulu - USA), PG. Dip. in Bank Management(IBSL), Dip. in Banking and Finance (IBSL), Dip. inCompliance (IBSL)

32 years of experience, including 30 years with NDB
13

Mr. Damitha Silva
Assistant Vice President Product Lifecycle Management
FCMA (UK), CGMA, Associate Member (IBSL), MBA Merit (PIM - University of Sri Jayewardenepura)

Ms. Shehani Ranasinghe
Vice President - Company Secretary
Please refer page 29 for the profile

Mr. Deepal Akuretiyagama
Chief Operating Officer(Resigned w.e.f. 18 February 2024)
FCMA (UK), CGMA, FBCS (Chartered Institute for
IT - UK), M.Sc. in IT - First Class (Keele University- UK), Project Management Certification (CICC- Japan), Leadership Skills Certification (Asian
Institute of Management - Malaysia), Reading a
Doctorate in Business Administration (Universityof Colombo)

07

CFA (USA) Charter Holder, FCA (SL), FCMA (SL),Masters in Economics (University of Colombo),
Bachelor of Business Administration (Sp)
(University of Colombo)

Ms. Ruwani De Silva
Vice President - Audit
FCMA (UK), CGMA, FCA (SL)33 years of experience, including 8 years with NDB

06

Mr. Hasitha Athapattu*
Vice President - Finance(Appointed w.e.f. 20 February 2024)

31 years of banking experience, including 6.5 years
with NDB

31 years of banking experience, including 18
years with NDB

05

Mr. Zeyan Hameed
Vice President - Branch Network
Management and Product Development
ACMA (UK), CGMA, EMBA (PIM - University of
Sri Jayewardenepura)

CMA (Australia), ACSI (UK), MBA (University ofSouthern Queensland), MFE - Merit (Universityof Colombo), PG Dip. in Business and Finance(Cranfield University School of Management UK/
CA SL), NDHRM (IPM SL)

Mr. Alex Perera
Vice President - Risk / Chief Risk Officer(Appointed w.e.f. 01 June 2023)
CFA (USA) Charter Holder, M.Sc. Quantitative
Finance and Financial Engineering (University ofManchester), B.Sc. (Hons) in Computer Scienceand Engineering (University of Moratuwa)

27 years of experience, including 24 years with NDB(Appointed as the Deputy CEO
w.e.f. 01 November 2023)

04

16

FCMA (UK), CGMA,FCMA (SL), AIB (SL), MBA - Merit(PIM - University of Sri Jayewardenepura), B.Sc. (Bio
Science) - First Class (University of Colombo)

Mr. Dimantha Seneviratne
Former Director/ Chief Executive Officer(Relinquished Office w.e.f. 31 January 2024)
Please refer page 28 for the profile

Ms. Ishani Palliyaguru
Vice President - Project Finance andCorporate Credit Control

17 years of experience
20

Mr. Nilanga Gajaba
Assistant Vice President Centralised Recoveries
MBA (Cardiff Metropolitan University - UK),
PG Dip. (IBSL), CISI (UK) - Risk in Financial Services
31 years of experience, including 16 years with NDB
Ms. Suvendrini Muthukumarana*Vice President/ Chief Financial Officer(Resigned w.e.f. 31 December 2023)
FCA (SL), B.Sc. (University of Colombo)
29 years of experience, including 23 years withNDB

CFA (USA) Charter Holder, Certified Financial
Risk Manager (FRM - GARP), Bachelor of Business
Management (Finance) - University of Bangalore
20 years of experience32

National Development Bank PLC

Annual Report 2023

The Leadership Team

* Not appearing in the group image.

Senior Management

Mr. Amal Yapa

Mr. Sanjeev KulendranMs. Vidisha Jayawardena

Mr. Lasantha MathupalaBBA (University of Houston - Texas)

Associate Member (Financial Services
Institute of Australasia), Associate Member(IBSL), B.Sc. (University of Madras)

Attorney-at-Law (Hons) of the Supreme
Court of Sri Lanka, Notary Public,
Commissioner for Oaths, Qualified Company
Secretaryy

MBCS, PMI, ISACA, PCI Implementer,
B.Sc. (Hons), PG Dip. in Computer Science(University of Sri Jayewardenepura)

Assistant Vice President Wholesale Banking
30 years of experience in banking

Assistant Vice President Internal Audit

31 years of experience in banking

Assistant Vice President Legal

Assistant Vice President Information Technology

31 years of experience in banking

33 years of experience with 23 years
in banking

Mr. Sameera Wijegunawardena

Mr. Amila Withanage

Ms. Anushca Saranapala

Ms. Shareen Jayasuriya

MBA (University of Colombo), M.Sc. - IT,
B.Sc. (University of Kelaniya), PMP, ITIL-V4,
OCP, VCP

41 years of experience in banking

FCMA (UK), CGMA, ACSI, CIM Dip. (UK)

Assistant Vice President - Business
Relationship and Portfolio
Management

30 years of experience with 28 years inbanking

MBA (University of Wolverhampton - UK),
Dip. in Credit Management (IBSL)Assistant Vice President Information Technology

Assistant Vice President Risk Management

Assistant Vice President Credit

20 years of experience with 5.5 years inbanking

Ms. Ganga Wanigaratne

Assistant Vice President Operations - Trade Finance,
Payments and Treasury Operations
38 years of experience in banking

29 years of experience in banking

Mr. Indika Tennakoon

Mr. Vijitha Wettimuny

Ms. Camy Somasunderam

MBA - Merit (University of Colombo),
MFE - Merit (University of Colombo),
B.Sc. Physical Science (University of Colombo)

Graduated from Military Academy asCommissioned Officer of Sri Lanka Air Force

MBA (University of Wales - UK), CIM Dip. (UK)

Assistant Vice President Retail Credit and Operations

Assistant Vice President Administration & Services

Assistant Vice President Customer Experience andContact Centre

31 years of experience in banking

13 years of experience with 4.5 years inbanking

29 years of experience in banking

Mr. Priyantha Gamage

Mr. Gihan Punchihewa

Assistant Vice President Branch Operations

Assistant Vice President Privilege Select Banking

Mr. Sameera Senerath

Mr. Sydney Downall

CISI (UK) - Risk in Financial Services, CISSP(ISC2 - USA), MBA (University of Southern
Queensland), PG Dip. in Business and Finance(ICASL)LLM (Master of Laws, Business with Finance,
CMU - UK), MBA (Anglia Ruskin University UK), LLB (Hons) (BNU - UK), BA (Hons) - FirstClass (UWIC - UK), PQHRM (CIPM), PG Dip in
Business Strategy (ABP-UK), ADBM (NIBM)EMBA - Merit (PIM - University of
Sri Jayewardenepura), FIB (IBSL),
PG.Dip. in Marketing (CIM-UK),
Associate Member (SLIM)

MBA (University of Southern Queensland),
Dip. in Marketing (CIM - UK)

29 years of experience in banking

18 years of experience in banking

Assistant Vice President Sales

23 years of experience in banking

Assistant Vice President Colombo Region and ProductDevelopment

30 years of experience in banking

National Development Bank PLC

Annual Report 2023

33

Mr. Sunil Karunaratne

Mr. Damitha Samaranayake

Mr. Dilum Amarasinghe
Assistant Vice President Leasing

Mr. Ashan Wikramanayake

Assistant Vice President Treasury

MBA (University of Western Sydney)

Associate Member (IBSL), ACI Dealing
Certificate - Paris

MBA (Anglia Ruskin University - UK)

Member (Association of Business Executives- UK ), MBA (Cardiff Metropolitan University- UK), Adv. Dip. in Business Administration(ABE - UK )Assistant Vice President Treasury
38 years of experience in banking

34 years of experience in finance leasing

32 years of experience in banking

Assistant Vice President Card Centre

17 years of experience in banking

Mr. Romesh Tissera

Mr. Himansu Wickramasinghe

Ms. Dayani Algama

Ms. Darine Fernando

AIB (Sri Lanka), MBA (University of Colombo)

Masters in Development Studies (University ofColombo), BA (Hons) (University of New Delhi)

MBA (Edith Cowen University - Australia),
Dip. in Corporate Banking (IBSL)

31 years of experience in banking(locally and overseas)

32 years of experience with 26 years in banking

33 years of experience in banking

Mr. Ramesh Perera

Mr. Thilanke Weerasinghe

Ms. Ayomi Kaviratne

Mr. Niroshan De Silva

ACMA (UK), CGMA

MBA (University of Colombo), PG Dip. (CIM - UK),
BA (Hons) in Leadership and Management(Northumbria University - UK), CITF (London
Institute of Banking & Finance), CSDG (London
Institute of Banking & Finance), CSCF (London
Institute of Banking & Finance)

B.Sc. Engineering (University of Moratuwa)
ACMA (UK), CGMAAIB (Sri Lanka), Dip. in Credit
Management (IBSL), MBA - University ofWales TSD

Assistant Vice President Zonal Head - Business Banking
32 years of experience in banking

Chief Manager Transaction Banking

34 years of experience in banking

Assistant Vice President Mid Corporate & Business Banking
Liabilities

Chief Manager Transaction Banking

Assistant Vice President Human Resources

Chief Manager Wholesale Banking

20 years of experience in banking

Chief Manager Wholesale Banking

Chief Manager Wholesale Banking

31 years of experience in banking

19 years of experience in banking

Mr. Rukmal Dharmadasa
Chief Manager Supply Chain Finance

B.Sc. in Accountancy & Financial Management(University of Sri Jayewardenepura), ACMA (UK),
Certified Trade Finance Professional (CTFP) - ICC
AcademyMr. Indrajith Gamage

Ms. Madara Ariyaratne

Ms. Anushi Vithanage

ACMA (UK), CGMA, MFE (University ofColombo)

Attorney-at-Law (Hons) of the Supreme
Court of Sri Lanka, Notary Public,
Commissioner for Oaths, Qualified
Company Secretary, BA (Hons) (University of
Sri Jayewardenepura)

Attorney-at-Law (Hons) of the Supreme Courtof Sri Lanka, Notary Public, Commissioner
for Oaths, Qualified Company Secretary,
LL.M Master of Laws (with Company Law
and Banking Law) (University of Colombo),
Post Attorney Diploma in Banking Law andInsurance Law - Merit (Sri Lanka Law College)

Chief Manager Wholesale Banking

26 years of experience in banking

Chief Manager - Legal

30 years of experience in banking

23 years of experience in banking

Chief Manager - Legal

29 years of experience in banking

34

National Development Bank PLC

Annual Report 2023

Senior Management

Ms. Champa Wickramanayake

Ms. Medhini Senathirajasegaram

Mr. Mohan Palihawadana

Mr. Rukshan Liyanage

Attorney at Law of the Supreme Court of
Sri Lanka, LL.B (Hons) (University ofColombo), Post Attorney Diploma inIntellectual Property Law (Institute of Higher
Studies - Sri Lanka Law College)

ACMA (UK), CGMA, MBA (University ofColombo), B.Sc. (Hons) in Computer Science(University of Colombo)

AICM (SL), CISI (UK) - Risk in Financial Services,
PG Dip. in Business and Finance (ICASL)

MBA (Anglia Ruskin University - UK), PG Certificate
in Business Administration (University of Leicester- UK), Professional Diploma in International
Business (London School of Commerce - UK),
Certificate Course in Credit (IBSL)

Chief Manager - Legal

26 years of experience in banking

Chief Manager Credit Risk Management

Chief Manager Credit Review Division

30 years of experience in banking

21 years of experience with 20 years inbanking

Chief Manager Credit Review Division

27 years of banking experience

Ms. Rasika Dassanayake

Chief Manager - Business Relationshipand Portfolio Management
ACA (SL), B.Sc. in Accounting (Sp.) - First Class(University of Sri Jayewardenepura)
23 years of experience in banking

Ms. Lourdette Wijeyanathan

Chief Manager- Business Relationshipand Portfolio Management
PG Dip. in Business Management (Universityof Wales), Dip. in Corporate Banking (IBSL),
Intermediate Banking Diploma (IBSL)
28 years of experience in banking

Mr. Mano Thalis

Chief Manager -ComplianceDip. in Banking & Finance (IBSL) PG Dip. Business
Finance & Strategy (ICASL), CAMS (Associationof Certified Anti Money Laundering Specialists),
Dip. in Compliance (IBSL) Fintelekt Certified
AML/CFT Professional (FCAP), Certificate inTreasury and Foreign Exchange Operations(CBS), Certificate in Foreign Exchange ( IBSL)

Mr. Nishantha Amunugama
Chief Manager Centralised Recoveries

MBA (University of Southern Queensland),PG Dip. in Business (AUS - ICASL)
27 years of experience with 25 years inbanking

29 years of experience in banking

Mr. Ruchinda Kodagoda
Chief Manager Centralised Recoveries

Mr. Manjula Gunawardana

Chief Manager - Trade Finance
31 years of experience in banking

Postgraduate Diploma (PDG) in Business
Administration London School of Commerce,
MBA (Cardiff Metropolitan University)

Mr. Rohitha Wijesinghe

Chief Manager Central Operations , Payments andClearing

Mr. Vinod Sivapragasam
Chief Manager Shared Services

MBA (Anglia Ruskin University - UK)

29 years of experience in banking

29 years of experience in banking

Mr. Renuke Perera

Mr. Prasanna M. Jayawardhana

20 years of experience in banking

Ms. Dilhani Piyasena

Chief Manager Transformation and ProgrammeManagement Support
MBA (PIM - University of
Sri Jayewardenepura), B.Sc. - First Class(Nagarjuna University - India)
30 years of experience in banking

Ms. Aloka Ekanayake
Chief Manager Transformation Unit

ACMA (UK), CGMA, ACA (SL),MBA (University of Leicester)
29 years of experience in banking

Chief Manager Application Support, Enterprise
Datawarehouse and MIS
MBCS (UK), MBA (Cardiff Metropolitan
University - UK), B.Sc. in Computer Science(The Open University of Sri Lanka), Dip. inManagement - (ICFAI University - India)

Chief Manager Privilege and Privilege Select Banking
MBA - Merit (University of Gloucestershire - UK),PQHRM (CIPM - SL), CMA (ANZ )33 years of experience in banking

25 years of experience in banking

Senior Management

National Development Bank PLC

Annual Report 2023

35

Mr. Nilendra Vithanage

Ms. Manik Boteju

Ms. Surani Peiris

Mr. Sanath Susantha

FCA (SL), ACMA (UK), CGMA, B.Sc. in Finance(Sp) (University of Sri Jayewardenepura),
MFE (University of Colombo), Diploma in
Treasury & Risk Management (IBSL)

B.Sc. in Management (University of London)

B. Sc. in Physical Science (University ofColombo), ACMA (UK), CGMA, MBA(PIM- University of Sri Jayewardenepura)

MBA (University of Ruhuna), B.Sc. in PhysicalScience (University of Colombo)

Chief Manager - Zonal Head Business Banking

Chief Manager Project Finance

Chief Manager Financial Analysis

21 years of experience in banking

Regional Manager Greater Colombo Region
FCA (SL)32 years of experience with 26 years inbanking

Mr. Nalin Abeyratne

Mr. Thilina Hewage

Mr. Vinjaya Jayasinghe

Bachelor of laws (LLB), Senior Associate
Member (IBSL), MBA (University of Ruhuna),
BBA (Sp.) (Hons) (University of Ruhuna)

MBA (University of Wales - UK), Dip. in Human
Resource and Organisational Behaviour(American College of Higher Education),
Certificate in Inspiring and Motivating
Individuals and Influencing People(University of Michigan - USA)

Associate Member (IBSL), MBA (Cardiff
Metropolitan University - UK), BMS Degree(The Open University of Sri Lanka), Dip. inManagement (The Open University of Sri
Lanka), Level 4 Certificate in Advanced WealthManagement (CISI - UK), Level 3 Certificate in
Wealth and Investment Management (CISI - UK)

Regional Manager North Western Region

Regional Manager - Central Region

26 years of experience with 23 years inbanking

28 years of experience in banking

Mr. Sisira Herath

Ms. Himali Nandika

Ms. Sudeepa Kumari

MBA - Merit (Cardiff Metropolitan
University - UK), Diploma in Business Finance& Bank Management - IBSL, Micro MBA(Nth Degree Systems,Inc)

FCA (SL), B.Sc. in Accounting (Sp.) - Second Class
Upper (University of Sri Jayewardenepura)

MBA (University of Suffolk - UK), FCA (SL), B.Sc.
in Accounting (Sp.) - Second Class Upper(University of Sri Jayewardenepura)

Regional Manager North Central Region

34 years of experience in banking

22 years of experience with 17 years inbanking

13 years of experience in banking

Mr. Chandima Alwis

Chief Manager Leasing

Chief Manager Finance

Chief Manager Finance

23 years of experience with 17 years inbanking

22 years of experience with 17 years inbanking

32 years of experience in banking

Regional Manager - Southern Region

26 years of experience in banking

Mr. Ranisha Perera

Chief Manager - Human Resources
PG Dip. in Management (Cambridge Academyof Management), BBA (Business University of
Costa Rica), Adv. Dip. in Teaching, Training andAssessing (City & Guilds), Adv. Dip. in HRM (EIPE),
Applied Lean Six Sigma Practitioner (SSMI),
Certified HR Business Partner (AON), Executive
Certificate in HR Analytics (CIPM), MBA in HRM(University of Bedfordshire)
19 years of experience with 17 years in banking

Mr. Gehan Heenkende

Chief Manager - Business Intelligence
MBCS (UK), CITP (BCS - UK), M.Sc. in
Advanced Information Systems (Universityof London)
33 years of experience with 2 years inbanking

Ms. Nadie Samarasena

Mr. Deepa Edirisooriya

ACMA (UK), CGMA, MBA (PIM - University of SriJayewardenepura), B.Sc. - First Class (Universityof Colombo

MBA (Cardiff Metropolitan University UK), B.Sc. (Hons) in Business Information
Technology - Second Class Upper(University of Greenwich - UK)

Chief Manager Product Lifecycle Management

25 years of experience in banking

Chief Manager Product Management & Innovation

17 years of experience in banking

36

National Development Bank PLC

Annual Report 2023

Senior Management

Mr. Dharana Korale Arachchi
Chief Manager - Marketing

Member (SLIM), MBM Marketing (Universityof Kelaniya), B.BMgt. Marketing (Sp.) (Hons)(University of Kelaniya)
12 years of experience with 5 years inbankingGroup Subsidiary Leadership Team

04
01

03

Mr. Kelum Edirisinghe

07
05

07

Mr. Ruwan Perera05

Mr. Md Maroof ur Rahman
MazumderMr. Senaka Kakiriwaragodage

ACMA (UK), CGMA, MAFE (University ofColombo), MBA in Finance (University Of
Colombo), B.Sc. in Physical Science(University of Colombo), PG. Dip. in Business
Administration and Management (Universityof Colombo), PG Dip. in Corporate andStrategic Finance (CA - SL)

MBA in Finance (University of Dhaka),
PG.Dip. in Computer Application Programs(Bangladesh Institute of Bank Management),
B.Sc in Civil Engineering (Bangladesh
University of Engineering and Technology)

Chief Executive Officer NDB Capital Holdings Limited

22 years of experience, including 14 years with
the NDB GroupMr. Dimantha Seneviratne
Former Director/ Chief Executive Officer
Please refer page 28 for the profile

CFA, FCMA (UK), CGMA, MBA (University ofManchester - UK), B.Sc. in Computer Scienceand Engineering (University of Moratuwa)
21 years of experience, including 19 years with
the NDB Group
04

01

Appointed w.e.f. 20 February 2024

Please refer page 28 for the profile

03

06

Chief Executive Officer NDB Wealth Management Limited

Director/ Chief Executive Officer

02

02

Mr. Darshan Perera
Chief Executive Officer NDB Investment Bank Limited
Associate Member (IBSL), Associate Member(CIM - UK), Passed Finalist (CIMA - UK), Passed
Level 2 (CFA - USA), MBA (University ofColombo), B.Sc. in Physical Science (Universityof Colombo)
31 years of experience, including 22 years with
the NDB Group06

Chief Executive Officer NDB Capital Limited (Bangladesh)

Over 27 years of experience in the industry
AbsentMr. Gihan R. Cooray

Mr. Girish Patil

Chief Executive Officer NDB Securities (Pvt) Limited

Managing Director NDB Zephyr Partners Lanka (Pvt) Limited

MBA in Finance (Cardiff Metropolitan
University - UK), Certificate in Capital Markets(SEC - SL), High Potentials Leadership
Programme (Harvard Business School - USA)PG Dip. in Management (SDM IMD - India)

22 years of experience, including 20 years with
the NDB Group

21 years of experience, including 9 years with
the NDB Group

Mr. Kazi Farhan Zahir
Managing Director & Chief Executive
Officer - NDB Capital Limited (Bangladesh)
Resigned w.e.f. 07 January 2024

MBA (North South University - Bangladesh),
B.Sc. in Electrical Engineering (Purdue
University - USA)
17 years of experience, including 3 years with
the NDB Group
National Development Bank PLC

Annual Report 2023

37

Rikka(15th Century)

Operating Landscape and Strategy

Nageirebana(16th Century)

SeikaMoribana(18th Century)(20th Century)

ModernA Transformative Spirit
Over the years, we have redefined our approach towards value creation, utilising
innovative concepts and creativity to address change, and embody a life ofcontinuous transformation.
Across centuries, ikebana has evolved with the times, reflecting various eras and influences. Each iteration is inspired bychanging dynamics and the needs of the time.

Operating Environment
We closely monitored the developments in the macro-economic, socio and political as well as natural environment as they had impact
of varying significance on the Group’s performance. We were agile in assessing how these developments could affect the Group’s value
creation process, how they impact our stakeholders and how the Group needed to recalibrate efforts in preserving stakeholder interests.

Macro-Economic Developments
The banking sector continued to be impacted by the lingering effects of the recent economiccrisis. Credit demand remained subdued in the backdrop of low economic activities while
repayment capacities continued to be impacted by liquidity constraints brought on bypersisting inflationary pressures and tax adjustments.

Credit Growth
LKR Bn11,50011,000Signs of improvement however were observed towards the third quarter of the year as theeffects of the economic reform programmes implemented by the Sri Lankan authorities started
to show preliminary results. A gradual increase in credit was witnessed in latter part of 2023 witheasing of policy rates by the Central Bank of Sri Lanka (CBSL). Meanwhile stabilisation of credit risk
was witnessed during Q3 of 2023 as indicated by the slowdown in the growth of Stage 3 loans.

10,50010,000
9,500
9,000
8,500

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Year-on-Year Contraction of
Sri Lankan Economy

An Easing of Inflationary
Pressures

Monetary Policy Easing

Gradual Appreciation of the
Rupee

The lingering impact of the
COVID-19 related economic
slowdown, social, political, andeconomic uncertainties and ashrinkage in aggregate demand
due to high inflation, monetary
tightening and fiscal tightening
during 2022 continued to weighin on the economy resulting acontraction of the economy in
the first two quarters of 2023. The
economy started showing signsof gradual recovery during thelatter part of 2023 with all three key
sectors recording growth in Q3 andQ4. Notwithstanding this turnaround the IMF estimates a 3.6%
GDP contraction for the full year due
to the significant contraction in Q1
and Q2 of the 2023.

Inflation witnessed sharp downward
momentum from the historicalhighs witnessed in 2022 owing
to the lagged impact of tightmonetary policy, normalisation ofdomestic supply side bottlenecks,
appreciation of the domestic
currency and the downward
adjustment of global commodity
prices. Accordingly, the Colombo
Consumer Price Index (CCPI)
reached single digits in July 2023
after peaking at 69.8% in September
2022 and remained relatively stablethroughout the remainder of theyear.

The CBSL commenced relaxing its
monetary policy stance in June
2023 ending the most stringent
monetary policy tightening
measures in the history of Sri Lanka.
The easing of monetary policy
together with the falling risk premia
following the finalisation of theDomestic Debt Optimisation (DDO)
resulted in market interest rates
adjusting downwards.

The acute shortages in foreignexchange liquidity witnessedin 2022 eased in 2023 with
an improvement in market
confidence with the approval of
the International Monetary Fund(IMF) Extended Fund Facility andincreased inflows through export
proceed conversions, workers’
remittances and tourist earning
as well as restrictions on imports.
Budgetary support from AsianDevelopment Bank and WorldBank funds also contributed to theeasing of liquidity conditions in thedomestic foreign exchange market.
As a result the exchange rate
which depreciated sharply in 2022
witnessed a notable appreciationand stabilisation during 2023.

Services
Industries

Agriculture

NCPI (2021=100)
CCPI (2021=100)

Impact on the Group - HighImpact on the Group - High

AWLR
AWDR

Policy stimuli towards supporting the country’s SME sector

2023
2022

Impact on the Group - HighImpact on the Group - HighThreats

Increased pressure on repayment capacities leading to increased credit risk
and a deterioration of credit quality across the banking sector
Subdued demand for credit growth amidst sluggish economic conditions
Pressure on NII due to lower credit growth and the decline in interest rates

Strategic Response40yRe-calibrated growth targets, taking a more cautious approach to lending while prioritising on portfolio qualityySustained focus on supporting customers through the crisis via financial and non-financial supportyPursued selected growth opportunities in local manufacturing, import substitution and export industries in line with the national development agenda

National Development Bank PLC

Annual Report 2023

Dec

Oct

Nov

Sep

Jul

Aug

200

12 Month T-bill Rate

Opportunities
A gradual resumption of trading activities due to removal of foreignexchange and certain import restrictions

Dec-23Oct-23

Nov-23

Sep-23

Jul-23Aug-23Jun-23Apr-23May-23Mar-23

250
Jan-2310

Feb-23

Dec-23Oct-23

Nov-23

Sep-23

Jul-23Aug-23

Q3

Jun-23Q2

Apr-23

Q1

May-23

-25

300

15
Mar-23

-20

350

20

Jan-23-15

25

Feb-23

0-5-10

LKR/USD
400

Jun

30

Apr

%

60
50
40
30
20
10
0

May

%

5

Monthly Average Exchange RateMar%

Movement in Interest Rates

Jan

Inflation YoY % Change

Feb

Quarterly GDP Growth by Sector

Regulatory Developments

Digital Disruption

Growing Impetus for Climate Action

Several measures were implemented by the CBSL toensure price stability and financial system stability.
Key developments during the year include;

Digitalisation continues to disrupt the banking
sector, transforming traditional banking models,
reshaping customer interactions, and driving
innovation in financial services. Key trends
impacting the digitalisation drive of the financial
sector are discussed below;

The pandemic has brought the urgency of theclimate crisis into sharp focus, and there is a growing
recognition that bold and urgent action is needed toaddress it. Governments, businesses and individuals
are increasingly recognising the need for collective
action to reduce emissions, transition to renewableenergy, and protect vulnerable communities from theimpacts of climate change.

Structural ReformsyyStrengthening the legal framework governing
the financial sector of Sri Lanka through theenactment of the Central Bank of Sri Lanka
Act (CBA) in September 2023. While increasing
the autonomy of the CBSL, the CBA enhanced
accountability of the CBSL in relation to its
policy actions
Amendments to the existing Banking Act, No.
30 of 1988 to strengthen and streamline theprovisions in line with international standardsyyPolicy Interventions
y

y
y
y
y

y
y

Further to accommodative monetary policy
stance adopted by CBSL, policy rates were
cut by a cumulative 650 basis points and the
Statutory Reserve Requirement (SRR) was
reduced by 200 basis points during 2023
Directions on discretionary payments ofLicensed Banks (LBs)
Revoking of Margin Requirements against
Imports
Imposition of maximum interest rate on certain
Rupee lending products
Request to reduce the interest rates of new andexisting rupee denominated lending productsby specific percentages on target dates subject
to a floor rate of 13.5%
Reduction of the penal interest rate to a level
not exceeding 2% per annum

y

y

y

Cap on Loan to Value (LTV) for credit facilities
granted for housing purposes

Customers are increasingly demanding
seamless banking experiences throughdiverse channels such as mobile applications,
online platforms, and chatbots, emphasising
the importance of convenience andpersonalisation in their banking experience.
Banks are responding by allocating moreresources towards digital transformation
efforts, aiming to deliver a seamless,omnichannel experience to customers while
also optimising their operational processes.
AI driven digitalisation, big data and analytics
and the integration of blockchain technology
are expected to be key disruptors as thebanking sector increasingly moves towards
more personalised offerings.
Banks are increasingly expanding their reachthrough ecosystem integration, forging
partnerships with non-banking entities likeretailers, e-commerce platforms, and service
providers. These collaborations enable banks
to provide integrated financial services
tailored to customer lifestyles.
Managing cybersecurity and safeguarding
customer data will remain a key focus as banks
increasingly shift to digital channels. Banks are
therefore increasingly embracing cuttingedge technologies like biometrics, blockchain,and encryption.

Impact on the Group - High
Opportunities

In Sri Lanka, voluntary, industry-led initiatives havebeen implemented to promote sustainable finance.
Early in 2015, the Sri Lanka Banks’ Association (SLBA)
launched the Sri Lanka Sustainable Banking Initiative(SL-SBI) with the aim to jointly agree upon minimal
standards or principles for integrating environmental
and social considerations into operations and to
implement these standards among the signatory
banks.
Spurred by the growing call for meaningful climate
action, banks are intensifying their commitment
to ESG agendas and progressively integrating
environmental and social factors into theirfundamental operations.

Impact on the Group - High
Opportunities

Impact on the Group - High
Opportunities

Opportunities for growing trade business due toremoval of margin requirements for imports

Opportunities to grow transaction businessand fee-based income

Closer monitoring of discretionary expenses andpositive impact on cost to income ratio

Greater cost savings through operational
efficiencies

Opportunities to grow renewable energy
portfolio due to Government’s renewed focus on
renewable energy sector
Implement green financing schemes to promote
environmentally sustainable businesses

Greater customer centricity
Threats

Threats

Impact of declining rates on margins

Threats

Increasing risks of cyber-attacks and financial
crime

Climate-related risks and implications on key
sectors such as tourism and agriculture
Potential disruptions to operations stemmingfrom natural disasters

Strategic ResponseyMaintained close engagement with customers
and authorities to ensure open communication
lines

Operating Environment

Strategic Response

Strategic ResponseySuccessful migration to the new version of thecore banking systemyDriving operational excellence through robotic
process automation and digitised processesyOngoing improvements to digital platforms
and digital offeringyObtaining ISO certifications for process
standardisationy

Increased focus on enhancing digital skills andinculcating a data-driven culture across theorganisationyDuring the year we strengthened our partnershipwith leading Green Financing Institution ‘Global
Green Growth Institute (GGGI)’ to build capacity inmobilising green fundingyContinued focus on minimising ourenvironmental footprint through responsible
consumption of resources including energy and
paper

y

Ongoing engagement with Sri Lanka Climate
Fund to formulate an action plan for achieving net
zero status

National Development Bank PLC

Annual Report 2023

41

Outlook

Changing Labour Dynamics
Increasing levels of digitisation in the banking sector has changed
the required skill profile of bank employees with an increased
emphasis on digital skills, analytics as well as empathy and creativity.
Sri Lanka’s brain drain continues to be a key problem across sectors,
as the country’s economic crisis led to a mass exodus of skilledworkers. Migration levels are particularly high in younger cohorts.

Impact on the Group - High
Opportunities
Growth opportunities for existing employees through roleenhancement
Increased focus on process automation and digitisation
Threats
Loss of tacit knowledge due to the loss of talent
Increased hiring and training costs involved in new
recruitment

The following section discusses the short-term outlook for thebanking sector considering significant macro-economic shifts andpolicy developments expected in the 2024
Gradually improving momentum in the domestic economy

Economic growth is projected to pick up from -3.6 % in 2023 to
1.8% in 2024, supported by accommodative monetary conditions
and the relaxation of import restrictions (Source: IMF)

Downward adjustment in interest rates

Market interest rates are expected to continue to adjust
downwards in line with eased monetary policy and administrative
measures taken to reduce overall market lending interest rates.

Impact on employee moral and customer satisfaction levels

Persisting inflationary pressures

Strategic ResponseyAdditional relief allowances to ensure financial security of
employeesyContinued upskilling of NDB Team to support organisational
realignmentyIncreased focus on developing leadership pipeline

Sources: Central Bank of Sri Lanka, Department of Census and Statistics

Inflation is expected to remain in the single digit level, however islikely to edge up due to the introduction of the Value-Added Tax(VAT) measures from January 2024.

Continued focus on improving regulatory and governanceaspects of the industry

Ongoing developments in the regulatory landscape including
proposed amendments to the Banking Act, CBSL’s Bank
recapitalisation plan and proposed improvements to Corporate
Governance frameworks

IMPACT

Continued pressure on maintaining a healthy net interest margin
in a declining interest rate environment
The gradual normalisation of market lending interest rates andimproving investor and business sentiments are expected tosupport a gradual expansion of credit to the private sector
Income levels and stabilisation of domestic inflation are expected
to improve debt repayment capacities

42

National Development Bank PLC

Annual Report 2023

Operating Environment

A Futuristic and Agile Strategy
The Group’s futuristic long-term strategy was launched in 2020 with the long-term objective of becoming the “Banking Group of Choice”
based on a strong proposition of customer centricity. Revolving around five integrated strategic pillars this strategy aims to differentiate
the Group’s offering by driving customer centricity across all aspects of its operations, to better cater to rapidly evolving customer needs.
Higher levels of uncertainty brought about by the unprecedented economic crisis in the country necessitated us to re-evaluate and recalibrate
our near term objectives. They also required the development of tactical changes to effectively address short to medium term challenges
including slower than expected economic growth, declining interest rates and the unprecedented brain drain from the country. Accordingly,
the Group formulated a mid-term strategy to be implemented and guide it during the ensuing two to three years. The mid-term strategy
which involves a greater focus on building resilience and operational efficiency was rolled out in the second-half of this year. This mid-term
strategy also placed heavy emphasis on transaction banking, whereby we aim to become the preferred bank of choice for all our customers
across multiple segments.

Mid-term strategy
Cruising throughuncertainties
Towards sustainablegrowthKey Strategic
Pillars

Business Focus
Customer
Solutions
Shift from a productcentred approach toa customer-centred
approachTransaction banking drive
in becoming the preferredbanking choice for all
customer segments

Digital and Data asTransformers
Leverage data and digital
infrastructure to offer
seamless, personalised
and customer-centric
solutions

Organisational
Realignment
Drive cohesive changes
in the organisational
structure to achievecustomer centricity andprocess efficiencies

Time-bound Goals

Empowered Staff
Build a motivated, creative,
and productive team byempowering employees
and fostering a culture ofinnovation and customer
centricity

Medium Term
 Capital augmentation

Short Term Pursue products offering higher risk
adjusted returns
 Driving transaction banking

 Transforming branch banking for greater
scale and efficiency
 Strengthening our ESG commitment

Long Term
 Becoming the Banking Group of Choicefor clients across all segments, stronglyaligned to national development agenda

 Preserving portfolio quality

National Development Bank PLC

Annual Report 2023

43

Delivering Our Strategy
CUSTOMER SOLUTIONSKey Focus

Market Dynamics Impacting Strategy in 2023

Tactical Re-alignment of Strategy

Emphasis on customer
centred approach in providing
convenient and seamlesssolutions to customers

y Increase in requests from customers for concessions andfacility restructures due to economic crisis

Support customers through the prevailing
economic crisis with innovative products
and services including advisory support

y Growing demand for seamless and convenient digitalbanking channels

Strategic Initiatives FY 2023

Resources Allocatedy Strengthening customer feedback channels by placing QR Boards at branches and sending
feedback SMS link to customers to obtain instant feedback on service levels

Ongoing customer-service related
trainingy Creating more opportunities for customer engagement through targeted customer forums,
more one-to-one interaction and greater digital engagement

Enhancements to digital capabilities

y Fully integrated digi loans facilities through NEOS App
y Continued emphasis on positioning the Bank as a lifestyle driven bank
Progress Achieved

Way Forward

4.9/5.0

LKR

Customer
Satisfaction Rate

Brand
value

9.2 Bny Strategic direction and formulation to be customer centricy Continued emphasis on staff training to enhance service levels across theorganisationy Improvement of customer engagement levels by leveraging technology, social
media platforms and customer relationship management

BUSINESS FOCUS
Key Focus

Market Dynamics Impacting Strategy in 2023

Tactical Re-alignment of Strategy

Transaction banking
drive in becoming
the preferred banking
choice in transacting for
all customer segmentsy Sharp decline in market interest ratesy Drive profitability growth through strategic focus
on NII and fee-based income

y Continued pressure on repayment capacity of customers
y Slower than anticipated economic recovery andeconomic activity

y Sharper non-performing loans managementy Enabling transactions drive through seamlessand convenient platforms
Resources AllocatedStrategic Initiatives FY 2023

y Strategic emphasis on preserving portfolio quality
y NEOS Corporate with new functionalities including CEFT, Letters of Credit and tradefacilities to drive transactions and fee-based income

Progress Achieved

44

Brand building to drive growth in identified
areas
Investments to improve data analytics
capabilities

Way Forward

8.58%

4%

14%

Impaired loans(stage 3) ratio

NII
growthGrowth in
fee income

National Development Bank PLC

Annual Report 2023

y Continued focus on driving NII
y Driving transaction volumes to grow fee-based income
y Improving and preserving asset quality

DIGITAL & DATA AS TRANSFORMERSKey Focus

Market Dynamics Impacting Strategy in 2023

Tactical Re-alignment of Strategy

Leverage data and digital
infrastructure to offer seamless,personalised and customercentric solutionsy Growing sophistication of customer digital requirementsy Increased risk of cyber threats and fraud

Greater focus on process automation todrive cost savingsy Cost escalations in IT infrastructurey Higher labour turnover due to migration resulting in
more scope for process automations

Strategic Initiatives FY 2023

Resources Allocatedy Successfully migrated to the upgraded core banking system with new modules such as
Treasury Front Office, Advance Collection, TEMENOS Corporate Internet Banking (TCIB), Digital
Layer, and others with greater processing capabilities

Investments in strengthening IT
infrastructurey Continued investments in network and information security systems including nextgeneration core and perimeter firewalls

Investments in data securityy Introduction of process standardisation, anomaly-based detection and response to streamline
processes

80 member strong IT Team
Subject specific training for IT
staff

y Obtained new process certifications including ISO 27001, (Information Security Management),
ISO 20000 (IT Service Management) and ISO 22301 (Business Continuity)
Progress Achieved

Way Forward

11%

12%

Growth in volume ofdigital transactions

Growth in value ofdigital transactionsy Continued focus on network and data securityy Emphasis on system stability and security

ORGANISATIONAL REALIGNMENTKey Focus

Market Dynamics Impacting Strategy in 2023

Tactical Re-alignment of Strategy

Drive cohesive changes in theorganisational structure toachieve customer centricity andprocess efficiencies

y Increasing preference of customers for a one-stop
solution for banking requirement

Introduction of Product Lifecycle
Management, with a view of incorporating
digitisation at all product levels, embracing
aspects of digital, tech and data together todeliver a better experience to customers

y Impact of high staff turnover on organisational
tacit knowledge including customer insights andrelationships

Strategic Initiatives FY 2023

Resources Allocatedy Re-purposing job roles to fill the vacuum created by relatively high labour turnovery Enhancements to NEOS App to promote cross selling of Bank’s products

Investments made in data analytics
technology

y Greater focus on data analytics to enhance share of wallet
Progress Achieved
Deeper customer
relationships andhigher wallet share

Delivering Our Strategy

Training and development for role
repurposing

Way Forward
Increased diversity ofearnings profiley Ongoing focus on developing data analytics capabilities to gain deeper
understanding of key business segments to identify cross selling opportunities
y Empower employees through knowledge enhancement, role restructuring andperformance evaluation to promote and drive cross selling

National Development Bank PLC

Annual Report 2023

45

EMPOWERED STAFF
Key Focus

Market Dynamics Impacting Strategy in 2023

Tactical Re-alignment of Strategy

Build a motivated, creative,
and productive team byempowering employees andfostering a culture of innovationand customer centricity

y Higher levels of attrition due to increased migration ofskilled workers from the country

Building internal capacity across all levels
and a strong leadership pipeliney More opportunities for career mobility as a result of new
vacancies within and outside the organisationy Impact on financial and mental well-being as a result ofhigher levels of uncertainty

Strategic Initiatives FY 2023

Resources Allocatedy Additional relief allowances to ensure financial security of employeesy Continued upskilling of NDB Team to support organisational realignmenty Increased focus on developing leadership pipeline

LKR 6.6 Bn in payments toemployees
LKR 39.3 Mn training investment

y Further deployment of NDBPAL a holistic employee well-being propositiony Increased employment engagement levels through team building and recreational activities
Progress Achieved

Way Forward

24%

78%

Female representation insenior management

Retention ratey Competency based training aligned to mid-term strategy of the Groupy Succession planning through leadership training

EDGE certified

For work place gender equity

46

National Development Bank PLC

Annual Report 2023

Delivering Our Strategy

Stakeholder Engagement
Stakeholder engagement is a critical aspect of our value creation process as it enables us toproactively identify, understand and address evolving stakeholder expectations and align our
strategic priorities to those of our stakeholders. We continued to engage closely with our
stakeholders during the year, exploring innovative modalities to deepen engagement levels.

Shareholders
Engagement Channels

Approach to stakeholder engagementy Annual and Extraordinary General Meetings

Identify Material Issues

Identify Stakeholders
In determining stakeholders
to engage with, the Groupprioritises stakeholders thathave the most significant
influence on its ability to1create value

Prioritise issues basedon importance tostakeholder groups

y Year-round meetings with investment
analysts, stock brokers, etc.
y Annual Reports

Formulate Strategy
Align stakeholder
priorities with strategic
priorities of the Bank

2y Quarterly investor webinars

y Investor road-shows3

Engage with Stakeholders
Tailor-made engagement
mechanisms to ensure thatengagement is meaningful,inclusive and of suitablefrequencyy Quarterly financial results publicationsy Quarterly performance updates

4y Investor presentations and announcements
to the CSE
y Dedicated investor relations page on our
website www.ndbbank.com
y Dedicated top management persons
earmarked for investor relations support

Key Concerns 2023
y Group’s financial performance and stability
amidst macro-economic crisis
y Effective risk management practicesHigh

Our Stakeholder Universe
Active Consultationy Sustainable returns commensurate with therisk undertaken

Collaboratey Strength of The Leadership Team

Stakeholder Influencey Staff retention ability amidst risingmigration levels in the country

Suppliers

Shareholders

Employees Customers

y Integrity and high standards of corporate
conduct and governancey Increased focus on ESG considerations

Our Strategic Responsey Implementation of mid-term strategy toaddress short to medium term challenges
Government

Communities

Keep Informed

Maintain Interesty Continued focus on strong governance andrisk management practices

More Information
Low

Stakeholder Engagement

Stakeholder InterestHighy A futuristic and Agile
Strategy

Page 43y Financial Capital

Page 56

y Risk Management &Corporate Governance

Page 108

y Investor Relations

Page 367

National Development Bank PLC

Annual Report 2023

47

Employees

Suppliers andBusiness Partners

Customers

Engagement Channels
y Annual employee satisfaction surveys
y Human Capital Management System (HCM)y Periodic Town Hall Meetings for all staff
y Weekly leadership team meetings, monthly
regional manager and business review
meetings, quarterly branch manager
meetings, etc.
y Induction programmes for all new recruitsy Work life balance initiatives conducted by
the Staff Recreation Club and ToastmastersClub

y QR table tops at branches to obtain
feedback on customer satisfactiony One-on-one meetingsy Dedicated team at the Contact Centre,
functioning 24x7 all year roundy Dedicated communication channel
through ndb.tenders@ndbbank.com

y Ongoing customer interaction at branches
and other business lines

y Invitation for bids, tenders and informationon the website

y Supplier reviews and assessments

y Customer visitsy Ongoing online and social media
interactionsy Print and electronic media publicationsy Online and mobile banking portalsy Annual Retail Banking Awards

Key Concerns 2023
y Financial and job security amidst economiccrisis in the country

y Loan repayment relief in view of macroeconomic challenges

y Fair and transparent pricing

y Increased levels of anxiety and uncertainty
regarding future of economy

y Seamless access to digital platforms

y Ease of transactingy Uninterrupted service deliveryy Fast response times

y Secure and stable platforms for transactingwith regards to correspondent banks

y Competitive and transparent pricingy Alignment to ESG aspects

y Effective performance management andattractive remunerationy Career advancement opportunitiesy Training and development opportunitiesy Continuity of business relationshipsy Responsible banking practices

y Work life balance

Our Strategic Responsey Additional financial support for employeesy Ongoing training and development
opportunities across all levels
y Ensuring employee physical and emotional
well-beingy Closer engagement to understand andsupport customers through the crisisy Further streamlining procurement process
to bring about greater efficiencies

y Continued focus on improving digitalplatforms

y Driving ESG aspects through policies andprocesses governing procurement andsupplier engagementy Continued focus on improving service
delivery and customer service

More Informationy Human Capital

48

Page 80

National Development Bank PLC

y Social and Relationship Capital

Annual Report 2023

Page 90

Stakeholder Engagementy Social and Relationship Capital

Page 90

Community

Government and Regulatorsy Publications including the Bank’s
sustainability reporting and other press
releasesy Liaison with the regulatory bodies onmatters concerning the sectory Community capacity building programmesy Engagement through industry associationsy Statutory reportingy Interaction with community through CSR
projects
y Engagement through social media

y Impact of lending practices on social andenvironmental issues
y Need for greater financial literacy among
underbanked communities
y Employment generationy Stability of the financial system
y Contribution towards stimulating
economic activityy Compliance with all relevant regulations,directions, and guidelines
y Direct and indirect impact on stakeholders,
the society and the environmenty Greater integration between businessstrategy and wider community needsy Active engagement with industry
stakeholdersy Full compliance with regulations andcongruence with roadmaps/ directionsy Social and Relationship Capital

Stakeholder Engagement

Page 90y Corporate Governance

Page 110National Development Bank PLC

Annual Report 2023

49

Material Matters
Our material topics are those that represent the Group’s most significant impacts on the economy, environment, and people,
including impacts on their human rights. We adopt an integrated approach to identifying our material matters; taking into
consideration stakeholder views and internal insights to understand our most significant impacts. The material issues thus
identified drive our strategic focus and form the basis of our internal and external reporting throughout the year.

Step 01

Step 03

Step 02
Identify Material Topics

Assess Potential Impact

Prioritise Matters

Material topics are identified based on
our assessment of emerging trends inthe operating landscape and ongoingstakeholder engagement activities.

Topics are assessed through a doublemateriality lens which considers bothfinancial impacts to the organisation
as well as economic, social, andenvironmental impacts to otherstakeholders.

Identified matters are prioritised
based on impact to organisation andstakeholders.

Process for determining material matters
The Materiality Map developed for 2023 based on the above process is depicted below

Materiality Map 2023

Organisational Impact
Profitable growth
Ecosystem partnerships

Stakeholder Impact

Brand positioning

Adapting to post-pandemic realities

Ensuring safety of employees and customers

Regulatory developments

10

Customer centricity

98Community engagement

7

Customer privacy

6
54

Elevated importance of risk management

Operational efficiency

3
2
1
0

Market and liquidity management

Talent attraction and retention

Impacts of sovereign rating changes

Brain drain due to migration

Managing socio-political impacts

Employee mental well-being

Managing macro-economic headwinds
Environmental, Social andGovernance aspects

RatingRating
Scale
Scale

50

National Development Bank PLC

Digital transformation
Embracing and leveraging technology and data
Responsible
lending

10 - 7: High importance

Annual Report 2023

Facilitating financial inclusion and financial literacy

6 - 4: Medium Importance3 - 0: Low importanceMaterial topic

Prioritisation
Organisational
impactStakeholder
impactH

H

H

M

Ensuring safety of employees
and customers

H

H

Customer centricity

H

Customer privacy

Profitable growth
Brand positioning

Operational efficiency
Talent attraction andretention

Brain-drain due to migration
Employee mental well-being
Digital transformation
Embracing and leveraging
technology and data
Facilitating financial inclusionand financial literacy
Responsible lending
Environmental, Social andGovernance aspects-

Shareholders

GRI 207- Tax
GRI 201- Economic Performance

56-

Customers

GRI 417- Marketing and Labeling,
SASB FN-IB-510a.2 Business Ethics,
SASB FN-CB-510- Business Ethics

88

H

-

Customers

44

H

H

-

Customers

H

H-

Employees,
Customers-

Employees

GRI 418- Customer Privacy

77
75 - 77 and 88 - 89

GRI 202 - Market Presence, GRI 401-Employment,
402- Labour/Management Relations , 404-Training
and Education, 405- Diversity and Equal
Opportunity,SASB FN-IB-330- Employee Diversity &Inclusion

H

H

H

H

Increased
importance

Employees

H

H-

Employees

H

H-

Customers,
Employees

H

H-

Customers,
Employees,
Shareholders

75

H

H

-

Communities, SASB FN-CB-240: Financial Inclusion and
Government Capacity Building

90

H

H

-

Customers,
Communities

99-

Shareholders,
Employees,
Business
partners

H

H

Managing socio-political
impacts

H

H

Impacts of sovereign ratingchangesH

M

Market and liquidity
management

H

H

Elevated importance of risk
management

H

H

Community engagement

H

H

H

H

M

M

H

H

Material Matters

Page reference
for further
information

80 - 87

Managing macro-economic
headwinds

Ecosystem partnerships

Relevant GRI/SASB Standard

Employees,
Customers

H

Adapting to post-pandemic
realities

Stakeholder
group
impacted-

H

Regulatory developments

Changes inmateriality
compared tolast year--

80 - 87

80 - 87
80 - 87
SASB FN-CB-230: Data Security

75

GRI 301-Materials , GRI 302- Energy , GRI 305
Emissions ,SASB FN-IB-410-Incorporation of
ESG factors in Investment banking activities,
SASB- FN-CB-410-Incorporation of ESG Factors
in Credit Analysis

10 - 103

Shareholders, GRI 201- Economic Performance
Employees,
SASB FN-IB-550- Systemic Risk Management
Customers
SASB FN-CB-550- Systemic Risk Management

40 - 42

Shareholders,
Employees,
Customers

40 - 42-

Shareholders-

Shareholders,Customers

337 - 366-

Shareholders,Communities

337 - 366-

Communities GRI 413- Communities

90 - 96-

Government,
Shareholders

40 - 42

Decreased
importance

Customers,
Employees

40 - 42-

Business
Partners

90 - 96

40 - 42

National Development Bank PLC

Annual Report 2023

51

Value Transformation Process
Having discussed the dynamics of the operating environment in which we functioned, how we strategised in navigating them and deepened
stakeholder relationships, the below depiction is the culmination of how the Group utilised its resources and relationships in generating
stakeholder outcomes. As we have done in the prior years, inputs have been classified based on the six capitals defined by the Integrated
Reporting Framework, together with a seventh capital identified by NDB, namely, Digital Capital given its significance and relevanceto us. We have depicted the elements of corporate strategy and business verticals among others, which have been integral in our valuetransformation process.

CAPITAL INPUTSVALUE TRANSFORMATIONThe Group’s capital funds, strong deposit
base and funding from other investors
provide a strong base to drive our strategic
goals.

Our Business is driven
through two key verticals

Banking

Total equity: LKR 75.9 Bn

Capital Markets

Deposits: LKR 615.2 Bn
FINANCIALCAPITAL

Borrowings: LKR 77.3 Bn(Page 56)

Lending

The Group’s Digital capabilities andinfrastructure continue to enhance customer
experience.

Deposit
Mobilisation

Temenos R20 core banking system
DIGITALCAPITAL

Investment
Banking

Integrated IT systems and digital services

WealthManagement(Page 75)

Facilitating
Transactions

An extensive network of physicaltouchpoints have enabled the Group to
expand its reach across the country.
Branches: 113

Stock Broking
and AdvisoryNon-financial
advisory support

Privilege Banking Hubs/ Centres: 16
ATMs: 82
MANUFACTUREDCAPITAL

CRMs: 86
(Page 78)
The experience, skills, attitude andcollective knowledge of our team are a key
differentiator.

Private Equity
Management

Bancassurance,
trustee & custodian
services, other

Employees: 2,756
HUMAN
CAPITAL(Page 80)
Corporate
Strategy(Page 43)

Organisational tacit knowledge, theBank’s reputation and brand strength andknowledge and expertise enable us tocontinue to push boundaries.

Reliable energy supply andwater usage which facilitateduninterrupted operations(Page 97)

National Development Bank PLC

olde
Stake
h

Organisational
Realignment

Digitaland Data
Transformation

Sustainable Business(Page 102)

Risk Management(Page 337)

VisionNATURALCAPITAL

52

Empowered
Staff

Business
Focus

nce

SOCIAL &RELATIONSHIPCAPITAL

Customers across all segments
Business partners andcommunities(Page 90)

Customer
Solutionsnaoverrate G 0)
11(Page

Relationships we have nurtured with diverse
stakeholders including the communities inwhich we operate continue to strengthen
our value proposition.

r En g(Page agement
47)(Page 88)oCorp

INTELLECTUAL
CAPITAL

Resource
Allocation(Page 43)

To be the driving force for a financially empowered Sri Lanka.
Annual Report 2023

OUTCOMESNet Impact to Capitals

FC

119.7 Bn

DIGITALCAPITAL

HC

Customers

No. of branches
relocated
01
Property, Plant andEquipment
LKR 3.1 Bn

LKR

SC

8.6 MnCarbon footprint

5,510 tCO2e

Employees

HUMAN
CAPITAL

Investments incommunities

LKR 39.3 Mn

71% internally filledvacancies

Brand value
INTELLECTUAL
CAPITAL6.6 BnTraining investment

LKR 9.2 Bn

SOCIAL &RELATIONSHIP CAPITAL

LKR

IC

Improvements incustomer satisfaction
indicators

NC
NATURALCAPITAL

Tier II
Debentures Issued

Over 150,000
training hours

Attrition
22%

New products/
propositions
introduced/ revamped

More streamlined
procurement process
Suppliers

Tier II
Debentures Issued

5.0 Bn23% growth indigitally enabledcustomers

Total processes automated496.1 BnMC

LKR

LKR 3.4 Bn

86

MANUFACTUREDCAPITAL

LKR

103% increase inshare priceInvestment in
Computer Software

DC

Gross loans andreceivables

11.67%

93 Correspondent
relationships

Reduction in Direct
Emissions27.85%

Investments incorporate sustainability
initiatives
Community

LKR

LKR 5.4 Bn ( +85%)
CET1 ratio:

Contribution to SDGs

91% growth inEarnings per share

Profit generated
FINANCIALCAPITAL

Interest income
generated

Impact to Stakeholders

Shareholders

KEY OUTPUTSLKR 8.6 Mn

National Development Bank PLC

Annual Report 2023

53

Management Discussion and Analysis

A Meaningful Connection
We believe in cultivating meaningful connections with the world around us, seeking
to create a sense of harmony in the midst of diversity.
The elements used in ikebana often symbolise varying characteristics, seamlessly uniting opposing
ideas and elements to create a cohesive, yet harmonious balance.

Our Financial Capital Inputs - Group
Total equity

Customer deposits

Borrowings

LKR 75.9 Bn

LKR 615.2 Bn

LKR 77.3 Bn

Value Drivers
� Effective re-pricing of assets and liabilities
� Risk and capital efficient lending� Organisation-wide efforts to preserve portfolio quality
� Continued focus on cost optimisation
� Efficient liquidity management

Financial Capital

Value Created - Group

Despite the challenging conditions
that prevailed during the year, we
continued to enhance our financial
capital through prudent financial
management. A strategic focus on
managing NIMs, driving non-fundbased income, maintaining portfolio
quality and managing costs enabled
the NDB Group to post an impressive
PBT of LKR 10.90 Bn in 2023.
   » 308%
Growth in PBT» 4%
Growth in NII» 11%
Increase innon-fundbased income» LKR 186.43
Net asset
value per share» LKR 14.42
Earnings
per share

Strategic Focus Areas 2023
� Focused approach in managing NIMs
� Transaction banking drive towards enhancing non-fund based income
� Capital augmentation

Please refer the full set of Financial Statements from page 161 onwards.

Financial Performance
NET INTEREST INCOMENII Trends

Interest income enhanced by 22% to LKR 119.4 Bn with interest expenses rising by 30% to LKR
87.4 Bn, leading to a net interest income of LKR 31.9 Bn, a YoY growth of 4%. The resultant Net
Interest Margin (NIM) of the Bank was 3.96%. Market wide interest rates came down from their
historic highs following policy rates cuts netting 650 bps by the CBSL, whilst average prime
lending rate dipped by approximately 16 percentage points during the year. The Bank’s NII
performance is commendable in such a backdrop and is a result of concerted efforts in driving
NIM which carries considerable upside potential.

LKR Bn

%

35

5

30

3.53

25

4.00
3.07

3.96

3.25

4

20

3

15

2
17.7

17.7

21.6

30.7

31.9

10

2019

2020

2021

2022

2023

5

1
0

0

NII

NIM (%)

NON-FUND BASED INCOME

Non-fund based Income

Total non-fund based income increased by 8% netting LKR 12.9 Bn. Net fee and commission
income increased by 14% to LKR 7.2 Bn, enhancing the dynamism of the Bank’s revenue
mix. Net fee and commission income represents fee income generated from core banking
operations, including trade related services, digital transactions, and card transactions. The
Bank’s concerted transaction drive with a wider objective of supporting the economy as it
gains momentum particularly on trade related services enabled enhanced fee income amidst
loan book contraction. The total of net gains from trading, net gains from financial assets at fairvalue through profit or loss and net gains from derecognition of financial assets amounted to
LKR 8.7 Bn, a notable improvement over 2022 due to variation in the exchange rate and interest
rates through the prior year.

LKR Bn

%

15

40

56

National Development Bank PLC

Annual Report 2023

30

2.0

3.8

30
20

5.6

6.3

7.2

10
4.3

3

29

3.9

6

3.4

9

28

5.8

30
25

5.7

12

2019

2020

2021

2022

2023

0

0

Net Fee and comission income
Other non-fund based income
Contribution of non-fund based income tototal operating income

IMPAIRMENT COSTS

Impairment Charges

Impairment costs during the year decreased by 28% to LKR 21.1 Bn primarily due to higher
impairment provisions made for foreign currency denominated Government securities in FY 2022.
Adopting a prudent basis, the impairment charge for loans and receivables increased by 35% to
LKR 16.0 Bn, given the economic conditions. NDB continued to maintain provisions on investments
in foreign currency bonds, for the expected International Sovereign Bond (ISB) restructuring to
be announced by the Government of Sri Lanka during the year. As of end December 2023, theImpairment (stage 3) to stage 3 loans ratio was 41.11% (2022: 37.44%) whilst the Impaired loans(stage 3) ratio was 8.58% (2022: 6.24%) reflecting the industry-wide concerns on credit quality.

LKR Bn

%

30

9.09

25

10
8

6.05

20
15
3.07

10

6.8

10.3

29.3

21.1

4

4.2

5

6

4.49

4.04

2019

2020

2021

2022

2023

0

2
0

Impairment charge
Total impairment allowance on loans andreceivables, contingent liabilities andcommitments as a % ofgross loans and receivables

TOTAL OPERATING COSTS

Cost Management

30.4

40
30

7

7

8

26.7

33.7

36
37.0
9

8

60

44

50

80

43

100

38

%
39
39.9

%

10

54

49

20

50

20
55

40
53

Total operating costs increased by 20% during the year to LKR 13.7 Bn. Personnel expenses
increased by 17% while other expenses increased by 22% in 2023. The general increase in pricelevels particularly energy and foreign currency denominated expenses drove costs up during theyear. Process automations leading to lesser resource usage and efficiencies, greater shift of clienttransaction to digital platforms and conscious assessment and rationalisation of discretionary
expenses, particularly as per directions issued by the CBSL were key contributors in managing costs
increases. The cost to income ratio was 30.4% and compared well within the industry reflecting ourongoing focus on effective cost management.

0

0
2019

Personnel
expenses

2020

2021

2022

Depreciation and Other
amortisation
expenses

2023
Cost toincome ratio

PROFITABILITY

Profitability

The Bank’s pre-tax profit increased by 396% to LKR 10.1 Bn, signalling an impressive rebound after
the significant dip in profits in 2022 attributable to external challenges. Profit for the year (PAT) at
Bank level meanwhile increased to LKR 5.4 Bn compared to LKR 2.9 Bn in 2022. At consolidated
level, NDB Group posted an impressive LKR 10.9 Bn profit before all taxes during the year compared
to LKR 2.7 Bn recorded in 2022. PAT at Group level meanwhile amounted to LKR 5.9 Bn, a 90%
increase over the previous year. Group Profit Attributable to Shareholders was LKR 5.8 Bn. Healthy
performance on revenue, reduction in impairment provisions compared to the comparative period
and effective cost management across all operations enabled enhanced profitability.

LKR Bn

%

12

20

10
8

11.59

11.20

15

12.47

8.11 10

6
4
10.1
4.8

9.2
5.1

10.3
6.9

2.0
3.0

10.1
5.8

2

4.62

2019

2020

2021

2022

2023

0
Bank-PBTGroup-ROE

50Group-PAS

TAXATION

Bank’s Taxes on Financial Services increased by
129% to LKR 2.7 Bn on account of the improved
profitability during the year. Income tax during theyear amounted to LKR 2.0 Bn.
MOVEMENT IN REGULATORY TAX RATES
Tax

2023

2022

FSVAT

18%

18%

Income tax

30% 24% & 30%

SSCL (w.e.f. 01 October 2022)

2.5%

Financial CapitalTax management:
The Bank’s tax strategy is formulated and implemented by a dedicated Tax Management
Unit, driven by a team of highly skilled finance professionals. A tax consultant has been
engaged to compute the income tax liability and handle the administrative functions
relating to filing of income tax returns. Tax compliance is consistently monitored byInternal Audit, Compliance Unit, and the external auditors. The Chief Manager in chargeof the Tax Management Unit liaises with the tax authorities on a regular basis, while
engagement is also supported by the tax consultant. The Bank was fully compliant with all
tax related regulations during the year.

2.5%
National Development Bank PLC

Annual Report 2023

57

Financial Position
TOTAL ASSETSGroup Asset Growth

LOANS AND RECEIVABLES

3

4

2019
Liquidassets

58

2021

2022

30

7 24

5 21

2020

0.5

9

1.0

0.34
5 25

0

1.5

65

71

67

1.34

40
20

2.0

1.67

1.58

1.97
74

60

3

3

2

80

0.0

2023

Investments Loans and Other
receivables assets

Group
ROA-BT %LKR BnOthers
Housing

19
18
24
22

Leasing

Portfolio Quality

42
42

58
57
55
49

Trade finance loans

Reflecting the industry wide phenomenon, portfolio quality continued to be impacted by the
economic conditions in the country. Stage 3 loans in 2023 amounted to LKR 82.5 Bn compared to
LKR 65.1 Bn in 2022. Stage 2 loans in 2023 amounted to LKR 103.3 Bn (2022: LKR 177.9 Bn). The Bank
continued to focus its efforts on maintaining portfolio quality by engaging closely with financial
distressed customers through business lines and the Bank’s Remedial Management Unit.

FUNDING AND CAPITAL

Consumer loans
Overdrafts
Medium and shortterm loans
Long term loans

132

104

136

0
2022

91

67

157

20 40 60 80 100 120 140 160
2023

Funding Composition

Annual Report 2023

Financial Capital

64

22.6
77
70

21.2
81

59

25.2
45

25
20

10
616

0

30

15

672

200

72

79

552

400

80

490

600

20.0

800

27.3

%

39

The Balance Sheet remained dynamic and resilient and the Bank maintained sound liquidity
and capital adequacy. The Bank’s equity base increased by 10% to LKR 70.1 Bn during the year.
Regulatory Liquidity Coverage Ratio (Rupee), Liquidity Coverage Ratio (All Currency) and Net stable
Funding Ratio stood well above the regulatory minimum requirement of 100% at 309.61%, 228.58%
and 142.26% respectively. The Statutory Liquid Assets Ratio of 39.02% (2022: 27.24%) was also well
above the regulatory minimum requirement of 20%. Tier I and Total Capital Adequacy ratios stoodat 11.67% (Group: 12.22%) and 15.90% (Group: 16.35%), well ahead of the regulatory minimum levelsof 8.5% and 12.5% respectively. NDB fortified its Tier II capital base with a LKR 5.0 Bn infusion of BaselIII compliant listed, rated, unsecured, subordinated, redeemable debentures during the year.

LKR Bn
1,000

405

The Bank’s deposits base as at end 2023 amounted to LKR 615.6 Bn, a 8% reduction compared to2022. The reduction is partly attributable to the appreciation of the Sri Lankan Rupee while the
sharp decline in interest rates towards the latter part of the year also impacted deposit growth.
Deposits continued to dominate the mix, funding 79% of the Bank’s total assets.

National Development Bank PLC%
2.5

Loan Portfolio by Product

Gross loans to customers in 2023 amounted to LKR 496.1 Bn a 14% decrease compared to FY 2022,
as discussed above. A more cautious approach to lending amidst deteriorating credit quality acrossthe industry also contributed to muted credit growth during the year.

58

%
100

5 19

The Bank’s total assets as at end 2023 amounted to LKR 779.9 Bn compared to LKR 832.8 Bn as
at end 2022. The 6% reduction in the asset position is predominantly due to the deflation of theforeign currency denominated asset book with the appreciation of the Sri Lankan Rupee versus thesevere depreciation seen in 2022. The gross loan book also witnessed a contraction of 14% to
LKR 496.1 Bn as a result of the deflationary impact of Rupee appreciation. Lower demand for loanson account of high interest rates during the year, prior to downward adjustments in response
to monetary policy easing and low economic activity in the country also affected loan bookcontraction. Amidst conditions of subdued credit growth, the Bank increased its portfolio of liquid
investments. Accordingly, Placements with banks which comprise short-term deposits placed inbanks witnessed a growth of 721% to LKR 33.7 Bn. Meanwhile, financial assets measured at fair value
through other comprehensive income which include investments in government securities also
increased by 88% to LKR 83.8 Bn during the period. Consolidated assets at the Group level declined
by 6% to LKR 787.0 Bn during the year.

2019

2020

2021

2022

2023

Deposits

EquityBorrowings

CASA

5
0

Shareholder Value Creation
KEY SHAREHOLDER RETURN INDICATORS - NDB GROUP

For the year ended December 31

2023

2022

2021

2020

2019

Return on equity (%)

8.11

4.62

12.47

11.20

11.59

Gross dividends paid during the year (LKR Mn)*

950

1,964

349

1,553

1,683

-

2.50

5.50

1.50

7.00

Dividend per share (DPS) (LKR)**
Dividend yield (%)**

-

7.81

7.98

1.92

7.00

Dividend payout ratio (%)**

-

33.20

26.34

6.82

34.10

14.42

7.53

20.88

21.99

20.53

-

3.01

3.80

14.66

2.93

Total shareholder return ratio (TSR) (%)

110.63-45.57-9.86-14.901.12

Price earnings ratio (PE ratio) (Times)

4.50

4.25

3.30

3.55

4.87

Net asset value per share (LKR)

186.43177.60175.65206.23195.60Price to book value (Times)

0.35

0.18

0.39

0.38

0.51

Earnings per share (EPS) (LKR)
Dividend cover (Times)*** Gross dividends declared and paid during the year with respect to the prior year**	The Board of Directors will consider a declaration of dividends for the year 2023 in due course. The Bank paid a total scrip dividend of
LKR 2.50 per share for the year 2022

NURTURING SOUND RELATIONSHIPS WITH OUR SHAREHOLDERS
In early 2024, NDB hosted the Board of Directors of
its largest shareholder, Norwegian Investment Fundfor developing countries - Norfund, at the NDB Head
Office in Colombo 02. Norfund and NDB share mutualinterests in promoting SMEs, empowering the women’smarket segment, accelerating the shift to clean energy
and driving digitalisation, amongst others, and willcontinue their collaborations along these lines. Norfund
invested in 9.99% of NDB’s shares as the Bank’s anchor
shareholder in 2021 via a private placement, and the
Bank has benefited from knowledge transfer from theinvestor on critical aspects since then.

   

Please refer Investor Relations from page 367 onwards for more investor information.

OUTLOOKThe effects of monetary policy easing are translating in to tangible results as indicative from the upward momentum in private sector credit during thelast quarter of 2023. Some stabilisation of credit risk was also witnessed since Q3 of 2023 as indicated by the slowdown in the growth of Stage 3 loans
at industry level. We are encouraged by these signs of recovery and will focus on pursuing selective growth opportunities through capital efficientlending. We are however cognisant of persisting risks and challenges in the short term including the impact on repayment capacities due to higher
taxes and will therefore continue to focus on preserving capital and portfolio quality whilst driving profitability with a sharper focus on net interest
margin management, fee-based income growth and cost rationalisation.

Financial Capital

National Development Bank PLC

Annual Report 2023

59

Performance of Business Lines
OPERATING CONTEXT
Subdued economic conditions
Lower propensity for savings
Resultant repayment pressures

Income tax hikes aimed at supporting fiscal
consolidation and elevated price levels,
affecting spending capacity of individuals
Gradual appreciation of the Sri Lankan
Rupee and impact on dollar denominatedportfolio

Subdued demand for private credit
Decline in market interest rates

DRIVING STRATEGY IN 2023

RetailBanking
Despite its relatively recent foray
into Retail Banking compared tomature peers, NDB has successfully
developed a strong retail proposition
which has allowed NDB to expand
its presence beyond its traditional
market segments and build a morediverse and inclusive portfolio. NDB’s
Retail Banking proposition aims
to provide customers with a fullyfledged lifestyle banking experienceby leveraging its strong digital
capabilities and innovative productofferings, which caters to every phaseof a customer’s lifespan. The Unit
recorded strong performance amidst
challenging operating conditions
during the year, reflecting a resilient
and astute strategy.

OUR VALUE PROPOSITION
A strong portfolio of customer-centricand lifestyle solutions
Best-in-class digital offerings that
focus on simplicity and customer
convenience

Focus on customer convenience

Driving financial inclusion of womenWith customers increasingly seeking
more convenient and seamless banking
experiences, we continued to enhance
our digital value proposition to Retailcustomers with the aim of creating better
user experiences and more convenientmethods of executing transactions.
This was bolstered by our two-pronged
approach in digitisation vis. accentuating
digital customer interfaces and automatinginternal processes for speedier turnaroundtimes. NDB’s digital offering to Retailcustomers includes the NEOS mobile App,NEOS Online, NEOS PAY - QR payment
method with which customers can makepayments to merchants, pay bills and carryout a wide range of other transactions,ATMs and Cash Recycle Machines placed
across the country at convenient locationsand video KYC (vKYC) based online accountopening powered by AI and end-to-end
integrated digi-loans. These platforms
collectively drove customer convenienceand led to approximately a 87% ofconventional branch transactions being
channelled via any one of these digitalplatforms. Affirming its high reception
and traction among customers, the NEOS
mobile App and NEOS Online banking
together recorded a 27% year-on-yearincrease in transaction value and 9%
increase in transaction volumes during theyear.

Strategic emphasis was placed on actively
promoting the NDB Araliya proposition
as a part of our overarching objectiveof empowering Sri Lankan womenand promoting female participation ineconomic and other socially-beneficial
activities. During the year we revitalised
the NDB Araliya proposition which waslaunched in 2017, in further driving themessage of the support NDB offers toaspiring women. The product re-launch
was based on the brand promise of “Giving
you more than you want for yourself”
and entailed island wide awareness andengagement activities with target female
market segments. Ongoing financial
literacy programmes and capacity building
initiatives meanwhile served to strengthen
engagement levels with the eligible
female populace. We also continued Sri
Lanka Vanithabhimana, an island-wide
women’s recognition programme, forthe fourth consecutive year, as part ofour efforts to reward and empower highperformance, high potential females acrossa number of categories (please refer page
94 for more information). These initiatives
have served to deepen our relationships
with our female clientele and promotesustainable development through women’s
participation across economic, social andother aspects.

Relationship driven service excellence

A multitude of customer touch points

Link to Strategy

60

National Development Bank PLC

Annual Report 2023

Link to Strategy

Driving CASA

Responsive product strategy

Preserving portfolio quality

The Retail Banking Unit, with the largest
base of customers drove significant
efforts in promoting the CASA deposits
base during the year. In addition toaforementioned NDB Araliya and NDB
Remit Saver (subsequently discussed)
propositions, the Bank revamped its
proposition for minor savers, NDB Shilpa.
Two distinct and attractive campaigns wererolled out during the year coinciding with
International Children’s Day in October andChristmas respectively. The former, themed“Double your interest, Double your future”,
encouraged youngsters and parents tocultivate a savings habit from an early
age and the message was strongly driven
all across the country. “NDB Brings Santa
Home Once More” ran through the monthof December, for the seventh consecutive
year, affording parents the delightful
opportunity of depositing any amountover a specified threshold into their child’s
NDB Shilpa Savings Account, and in return,choosing from a diverse selection of gifts,
to be delivered by Santa Claus =at theirhomes. The Bank places special emphasison minor savers towards striking long-term
relationships, particularly as the Bank isbetter equipped to serve the emerging
generations with new-tech enabledbanking solutions. The results of driving
CASA was reflected in the impressive 55%
growth in the Unit’s net interest income.

Our product strategy continues to be
driven by evolving customer and market
dynamics. During the year, we took amore cautious approach to growth as risk
factors escalated posing a threat to asset
quality. However, we strengthened ourunderwriting standards and shifted focus
on capital efficient lending such as pawningand other products such as credit cards
and pension loans in response to customer
needs. Affirming our close congruence toevolving opportunities, the Bank launched
NDB Remit Saver catering to the needs of
migrant workers in the backdrop of risingmigration levels and the country’s need
to attract remittances. We also continued
to enhance our credit card proposition,
focusing on providing customers attractive
discounts and additional convenience.

Supporting our customers with tailormade solutions to address their financial
difficulties was a key priority. As we sought
to preserve portfolio quality, we continued
to reach out to customers proactively,
offering customised restructuring
arrangements and innovative productswith flexible tenors and special rates to easefinancial pressures. Enhanced underwriting
standards and targeted lending meanwhile
enabled the Unit to maintain portfolio
quality while pursuing cautious growth inrelatively low risk segments.

New product launch

Link to Strategy

Outlook and Way Forward

NDB Remit Saver
Product: Dedicated savings accountTarget market: Migrant workers and theirfamily members, potential migrant workers
Benefits: Attractive interest rates, freehospitalisation cover and a range of value
additionsContribution to the economy: Promotes
foreign currency worker remittanceinflows to the country

Opportunities
Gradual improvement in economic
conditions
Lower interest rates and expected
positive impact on credit demand

Threats
Impact of higher income tax
Lower disposable income
Increasing levels of migration
Adversely affected asset quality

Strategic Focus in 2024
Maximising fee-based income generation

The Unit also further expanded its robustand dynamic cards portfolio. An innovative
pre-paid Tourist Card was issued in strategic
partnership with the Sri Lanka Tourism
Development Authority designed tofacilitate seamless transactions for tourists
during their stay within the country. Thisintends to provide much impetus to thethriving tourism industry in the country.

Link to Strategy

Performance of Business Lines

Link to Strategy

Preserving portfolio quality bystrengthening underwriting standards,
monitoring mechanisms and collection
processes
Increase use of data analytics to drive
customer-centricity
Continued focus on empowering thewomen’s market segment
Continued emphasis on digital drive with afocus on providing simple and convenient
customer solutions
Driving process efficiencies to further
enhance profitability

National Development Bank PLC

Annual Report 2023

61

Privilege
Banking
NDB Privilege Banking continued to
uphold its position as the undisputed
market leader in the Sri Lankan privatebanking domain, enabled by excellence incustomer service, dynamic solutions andconvenience defining digitised platforms.

OPERATING CONTEXT
Comprehensive solutions combining bothbanking and capital market products
curated for customer wealth maximisation

PERFORMANCE AND STRATEGIC FOCUS

ACCESSIBILITY

The Privilege Banking Unit’s deep segmentationof customers vis. Privilege, Privilege Select andPrivilege Select Plus for high net worth to ultrahigh net worth customers range and Elevate for
emerging high net worth customers, ensured
specifically curated life-style and financial
solutions which met their unique demands,
aspirations and goals. The fully-fledged suite ofsavings and investment options the Unit affords
its clients, transcending both commercial
banking and capital markets, remained
unmatched by any other player in the segment
given NDB’s distinct stand as a financial services
Group. These dynamic options ensured
that customer wealth was preserved andenhanced notwithstanding the challenging
market conditions that prevailed due to themacroeconomic headwinds.

Privilege Banking services remained accessible
to all customers as per their preference,
through a precise fusion of both digital andphysical means. The Unit’s swift and intelligent
advisory and product support was enjoyedby the valuable clientele spread across thecountry as well as the globe. NDB NEOS digitalplatform continued to gain traction given theconvenient, seamless and safe transaction
platform it afforded with multiple transaction
options. Sixteen dedicated Privilege Banking
Centres located at strategically important
localities, together with the Bank’s 113 brancheswith dedicated relationship management
access ensured uncompromised levelsof service to all customers. NDB Privilege
Newsletter, issued on a quarterly basis
comprising insights on the macro-economy,
investment options and emerging trends
empowered the Unit’s customers to make wellinformed decisions.

The Unit closely aligned its efforts in supporting
the achievement of the Bank’s overall strategic
priorities. Accordingly, Privilege Banking
contributed to the growth of the Bank’s CASA
base and fee income. Segment revenue
reported an impressive growth of 46% year on
year, making a significant contribution to the
Bank’s overall revenue. The Unit also continued
to promote Family Banking as an integral part ofthe strategy to build brand loyalty and increasecustomer retention across generations.

Annual Report 2023

Financial Advisory Services
An integrated solution for all investment
advice done in partnership with the Bank’s
capital markets cluster group companies

Enhanced Lending Services
Designed to meet complex borrowing
requirements

Exclusive Life and Health Benefits

Priority Services
Priority and personalised services offeredacross the NDB Group network

Value Added Services
Estate planning advisory, loyalty
programmes, philanthropy services,family banking and digital services

Exclusive Concierge Services
Designed to meet global and local
lifestyle requirements

The Unit is committed to maintain and strengthen
the value proposition by providing solutions
that extend above and beyond customer
expectations. NDB Privilege Banking also remains
focused on pursuing cross sell opportunities
within the NDB Group to drive growth.
National Development Bank PLC

NDB Privilege Offering

Provided in partnership with international
service providers

Amidst high staff attrition seen across thebanking industry over the past two years, theUnit was able to retain its key talent enabledby the reputation NDB Privilege Banking
commands, as a preferred employer forenriching and rewarding career opportunities.
This enabled the Unit to maintain its best inclass service standards consistently.

62

Exceptional customer service
extended by relationship managers
with high product and market acumen

Curated Quarterly Newsletter
Containing macroeconomic, investment
coverage and emerging themes inbanking and finance
Performance of Business Lines

Outlook and Way Forward
Opportunities
Gradual improvement in economic
conditions leading to greatertransaction volumes

Banking
Simplified

Lower interest rates and expected
positive impact on credit demandBusiness
Banking

Threats
Impact of higher income tax affecting
savings and investments by customers
Increasing levels of migration which
may affect customer baseStrategic Focus in 2024
Retaining liability portfolios andenhancing net interest income
Supporting CASA growth byleveraging on digital capabilities andtransaction banking
Maintaining fee-based income bymaximising cross sell opportunities
Assets growth through strategic
lending
Use of data analytics to support
customer centricity and best in classserviceI have been banking with NDB since2016, with the initial objective of
making it my secondary bank, butwhat transpired is NDB being my
preferred banking choice, where I
have consistently used several services
over the years. NEOS is one such great
example, all through the pandemic
and post-pandemic times, it was
extremely useful in keeping track of
my banking matters, and payments.
The user interface and seamlessconnectivity offered in the App ishighly appreciated, when I am pressed
for time, while on the go for personalerrands or during work projects.
I look forward to seeing even morefeatures in the next version upgradefrom the team.

Ms. Dilrukshi Fernando,
IT Consultant

As the country emerged from theaftermath of continuous economic
shocks during the year, NDB’s BusinessBanking Unit further augmented
its support to the SME clientele inenhancing resilience and accelerating
recovery. As SMEs form the backboneof the economy, the Unit closelyaligned its efforts to national priorities
such as driving exports and extended
both financial and advisory support.

OUR VALUE PROPOSITIONA deep understanding of the uniqueneeds of SMEs based on a long history offinancing the sector
Tailor-made products and services tomeet unique needs of SMEs acrossmultiple sub-sectors
A cohesive business model that prioritises
relationship and advisory driven banking
services
Access to concessionary credit lines as a
Participating Financial Institution (PFI)
offered by GOSL and global multilateralfunding agencies

OPERATING CONTEXT
Macro-economic pressures including
inflationary domestic conditions,high costs of production and subdued
consumer sentiment negatively impacting
credit demand and repayment capacities
A gradual resumption of trading activities
due to removal of certain import
restrictions and enhancement in foreignexchange liquidity

Performance of Business Lines

National Development Bank PLC

Annual Report 2023

63

DRIVING STRATEGY IN 2023
Supporting SME Revival

Notwithstanding the external challenges,
the Unit maintained its uncompromised
focus on supporting the SMEs, particularly as
this was one of the most hard hit segments
during the economic crisis. We continued tomaintain a high level of engagement withcustomers, strengthening relationships andsupporting them in rebuilding their businessventures, which were subject to varying
levels of disruption. Providing short term
capital remained a key focus during the year
in response to one of the most prevalentand common challenges that the SMEs weregrappling with, that of liquidity shortage. As
debt repayment was also a most pronounced
challenge, the Bank’s Remedial Management
Unit established in 2022 continued to play animportant role providing advisory services andtailor-made repayment paths to our clientele.
Affirming the dynamism and deep inroads wehave made in the SME sector, we extended
support to a multitude of sub-sectors that are
critical in national economic growth, export
revenue generation, employment generation,etc. such as cinnamon, coir, paddy andcoconut.

We also leveraged our relationships withfunding partners to access credit lines tochannel concessionary funding to reduce theinterest burden on our SME customers. During
the year NDB entered into a Memorandumof Understanding with the Ceylon Chamberof Commerce to facilitate the developmentof the SME and export sectors in Sri Lanka.
The partnership seeks to address some of the
key challenges faced by them by creating an
economic infrastructure that will ensure moresustainability for these sectors.
Over 20 capacity building and financial
literacy programmes were also conductedacross the entire country, in collaboration with
the International Finance Corporation (IFC)and USAID to build SME capacity and support
revival. Our export customers also continued
to benefit from our holistic proposition NDBJayagamu Sri Lanka which brings together
curated financial support, advisory supportand expert support from various third parties.

Link to Strategy

Driving the Digital
Transformation of SMEs

We continued to work towards bridging
the technology knowledge gap within
the SMEs by actively extending our digitalvalue proposition to SMEs and creatingwidespread awareness on using modern
digital technologies. Our pioneeringbusiness banking mobile app for the sector,
NEOSBIZ continued to gain momentum
amongst our SME clientele with more
SME customers being onboarded to thedigital platform during the year. The App
which contains a range of features such as
Bulk Salary Transfers, Bulk Fund Transfers,
Payee Management to manage suppliers,
Biller Management and Bill Payments,
Transaction Approvals to authorise andapprove transactions, Merchant QR
Payments among others, allow SME
entrepreneurs to have full control andvisibility over all transactions that are carriedout through the App. As part of our broader
efforts to drive SME digitisation we also
partnered with the IFC to conduct a series
of workshops and webinars to provide
SMEs with necessary expertise to efficiently
pursue business goals and make their dayto-day business banking transactions easierand faster with the aid of modern digitaltechnologies.
NEOSBIZ performance 2023

>1,500

Active customers>LKR 38 Bn
Value of transactions

Province Wise Composition of
Support to SME-S sector

Sector Wise Composition of
Support to SME-S sector

4%

2%

5%

2%

5%

2%

5%
6%

70%

2%
2%
2%

3%
7%

34%

10%
10%
16%

15%

Western
North Western
Nothern
CentralSouthern
Sabaragamuwa

64

Eastern
North Central
Uva

National Development Bank PLC

RetailTrading
Financial Services
Education
Other
Manufacturing

Annual Report 2023

Infastructure
Agriculture
Construction
Hotels & Tourism

Performance of Business Lines

Link to Strategy

Empowering Women Entrepreneurs

Efforts to empower our female clientele
continued during the year with a series
of initiatives carried out as part of theBank’s ‘Banking on Women’ proposition.
NDB Araliya, our dedicated platform
for women, was enhanced during theyear and accelerated its support to thefemale entrepreneurs. The platform offers
customised support to women through arange of products and services. Continuing
our efforts in holistically supporting thefemale clientele, we also conducted anumber of advisory sessions on pertinent
topics such as debt management, financial
literacy, financial management during acrisis, etc.
Link to Strategy

Focus on Transaction
Banking for SMEs

Given the subdued appetite for longer
term financing by SMEs during the year,
we placed strategic focus on promoting
our transaction banking proposition
to our export and commodity importclientele. Dedicated Transaction Banking
coordinators were appointed at regional
level to work closely with SME customers
and drive transactions. We also actively
promoted our digital platforms to drive
transactional efficiencies and provide
a safe and seamless digital platform fortransactions. This in turn drove the Unit’s fee
and commission income which increased
by 41% over the prior year.

Please refer Social & Relationship
Capital on page 90 for more
information on support extended
to SME customers, including female
entrepreneurs.
Link to Strategy

Performance of Business Lines

Outlook and Way Forward
Opportunities
Policy stimulus towards supportingthe country’s SME sector

Banking
Simplified

Removal of import restrictions andresultant increase in trading activities
The gradual revival of the tourism
industry

Threats
Impact of VAT hike on SME viability
Delay in loan recovery in particularsectors such as construction andapparelPotential instability in the foreignexchange rates
Limited possibility in reviving certain
severely affected SMEs

Strategic Focus in 2024
Maximising fee-based income
by driving transaction banking
proposition
Continuous support for revival of SME
sector by providing holistic support
Pursue selective lending
opportunities in sectors such asexports and commodity importers
and local manufacturing
Preserve portfolio quality by ensuringrisk efficient lending and a greater
emphasis on monitoring
Continued focus on empowering thewomen’s market segment

Embarking on my culinary journey,
I transitioned from home baking toowning Pink Salt in Dehiwala, andtwo years later, own Brown Sugar
Cafe and Dessert Bar and Isle Amore
Pizzeria. Navigating the challengesof the competitive food industry, theinvaluable support and advice from
NDB, especially for Small and Mediumsized enterprises (SMEs), have been
indispensable. Beyond providing
financial backing, their guidance has
played a crucial role in my journey. A
significant boon has been NEOSBIZ,NDB’s tailored app for SMEs. It’s
not just a tool; it’s a time-saving
marvel, liberating me from lengthy
bank queues and allowing me tochannel more energy into refining mybusiness. Here’s to the ongoing successof my ventures, supported by theguidance of NDB and the efficiency of
the NEOSBIZ app and to the exciting
journey ahead for other SMEs!

Ms. Diarra Wickremasinghe
Managing Director
Pink Salt - A thematic beach restaurant
offering Asian cuisine, situated in
Dehiwala

National Development Bank PLC

Annual Report 2023

65

RefinanceOperations

NDB is a leading Participating Financial Institution (PFI) in many funding lines offered by theGovernment of Sri Lanka and global multilateral funding agencies. The strong partnerships nurtured
over the years have enabled NDB’s Refinance Unit to successfully channel funding at concessionary rates
to priority sectors in the economy directly contributing to the economic growth of the country.

PERFORMANCE AND STRATEGIC FOCUS
The Unit remained focused on contributing to
the country’s economic recovery by providing
concessionary funding and technical support to
SMEs affected by the unprecedented economiccrisis. Accordingly, the Unit disbursed LKR 2.6 Bn
to 224 projects during the year through a total of
fifteen main credit lines.
Lending during the year was mainly through SMELine of Credit (SMELoC), the Emergency Response
Scheme granted by the Asian Development Bank
(ADB) to support the working capital requirementsof businesses affected by the economic crisis.
The scheme mainly targeted the manufacturing
and service sectors, with special emphasis on
agriculture, export and tourism. As a part of
the facilities offered through this scheme, loans
amounting to LKR 246 Mn were granted to female
entrepreneurs under the women-led businessfinancing initiative. The initiative also included a
grant portion resulting in LKR 26.9 Mn of grantfunding for 17 women-owned businesses.

Islamic
Banking

In addition to the above, the Bank continued
lending actively under ongoing schemes suchas ADB SMELoC, DFC, SMILE III Revolving and E
Friends II Revolving Fund. A total of LKR 2.06 Bn
was granted through these schemes to over 159
projects across the country.
Several technical assistance and capacity building
programmes were also conducted during theyear in partnership with multilateral agencies.
Over 30 SMEs participated in an ADB fundedfinancial literacy programme for tea small holders
conducted by PricewaterhouseCoopers, aimed
at capacity building of SMEs amidst ongoingchallenges. Participants in the programme werealso eligible for partial grant funding to meetworking capital requirements. An internal capacity
building programme was also conducted inpartnership with USAID for 35 relationship mangers
to build capacity and develop skills to evaluate ICT
funding project which is an ongoing and upcoming
sector.

ADB, DFC, SMILE III & E Friends
Loans Granted in 2023
4%

1%

25%

70%

ADB (Asian Development Bank)DFC (Development Finance Corporation)
SMILE III Revolving FundE Friends

In 2023, NDB became a shareholder ofthe recently established National Credit
Guarantee Institution (NCGI). Operated
as a Public-Private Partnership, the NCGI
enables SMEs and start-ups to borrowfrom participating financial institutions
based on a guarantee provided by the
NCGI, without collateral. NDB’s active
involvement in NCGI is a testament of its
long standing commitment to supporting
the SME sector in the country.

NDB Shareek is a leading player in the country’s Islamic banking space, offering the full spectrum of
Sharia compliant products including Diminishing Musharaka, Murabahah, Wakala, Mudarabah andIjarah. The Unit has continued to strengthen its market position, through a strategic focus on innovative
products, superior customer service and widespread geographical reach.

PERFORMANCE AND STRATEGIC FOCUS
The Unit witnessed strong performance during
the year recording a 26% growth in total assets.
Total operating income grew by 72% while nonperforming facility/ advance ratio was contained at
3%. The strong performance despite the economic
headwinds faced during the year is a testament of
the strength of the Unit’s value proposition.
During the year the Unit focused on supporting
export sector customers, extending Murabaha andWakala facilities. Furthermore, we extended longterm working capital requirements by offering
Diminishing Musharakah and Ijarah facilities.
Financial support was extended to a range ofindustries including poultry, LED based industries,
prawn farming, vegetable and mango plantations,minor crops, etc. Meanwhile, we continued
to support our customers to recover from theeffects of the economic crisis by offering flexible

66

National Development Bank PLC

repayment schemes and facility restructures in
addition to advisory support. In an effort to bolster
economic growth and support various industries,
NDB Shareek also channeled funds secured
through credit lines at concessionary rates.
Meanwhile, in line with the Bank’s strategic thrust
towards empowering women, NDB Shareek
continued to tap a hitherto unbanked segment inIslamic finance by mobilising deposits from women
through the NDB Araliya proposition.
We are confident of the growth prospects ofthis segment and continue to build internal
capacity in Islamic finance concepts. Accordingly,
training was provided to branch staff on Islamicbanking products and concepts while also
educating customers on our Islamic banking value
proposition.

Annual Report 2023

Performance of Business LinesNDB Shareek was the proud recipientof two coveted awards in 2023 fora Diminishing Musharaka facility
structured for a leading player in thepoultry industry. The recognition received
highlights our expertise in Islamic financestructuring. The facility received the Goldaward for deal of the year at the annual
Islamic Finance Forum of South Asia
(IFFSA) Forum while also receiving a Gold
Award for Deal of the Year from
Sri Lanka Islamic Banking & FinanceIndustry Awards (SLIBFI).

Deepening Customer Relationships

Wholesale
Banking
The Wholesale Banking Unit of
the Bank caters to our corporateclientele, offering a full gamut ofcommercial, transaction and cash
management services to support
their complex financial needs. The
Unit maintained its position as thelargest contributor to NDB’s loans
and receivables portfolio accounting
for 34% in 2023.
OUR VALUE PROPOSITION
A comprehensive product portfolio tomeet the complex financial requirementsof corporates
Structured working capital solutions fora corporate’s entire value chain including
their distributors and suppliers
Strong digital and data capabilities that
ensure superior customer experience andconvenience
A holistic offering that includes bothfinancial and non-financial support

OPERATING CONTEXT
Improvement in foreign currency and
Rupee liquidity in the market
A gradual uptick in trade related
activities and industry activities in thelatter part of the year due to certain
relaxations of restrictions on imports
Decline in market interest rates as aresult of relaxed monetary policy stancefrom June 2023 creating a demand for
lending products

Performance of Business Lines

Our ongoing focus on supporting
customers navigate the crisis and recoverfrom the downturn with resilience, enabled
us to further deepen our customer
relationships. During the year, the Bank’s
Transaction Banking Unit scaled up its
support by offering comprehensive tradeand cash management solutions to support
customers carry out their operations
efficiently and manage their cash effectively
as they gradually emerged from the crisis.
A dedicated trade sales team was also
deployed to facilitate customer requests
when processing trade transactions. The
efforts translated in to 12% growth in net
fee and commission income earned by theUnit, contributing to overall performance of
the Bank.
Meanwhile, the Remedial Management
Unit (RMU) continued to engage closelywith customers in need of its specialised
support, proactively identifying
requirements and offering financial andnon-financial support including guidanceon new business models, advisory services,and cash management, among others.
Such service offered by the RMU was
critical and impactful in ensuring business
continuity of our customers at the mosttrying times.
Link to Strategy
Maintaining Portfolio Quality

Maintaining portfolio quality was a key
priority amidst continued pressures on therepayment capacity of customers. Closer
monitoring of facilities through dashboards
ensured that early warning signals were
proactively identified and addressed.
Meanwhile, we also used our data analytics
capabilities to segment the portfolio basedon risk levels and tailor monitoring andcustomer servicing accordingly.

Leveraging Digital and Data
Capabilities

We continued to leverage our digital anddata capabilities to enhance the customer
experience, deepen customer insights andstrengthen monitoring. NEOS Corporate,
our electronic banking platform specificallydesigned for corporate customers waslaunched during the year with additional
capabilities aimed at providing customers
more convenience and control. Designed
to integrate effortlessly with our IT systems,
these platforms provide a straightforward
and frictionless process that elevatethe customer experience. Additional
investments in digital platforms continued
through the year fortifying the convenience
we offer to our dynamic customer base.
Our advanced data analytics capabilities
meanwhile enabled us to utilise information
scientifically to make strategic decisions
and implement more innovative risk
management practices while providing
personalised banking solutions to suit eachcustomer’s unique needs.
Link to Strategy
Focus on Supply Chain Financing

During the year we focused on enhancing
our supply chain financing value
proposition as part of our efforts to support
the Bank’s mid-term strategy of driving fee
income and CASA growth. Simultaneously,
we empowered our customers through our
supply chain financing solutions whereby
they were able to grow their sales, reduce
financial risks in supply chain and enhanceliquidity of their channel partners including
suppliers, distributors and dealers. Linking
to our settlement platforms also broughtthem the efficiency of converting paper
based payments to digitalised platforms.
Link to Strategy

Link to Strategy
Export Drive

Link to Strategy

Concerted efforts were driven towards strengthening exports as part of our efforts to support thecountry’s economic recovery and bolster foreign exchange reserves. Ongoing engagement andcareful planning of export customers’ commitments enabled the Unit to meet customer requirement
in a full and timely manner, further strengthening
relationships with our export clientele.
National Development Bank PLC

Annual Report 2023

67

Outlook and Way Forward
Opportunities
Gradual resumption of corporate activity
in line with anticipated macro-economic
stability
Policy stimulus towards supporting theexport segment
Reduction in interest rates is likely toincrease demand for investments thereby
providing further business opportunities

Threats
Negative impact on trading activity as aresult of VAT hikeContinued repayment pressure
Growing competition in the wholesalebanking space

Banking
Simplified
NDB has been one of our main bankers
for more than a decade and partneredwith us in our journey so far to reachwhere we are today. In the past NDB
has supported the Aberdeen Groupin its expansion projects in different
sectors and the journey continues eventoday, where NDB has been efficientin terms of the speed of response to
our funding requirements and theflexibility granted whilst maintaining
high standards. NDB is also continuing
to invest in technology front andwe have benefitted immensely byusing their online banking platforms
and different financial products toleverage on our business model. It
has been a mutually-beneficial anda strong relationship with NDB todate and it will continue in the same
passion in the future too.

Strategic Focus in 2024
Managing NIM in a low interest rateenvironment
Being the preferred bank for our customers
and encourage transaction volumes
routed through the Bank
Focus on more online penetration offering
low cost products
Cautious approach towards lending amidst
declining interest rates and higher demandfor credit

Aberdeen Holdings(Pvt) LtdA leading diversified
conglomerate in Sri Lanka with
operations spanning over 10
countries in 11 distinct sectors

Project &Infrastructure
Financing (PIF)
Recognised as a leader in the project
financing space of Sri Lanka, theBank’s PIF Unit extends specialised
financing to a wide range of large
scale projects comprising utility
infrastructure, residential, leisure andenergy generation, amongst manyothers, together with a holistic value
proposition honed over four decades.
With the winding-up of previously
extended moratoria, PIF customers
entered a fresh set of challenges in thepost economic-crisis context during2023. The PIF Unit consolidated its
position towards extending curated
support to them in ensuring theirfinancial resilience and business agility.
OUR VALUE PROPOSITION
Unique insights and domain specificknowledge in project financing

Expanding value chain financing proposition
with a focus on supply chain financing

Key lender to the renewable energy
sector in Sri Lanka

Continued emphasis on export sector

An integrated banking solution that
includes long term lending products,
debenture investments and advisory
services

Driving cost rationalisations through greater
digitalisation and operational efficiencies
Sustained focus on preserving portfolio
quality with greater emphasis on
recoveries and managing impairments

OPERATING CONTEXT
Repayment capacity of both State andprivate sector continued to be impacted
by economic crisis in the country
Inflationary pressures and liquidity
constraints continued to impact
project costs, resulting in a slow-downof ongoing projects
Demand for long term funding
remained subdued amidst low
economic activity and customer
expectations of a further reduction ininterest rates

68

National Development Bank PLC

Annual Report 2023

Performance of Business Lines

Supporting our Customers

Building Capabilities

Supporting our customers through theeconomic crisis remained a key priority
amidst continued pressures on payment
capacities of customers. We continued
to engage with customers closely toproactively identify payment stresses andoffer customised solutions including facility
restructures concessions and interest
waivers. During the year 56 customers
accounting for almost 50% of the portfolio
was restructured owing to the stressed
economic conditions.

Strategic emphasis was placed on upskilling
the PIF team particularly in emerging
areas such as sustainable finance. Training
programmes were conducted on green
funding, CBSL’s Green Financing Taxonomy
and ESG considerations in financing together
with awareness programmes on complianceissues and regulatory developments.
Meanwhile, we continued to explore scopeenhancement and new career opportunities
for employees amidst the growing challengeof skill migration in the country.

Link to Strategy
Contribution to a Green Economy
With the Government increasing its focus on
renewable energy sources, we see significant
growth potential in this segment in the short
to medium term. NDB with its established trackrecord and unique capabilities in this segment
is ideally placed to contribute to the country’s
Green energy drive and remains focused ontaking advantage of this emerging opportunity.
During the year we strengthened our partnershipwith leading green Financing Institution Global
Green Growth Institute (GGGI) to build capacityand mobilise funding, thereby further enhancing
our value proposition in this segment.
Meanwhile, as a key lender to the renewableenergy sector in Sri Lanka, we took a leading rolein industry efforts to address challenges facedin the industry including liquidity constraints;
by driving multi stakeholder engagement
and closely collaborating with other banks toformulate a common restructuring model forrenewable energy suppliers.

Link to Strategy
Process Efficiencies

As a part of our ongoing efforts to improve
efficiencies, several of our internal processes
and work-flows were re-engineered during
the year. Examples are improvements to ourloans disbursement work-flow and internalmonitoring processes for more stringent
controls, including compliance with loan
covenants. In addition to greater efficiency
levels, these improvements also enabled
our staff to dedicate more time towards
customer relationship management.

Banking
Simplified

Link to Strategy

Outlook and Way Forward
Opportunities
Acceleration in demand for project financewith anticipated stabilisation of critical
economic factors such as interest rates,
exchange rate and inflation
Opportunities to grow renewable energy
portfolio on account of the Government’s
renewed focus on renewable energy sector
Offshore opportunities in plantation,
tourism and power sectors particularly in
Maldives, East Africa and South East Asia

Threats
Delayed economic recovery
Impact of lower interest rates on NII
Challenges in employee retention due tobrain drain

Strategic Focus in 2024
Sustained emphasis on maintaining
portfolio quality

Being a former development bank,
NDB has its roots well established infunding new projects, especially in thelocal renewable energy sector. NDB
has pioneered many renewable energy
projects in the country as well as
overseas, which was a key reason for
us to partner with the Bank for various
projects our group has undertakenover the years. In addition to theabove, NDB has been a lead arranger
in many syndicate term loan facilities
granted to important projects. NDB
has a great team of professionals who
possesses immaculate knowledge andknow-how in structuring facilities
that are complex in nature. Further,
the Bank was able to meet very tightdeadlines imposed by the country’s
main utility provider when bidding
for new projects in the renewableenergy sector. So quite frankly, NDB
has simplified for us what otherwise
would be a very complicated banking
relationship given the intricate natureof projects we undertake.

Mr. P K Pathmanatha
CEO/ Chief Executive Director
Panasian Power PLC - Sri Lanka’s
pioneering supplier of clean andrenewable energy

Increase fee-based income through agreater focus on transaction business
Leverage existing relationships and digital
capabilities to drive CASA basePursue capital efficient projects in thrust
industries such as pharmaceuticals, foodand beverages, manufacturing andrenewable energy and financial services
Pursue strategic opportunities in off-shore
markets

Link to Strategy
Performance of Business Lines

National Development Bank PLC

Annual Report 2023

69

STRATEGY AND PERFORMANCE

Foreign Exchange (FX) Desk:FX revenue, which was severely impacted by restrictive and limited trading during the previous
year, witnessed a significant improvement during 2023 with the easing of market restrictions which
resulted in a gradual increase in foreign trade volumes and foreign currency remittances. Focused
efforts to capture market opportunities in trade/transaction related business enabled the Unit toincrease FX revenue by 106% to LKR 2.9 Bn during the year.
Exchange Rate Movement 2022 - 2023
USD/LKR
390
370
350
330

OUR VALUE PROPOSITION
Highly-skilled and experienced
Treasury teamWide array of products to cater to theevolving needs of a dynamic market

290
270
250
230
210
190

Dec-23Oct-23

Nov-23

Sep-23

Jul-23Aug-23Jun-23Apr-23May-23

Feb-23Mar-23Jan-23

Dec-22Oct-22

Nov-22

Sep-22

Jul-22Aug-22Jun-22

May-22

Apr-22

150

Mar-22

170
Jan-22

NDB’s Treasury Unit is a market
maker in the foreign exchange anddebt market and plays a vital rolein managing the Bank’s market
risks such as interest rate andliquidity risk through the Asset
Liability Management (ALM) desk.

310

Feb-22

Treasury

ALM Desk
The ALM Desk performed exceptionally well, specifically in Fixed Income Trading, building asound Treasury Bill and Treasury Bond portfolio capitalising on the LKR interest movement post
Domestic Debt Optimisation finalisation in 2023. Total capital gains realised enhanced through 2023
contributing to net revenue of the Bank through a high yielding portfolio. The Bank’s Balance Sheetmismatches were also managed effectively to optimise Bank’s net interest margins.

Outlook and Way Forward
OPERATING CONTEXT
The severe foreign exchange andliquidity shortages witnessed in 2022
gradually eased and stabilised with theincrease in foreign exchange inflows
In response to the accommodative
monetary policy adopted by the
CBSL in 2023, overall market Rupee
interest rates eased significantly withthe benchmark AWPL rates declining
by approximately 16 percentage
points during 2023
Yields in Government Securities also
moved lower across all maturities, inline with the easing of interest rates

Opportunities

Threats

Expected finalisation of external debt
restructuring by the first-half of 2024 may
result in positive revision of the country
sovereign rating by the rating agencies,
thus opening opportunities for renewed
investment inflows and easing restrictions
placed on international trade

Continued pressure on margins due toincreased competition

Interest rates are expected to stabilise andremain low as CBSL’s primary objective is tomaintain domestic price stability, keeping
the CCPI based inflation at 5%
Exchange rates are expected to remain
stable in the near term subject to stable
external environment

Possible impact on tourism inflows due
to impending presidential/ parliamentaryelections in 2024
Slower than expected economic recovery
may limit new market opportunities

Strategic Focus in 2024
Continued focus on trade and transaction
banking amidst improvement in market
conditions
Ongoing focus on increasing net interest
margins and capital gains
Sustained focus on maintaining healthyliquidity levels and managing ALM risk

70

National Development Bank PLC

Annual Report 2023

Performance of Business LinesPerformance of Group Companies

Profile and Business Activities

2023 saw Sri Lanka gradually emerge from its worst ever economic crisis with macroeconomic fundamentals stabilising following painful reforms undertaken
to put the economy back on track. Responding to these positive developments, capital markets also witnessed some growth momentum during the year. The
benchmark All Share Price Index (ASPI) and the S&P SL20 Index gained 25.50% and 16.42% respectively during the year. However overall market participation
declined with average daily turnover declining to LKR 1.69 Bn from LKR 2.97 Bn in the previous year. In contrast, the volatile interest rate environment fosteredsignificant interest and activity in the fixed income space, with large inflows seen to the money market unit trust funds and Government securities in general.
Corporate Debt raising activities also gradually regained momentum during the second half of the year with improvements in the overall business climate. In
this backdrop the performance of NDB’s Group companies engaged in capital market services were as follows.
NDB Capital Holdings Limited

NDB Investment Bank Limited

NDB Capital Holdings Limited (NCAP) is

NDB Investment Bank Limited (NDBIB) is a leader in the Sri Lankan Investment Banking sphere, offering a wide arraythe holding company of the NDB Groupof investment banking services such as debt and equity structuring and distribution, mergers and acquisitions, andInvestment Banking Cluster. NCAP directly

corporate advisory services. During the year NDBIB became the first Corporate Finance Advisor to be licensed by the

manages its funds through strategic

Securities and Exchange Commission of Sri Lanka. NDBIB was crowned as ‘Best Investment Bank in Sri Lanka’ by theinvestments in listed equities, private equity,

Euromoney Magazine for the 12th consecutive year and was recognised by the Asiamoney Magazine as the “Bestfixed income securities, Government bonds,

Investment Bank in Sri Lanka” for the 7th consecutive year in 2023. NDBIB’s competitive edge is underpinned bystructured debt, acquisition funding, pre- IPO

innovative and customised investment banking solutions, a highly skilled and diverse team, and deep-rooted stakeholder

placements/ mezzanine financing, and otherrelationships and collaborations built over the years.

Balance Sheet related activities.
Despite a yet another challenging year for capital markets

Scheme, (2) Goodhope PLC, Indo-Malay PLC, Selinsing

compared to the previous year.

amidst sluggish economic conditions, NDBIB was able to

PLC and Shalimar (Malary) PLC on their respective

� NDBIB maintained its reputation andcomplete several transactions and advisory assignments inde-listings from the Colombo Stock Exchange,2023.

and (3) Dankotuwa Porcelain PLC, by facilitating an� Exclusive Financial Advisors and Managers to Hela Apparel

Independent Opinion on the Mandatory Offer made

� Investment returns increased significantly

position in the market.

Strategic Priorities

� NDBWM strengthened its market
leadership reaching highest ever Assets

Holdings PLC in its USD 14 Mn fund raising from Norfund to

by Ceyline Investments (Private) Limited.

Under Management with Total AUM of

support Hela Kenya. This transaction marked NDBIB’s debut� Carried out valuations for multiple local and

LKR 300.0 Bn
� NDBS maintained its performance whilein the African continent.

regional players operating in power generation,

� Exclusively managed the Initial Public Offering (IPO) of UB
Finance PLC and jointly managed the IPO of Cargills Bankoil and energy sectors, among other sectors.

� Ongoing investment in NDB Capital

PLC. Both the Issues were oversubscribed on opening day.

� Managed the Basel III Compliant, Tier 2, Listed, Rated,

Accordingly, NDBIB played an active role in 2 out of the 3

Subordinated, Redeemable Debentures with non-

Scholarship Trust which aids deserving
undergraduates across disciplines

Equity IPOs which took place in the market in 2023.
� NDBIB also managed the Rights Issues of Pegasus Hotels of
Ceylon PLC and Equity Hotels Limited.
the valuation and structuring of its Employee Share Optiony Operating income - LKR 387 Mn (-42%)y Pre-Tax profit - LKR 226 Mn (-56%)
y Net profit of - LKR 137 Mn (-63%)

viability conversion option for NDB Bank worth LKR 5 Bn.
� Managed the structured term loan facility for
Ninewells Hospital (Private) Limited worth LKR 1 Bn.

� Financial Advisors to; (1) Commercial Bank of Ceylon PLC on

Performance
Highlights

entertainment, mixed development, materials, andkeeping the market share steady.

� Arranged USD 3.6 Mn worth funds for a Maldivian
resort company.

y 64 assignments undertaken during the year (comprising of comprehensive investment banking assignments
including; equity and debt raisings, valuation assignments and sell and buy-side advisory assignments, among others)y Funds raised – Approx. LKR 20 Bn

Reduction in profitability mainly due to NDB
Capital Holdings not obtaining subsidiary
dividends and losses incurred from exchange

Opportunities/Risks

rate appreciation throughout the year.
Potential opportunities in equity markets

Uptick in demand for new listings and corporate debt

Expansion into regional markets by leveraging on

due to depressed asset prices .

instruments on the back of normalised interest rates and

NDBIB’s expertise in the South Asian markets and via

Macro-economic uncertainty and volatility.

improved market sentiments.

strategic foreign collaborators.

Frequent changes in tax policy and

Ability to capitalise on new capital market initiatives andPolitical uncertainty stemming from an election year.

increase in tax rates.

novel capital market products.

Introduction/increase of taxes that may deter

Subdued business sentiments and highOpportunities for corporate debt restructuring due to theinvestor sentiments further.

volatility in the economy and stock market.

reduction in the single borrower limits of banks.

Obstacles in securing IMF and other funding lines

Increased activity in the Mergers and Acquisitions space indue to the non-achievement of macro-targets.

a volatile macro-economic environment.

External shocks from possible geo-political instability.

Potential to introduce foreign investors to the market forWay
Forwardthe purpose of SOE and corporate restructurings.
Continued focus on enhancing returns of

NDBIB intends to focus on strengthening its deal pipeline and improving transaction execution by leveraging on

the investment portfolio while supporting

strategic collaborations and the multifaceted capabilities and experience of its staff. Going forward, NDBIB will pay

subsidiaries in the respective business lines.

particular focus in sourcing and executing cross-border transactions with higher fee potential and exposure, whilst
continuing to cater to Sri Lankan corporates.

National Development Bank PLC

Annual Report 2023

71

Profile and Business Activities
Strategic Priorities

NDB Wealth Management Limited

NDB Securities (Pvt) Limited

NDB Wealth Management Limited (NDBWM) maintains its stronghold
as the leading private sector fund management company in the
country. With a legacy spanning over 32 years in Sri Lanka’s asset
management sector, it serves a diverse clientele, including individuals,
high-net-worth individuals, and institutional investors, totalling over
35,000. The company continues to innovate and expand its productoffering and during the year entered into a strategic partnership withAIA Insurance, to offer high net worth clients comprehensive insurance
solutions to fulfil their protection, retirement and health requirements.

NDB Securities (Pvt) Limited (NDBS) is a leading stockbroker with astrong retail and institutional client base. Its competitive edge lies in
its superior customer proposition that centres on strong relationshipmanagement, a state-of- the-art online trading facility, and marketleading research capabilities. NDBS continues to contribute towards
enhancing the vibrancy of the stock market by introducing foreign andlocal institutions and individuals to the Sri Lankan capital market.

y To expand the product offering of the Unit Trust portfolio byintroducing a range of new unit trust investment options.

y Continued focus on new client acquisition.

y To diversify the asset classes and available investment opportunities
for the discretionary portfolios.
y To grow the assets under management and focus on client retention
and value addition.

y Sustained focus on robust risk management and compliance tostrengthen long-term resiliencey Leveraged Group synergies to strengthen non- core revenue streams

Performance Highlights

y To enhance the customer journey through digitisation.
y In 2023, the company attained numerous noteworthy milestones.
Total assets under management surpassed LKR 300 Bn, withtotal Unit Trust Assets under Management reaching LKR 200 Bn,establishing the company as the leading Unit Trust manager in theindustry with a market share nearing 50%. The company’s flagshipunit trust fund, NDB Wealth Money Fund meanwhile quadrupled in
assets to reach LKR 189.5 Bn, retaining its number one position as thelargest Fund in the Unit Trust Industry.
y Moreover, during the year, the company collected LKR 123 Bn(Net) for its Unit trusts, which represents more than 62% of the netcollection of the entire unit trust industry.

y In 2023, the average daily market turnover decreased by 43%
compared to the previous year. The average daily market turnover
reduced from Rs. 2.97 Bn to Rs. 1.70 Bn in 2023.
y Despite the challenging operating environment, NDBS recorded a
brokerage income of LKR 195.72 Mn.
y NDBS maintained a market share of 4% in 2023.
y In an effort to increase investor awareness, NDBS has been actively
participating in investor forums held by SEC and CSE, as well as
conducting webinars and podcasts.

y The Company also achieved an all-time high revenue of
LKR 817 Mn, an increase of over 90% compared to 2022.
y Profit after tax surged by over 269% to LKR 213.4 Mn.

Opportunities/Risks

y Return on shareholders’ Equity (ROE) exceeded 91%.
As Sri Lanka emerges from a crisis environment, macroeconomic
fundamentals are returning to normal, resulting in decreased risk
premiums and greater attractiveness and accessibility of corporate
debt investment opportunities.

A likely improvement in market sentiments once the external debt
restructuring is completed and remaining IMF tranches are received.

Stabilising businesses listed on the CSE especially through thenormalisation of their operations and significant reductions infinance costs, may open up new equity investment opportunities.

Moderation in inflation to single digit levels, and its pass-througheffect on interest rates.

A continuation of monetary easing and resultant decrease in interest
rates is conducive for growth in Unit Trust assets.
Pick-up in economic activity may be delayed due to 2024 being anelection year resulting in investors taking a wait-and- see approach.
Increased taxes and higher cost of living may restrict funds available
for savings and investment.

Way Forward

The uncertainty regarding external debt restructuring remains a
topic of discussion.

72

NDBWM will continue to offer investors alternative opportunities via
new and innovative products and asset classes to enhance investor
returns in the medium to long term. Moreover, the company will deliver
value-added financial services through strategic partnerships.

National Development Bank PLC

Annual Report 2023

A gradual recovery of the tourism sector, and its positive externalities
to the economy.

Industry-wide technological developments such as the introductionof Regulated Short Selling and Stock Borrowing and Lending
increasing the market participation and liquidity.
Recovery of global economies to bode well for export companies.
Fiscal tightening, including the increase in tax rates and its impact on
consumer demand and corporate earnings.
Slowdown in the drop of market interest rate dampening thedemand for equities.

Strategic focus will be placed on expanding the high-net-worth clientbase by leveraging the Bank’s captive clients. We will continue to seek
collaborations with Group companies, leveraging our position andunique capabilities as a total financial service provider (on the back ofGroup strengths).

Performance of Group Companies

Profile and Business Activities

NDB Capital Ltd (Bangladesh)

NDB Zephyr Partners Limited (Mauritius) Development Holdings (Pvt) Limited

NDB Capital Limited (Bangladesh) offers awide array of investment banking services
in Bangladesh including M&A, advisory, IPO,
portfolio management, fund raising, bonds
and preference shares, project finance andworking capital, among others

NDB Zephyr is the Fund Manager ofEmerald Sri Lanka Fund, a pioneering
private equity fund dedicated to investingin small and mid-sized businesses seeking
expansion capital in Sri Lanka. NDB
Zephyr is jointly owned by NDB Capital
Holdings Limited (NCAP) (60%) and
Zephyr Management, LP (Zephyr) (40%), a
New York-based global emerging markets
investment firm.

y NDB Zephyr continued to support its
portfolio companies. Arimac Lanka(Pvt) Limited, Idea Group Limited, andy Engaged in debt and equity transactions
Cleanline Linen Management (Pvt)with reputable organisations, thereby
Limited - in expanding into export
maintaining market leadership andmarkets, implementing businessenhancing market reputation.
diversification strategies, improving
y Pursued new opportunities under corporate
access to working capital, andadvisory, agency and trusteeship and M&A.
rationalising costs amidst challenging
y Several large ongoing transactions including
economic conditions.
11 advisory and fund-raising mandates
during the period including an IPO mandate y Consolidated Business Systems Ltd
exited the fund in December 2023.
and multiple approvals from the Securities &Strategic Priorities

y Proactively pursued opportunities in equity
investments and IPO participation.

Development Holdings (Pvt) Limited (DHPL) owns
and maintains the DHPL building (also known as
NDB-EDB Tower), the 16-storeyed commercial
property located at No. 42, Nawam Mawatha,
Colombo 02. The building houses Sri Lanka Export
Development Board (EDB), several departments of
NDB Bank, Japan International Cooperation Agency(JICA), Sri Lanka Export Credit Insurance Corporation(SLECIC) and many other reputed global and local
corporate and multi-lateral agencies.
y The property continued to leverage its strategic
location, state-of-the-art facilities and reputation
as a premier business space to pursue further
opportunities

Exchange Commission.

Performance Highlights

y Loss after tax of BDT 7.2 Mn in 2023
(2022: loss of BDT 11.6 Mn).

y Revenue remained flat in USD terms.
y Loss after Tax of USD 27,976 (-298%).

y Profit Before Tax of LKR 444 Mn supported byrevaluation gains of LKR 254 Mn.
y The continuous increase in value reflects theManagement’s ongoing efforts to develop theproperty.

y Conclusion of several major transactions
such as:1. BDT 2,000 Mn Zero Coupon Bond issued
by Envoy Textile Limited
2. Syndicated Fund Arrangement of USD 30
Mn and BDT 1.3 Bn for Intraco Solar Power
LimitedWay Forward

Opportunities/Risks

y Secured several agency deals which will
generate recurring fees for the next 15 years.
Economic recovery with large scalebusinesses is likely to open up restructuring
opportunities.

Government thrust towards theSME, tourism, export, and domestic
manufacturing sectors.

Gradual relaxation of the floor pricing
mechanism in the stock market after thenational elections could improve the market
sentiments.

Exit opportunities for portfolio
companies, given positive market
sentiments around export businesses.

Leverage on the strategic location and state-ofthe-art facilities to attract prospective investors.
Ongoing investments in upgrading facilities andamenities offered.
Increased competition from emerging largescale
mixed market developments in the city

Liquidity crunch and rising interests likely tonegatively impact fund raising.
We will primarily concentrate on capitalisingon investment banking opportunities
emerging in the Bangladeshi market to
improve operational efficiency and strengthen
our position in the market. In doing so wewill continue to explore non-conventional
areas of corporate advisory such as M&As todiversify the business portfolio. Meanwhile wewill collaborate with other subsidiaries of NDBGroup to secure cross-border deals for both
equity and debt arrangements

Performance of Group Companies

The company will continue to focus
on improving the performance andgovernance in portfolio companies.
NDB Zephyr is currently exploring exit
opportunities for one of its portfolio
companies and is also planning toestablish the second fund as part of its
investment strategy.

DHPL is shaping up to have one of the mostmodern and state-of-the-art auditoriums in
Colombo, which will be open for use during 2024.
Focus will be based on driving operational results
using its unique proposition.

National Development Bank PLC

Annual Report 2023

73

Designed with a Purpose
Armed with a vision and the power ofprecision, we utilise the resources at our
disposal to create a masterpiece that will
deliver timeless value to all.

Performance of Group Companies

Our Digital Capital Inputs
� Seamlessly integrated IT systems and advanced digital services
� IT equipment and related software applications
� Robotic Process Automation (RPA) infrastructure and workflow solutions
� Customer-facing digital platforms and touchpoints
� Data centres, hosting networks and enterprise tools

Value Drivers
� Continuous investment in digital infrastructure to support the Bank’s aspiration of becoming
an increasingly digitally enabled bank
� Obtaining ISO certifications for process standardisation
� Successful migration to the core banking system - latest version

DigitalCapitalDigital capital plays a vital rolein driving the Bank’s digitalbanking momentum; connecting
customers to enhanced
experiences, improving employee
productivity, optimising resources
and creating a digital workforce
that will propel NDB into an era ofdigital transformation in a rapidly
evolving environment.

� Driving operational excellence through RPA and digitised processes� Increased focus on enhancing our digital skills and inculcating a data-driven culture across theorganisation

Value Created» 11% increase in
number of digitaltransactions» Over 400,000
digital platformusers» 99.25%
system uptime» Zeroinstanced of data
breachStrategic Focus Areas 2023
� Acceleration of our digital journey� Responding to sophisticated customer demands
� Achieving operational efficiencies
� Strengthening security and IT governance

MANAGING OUR DIGITAL CAPITAL

With digital investments increasing in bothpriority and value, the Bank has strengthened
its digital governance structure and policy
framework which articulates the Bank’s
priorities, facilitates resource allocation andsupports the overall internal control frameworkof the Bank.
The Board Digital Transformation Committee
provides oversight in the implementation of thedigital strategy of the Bank while the frameworkof IT policies, proactive risk management
practices and the clear demarcation of
responsibilities through the three lines ofdefence governance model ensures that IT risks
are identified and managed in a systematicmanner.
A fully fledged team of over 80 highly skilled
professionals who are experienced in theirrespective roles make up the IT Department.
The IT team is well equipped to support
the Bank’s operations and security needs.
Strengthening their capabilities remains
a priority for the Bank, with continuous
training and certification programmes being
encouraged.

The Bank is further guided byvoluntarily obtained global
certifications to ensure process
standardisation and optimisation
within the IT department.
» ISO/IEC 27001 Information Security
Standard» ISO 22301 Business Continuity
Management Systems Standard» ISO 20000 IT Service Management
Certificate (currently being
implemented)» Mandatory surveillance audits
carried out annually to ensure
standards are maintained

OUR TRANSFORMATIVE DIGITAL STRATEGY

NDB’s digital strategy has been a key cog indriving the Bank’s mid-term strategic agenda.
The strategy seeks to future-proof NDB byelevating technology to a transformationalrole, thereby maximising the value of assets,enhancing partnerships and sharpening ourcompetitive edge. While remaining committed
to the Bank’s transformational digital strategy,
it was re-evaluated during the year to address
our short to medium term goals of improving
Net Interest Margin (NIM) and preserving asset
quality amidst the high levels of uncertainty
brought about by the country’s economic crisis.

National Development Bank PLC

Annual Report 2023

75

ENHANCING CUSTOMER EXPERIENCES

NDB was able to cater to the unprecedented
customer shift towards digital platforms
having strategically invested in elevating
its digital propositions over the years. The
Bank’s mobile-first approach transformed thecustomer experience by addressing customer
concerns, ensuring service efficiencies andoffering customised solutions to meet evolving
customer needs. This approach enabled the
Bank to optimise available infrastructure while
facilitating a wider reach of customers.

Enhancing
CustomerExperience

Optimising
Operational
Efficiencies

Initiatives launched to strengthen digitalofferings to external and internal customers are
as follows:
External Customersy Launch of NEOS Corporate andintroduction of new functionalities
including CEFT, Letters of Credit andtrade facilities

Data Driven
Decisionmaking

Core Banking System Upgrade
The migration to the latest version of theCore Banking System was successfullycompleted during the year providing the
Bank with a solid system that supports its
medium-term goals. Additional modules
including Treasury Front Office (TFO),
Advance Collection, TEMENOS Corporate
Internet Banking (TCIB), Digital Layer andothers are also in function, generating
increased efficiencies, providing increased
flexibility and supporting improved
decision-making.
Upgrade of the core banking system
supports our day-to-day business
operations, leading to significant
efficiencies across the organisation. The
latest version of the Core Banking Systemequips the Bank with state-of-the-art
technology to adopt futuristic banking
features which will transform the value
proposition to both external and internalcustomers. Integrated modules supporting
customer relationship management willfurther enhance the customer experience.

Value of Computer Software

2019

76

2020

2021

2022

3,421

3,071

2,336

2,066

4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

1,574

LKR Mn2023

National Development Bank PLC

y Conducted customer visits andtown-storming activities to promote
the services offered through Agency
Bankingy Additionally, NEOS App for the retailclientele and NEOSBIZ, the only
mobile app for the SME clientele
also consolidated their position andextended enhanced performancethrough the year
Internal Customers (Staff members)y Digitised internal processes through IT
Service Managementy Data analytics to bring increased visibilityof branch/ business lines performancey Establishment of a ProgrammeManagement Unit to successfully
implement new projects
y Further deployment of RPA technology
to address gaps in customer service andprocess efficiencies
Organisational re-alignment for superior
solutions and enhanced customer experience

The Digital Financial Services Unit of the Bank
was recently restructured, where the focus ofdigitisation as a separate pillar has now been
evolved to encompass a journey of holistic
digitisation at product design level. The new
Unit is named Product Lifecycle Management,with a view of incorporating digitisation at all
product levels, embracing aspects of digital,tech and data together to deliver a better
experience to customers.
Annual Report 2023

Digital Capital

DATA DRIVEN DECISION-MAKING

The Bank leverages big data analytics todevelop data driven forecasts and makeinformed decisions which enable us to offer ourcustomers innovative and relevant solutions
that cater to their needs. Data analytics
capabilities are strengthened through a data
driven culture and embedding of data insights
into daily operations and decisions.
Digital dashboards across all areas of theorganisation enhance the quality of decision
making by ensuring access to real-time data
which is accurate and relevant. Insights
gathered from these dashboards are sharedacross branches supporting performancemonitoring.
During the year, targeted data visualisation
brought visibility into the Bank’s three key
priorities of improving margins, maximisingasset quality and driving transactions, thereby
supporting the mid-term strategy developed in
response to the economic crisis experienced in
the country.

Along with the new Core Banking
System, specific modules like theAdvance Collection Module (TAC)
and Treasury Front Office (TFO) havebeen implemented to provide better
visibility to customer exposure and help
manage interest rates effectively.

OPTIMISING OPERATIONAL EFFICIENCIESINFORMATION AND CYBERSECURITYOUTLOOK

Technology transformation is changing the way
we work and interact with each other. Timely
investments in IT infrastructure and ongoing
focus on enhancing IT capabilities facilitateda smooth shift to a hybrid working model.
The team continued to opt for Work from
Home arrangements on a roster basis thereby
minimising office space requirement.

Ensuring security and privacy of customer
information is a top priority for NDB along with
the increased thrust towards digitalisation andthe rapid expansion of our digital and online
services. In an environment where cyber risk
has emerged as a key risk, we continued tostrengthen the IT security infrastructure inplace to ensure uninterrupted services to all
stakeholder groups while maintaining theconfidentiality of information.

While remaining aligned to our mid-term
strategy, NDB’s digital strategy will play a keyrole in achieving our medium-term objectives.
Information security and maintaining systemstability will continue to be a focus area, while
we will also continuously invest in digital
infrastructure that will enable us to meetthe evolving needs of a new generation ofcustomers. We will look at eliminating extra
paperwork and completely digitalising thecustomer onboarding process in order toenhance the overall customer experience. We
will also leverage big data and data analytics
for better insights while nurturing partnerships
which will strengthen our stakeholder value
proposition.

The gradual move to paperless offices andautomation of processes led to significant
operational efficiencies, productivity
improvements and cost savings for the Bank.
Employees were free to do more meaningful
work, for example managing relationships withcustomers, as mundane and repetitive manualtasks were automated. This has also created asense of satisfaction among our employees,
contributing towards the creation of anempowered team.

The Bank has a robust defence-in-depth
strategy in place, including firewalls, endpoint
protection, mock simulations for employees,
staff training on an ongoing basis and acomprehensive set of security controls
spanning physical to logical security layers.
Key IT Security Protocols in Placey Next generation core and perimeter
firewallsy Anomaly-based detection and response
y Full Endpoint Detection and Response(EDR) implementationy Implementation of Data Loss Prevention
y Vulnerability assessment and penetration
testingy Network Access Control (NAC)y Web Application Firewalls
y Privileged Access Management (PAM)y Intrusion Prevention System (IPS)

87% of ourtransactions
are processed
through digitalchannels
Workflowtechnology isembedded toaddress the gap
in customer
services

Digital Capital

RPA technology
is widely used
to manage
end-usercomputingContinuous
improvementof processes
and back-end
integration

Process
standardisationy Intrusion Detection System (IDS)y Endpoint Security Solutions
The ISO/IEC 27001 Information Security
Certification obtained last year provides external
assurance on our information security, cybersecurity and privacy protection. During the year,
there were no incidents of security breaches orsubstantiated complaints regarding breaches ofcustomer privacy and losses of customer.

National Development Bank PLC

Annual Report 2023

77

Our Manufactured Capital Inputs
� An island wide branch network of 113 branches which facilitates financial inclusion, enhances
brand visibility and provides an effective platform to deliver the Bank’s products and services
to customers
� A network of 168 ATM and CRMs which provides customers a range of banking services andensures enhanced customer convenience

Value Drivers
� Enhancing customer experiences by ensuring efficient services through the branch network
� Strengthening mechanisms to measure customer satisfaction at branches� Improving efficiency levels through automation and process improvements

Value Created

Manufactured
Capital» 4.9/ 5.0 Customer
satisfaction rate

» Driving financial» Direct interaction» 33% of transactions
inclusion through thefor financial advisoryconducted using
13 branches locatedsupport for retailATMs and CRMs
in economicallymass, high net worth
disadvantaged areas
and SME clients» Expanded customer
reach

Comprising physical infrastructure
including an island-wide networkof branches, ATMs, CRMs
and other built assets, NDB’s
Manufactured Capital plays an
integral role in delivering superior
customer experiences.

Strategic Focus Areas 2023
� Strengthening customer relationships by enhancing customer engagement at branches� Enhancing customer connectivity and reach� Building brand value through branch network
� Improving operational efficiency at branches through process improvements

OUR MANUFACTURED CAPITALTHE BRANCH NETWORKNew Additions to Property, Plant & Equipment
LKR Mn

2020

2021

282

2019

299

642
427

800
700
600
500
400
300
200
100
0

651

Manufactured capital consists of physicaland digital infrastructure which includes
property, plant and equipment, investment
properties and right-of-use assets. Given thesignificant strategic emphasis we place on
digital infrastructure, for reporting purposes,
same is segregated as Digital Capital and set
out on page 75. At Group level property, plantand equipment amounted to LKR 3.1 Bn as at
the end of the year. Continuous investments innurturing manufactured capital have enabled
the Group to transform to a customer centric,
digitally enabled organisation, supporting ourability to deliver value to multiple stakeholders.

2022

2023

Composition of Property, Plant & Equipment
1%
9%

24%

20%

Computer Equipment
Freehold Buildings
Office Equipment & Furniture
Freehold Land
Leasehold Buildings
Motor Vehicles
Capital Work- in- Progress

The Bank’s Head Office located at
No.40, Nawam Mawatha, Colombo 02
National Development Bank PLC

The current network of branches complements
the Bank’s digital drive, playing a pivotal role inservicing customers across all segments, whileproviding the human interaction that drives
engagement, trust and loyalty.

31%

15%

78

NDB’s Manufactured Capital comprises anextensive branch network of 113 branches
spread out across all nine provinces, enabling
the Bank to increase banking penetration to themost underserved segments of society; 13 outof the 113 branches are located in economicallydisadvantaged areas, playing a vital role inpromoting financial inclusion.

Annual Report 2023

The island-wide branch network facilitates
additional offerings such as Privilege Banking
for the high net worth customer segment,
Elevate for emerging high net worth
customers, SME banking and Islamic finance,
thereby ensuring deeper penetration of these
propositions. Dedicated resources have also
been deployed at each branch to facilitate
NDB’s Banking on Women initiative to identify
and address the needs of female customers.

BRANCH STRATEGY IN 2023

Branch Network

As the main touchpoint for customer interactions, the branch
strategy focused on enhancing the Bank’s reputation and brandby ensuring uninterrupted customer access to our services andimproving the overall customer experience. Given the operating
environment that prevailed during the year, the Bank did not
actively seek to expand its footprint geographically.

1113

Branches

2

18

82

District
4
6
17
14

13
8

16

21

19

15

CRMs

Number of Branches in
Economically Disadvantaged Areas

3

5

86

ATMs

7

No. of Branches

AmparaBatticaloa
Trincomalee
JaffnaVavuniya
Total

3
2
1
6
1
13

Vintage
20

22

9

10

No. of Branches

CRMs< 5 years
5 - 10 years
10 - 20 years> 20 years
Total

ATMs

11

Branches

12

Vintage

Northern Province

7

4

4

1

Jaffna District

6

3

3

2

Vavuniya District

1

1

1

District

North Central Province

5

5

1

3

Anuradhapura District

3

3

1

Colombo

4

Polonnaruwa District

2

2

0

North Western Province

11

10

4

5

Kurunegala District

6

7

2

6

Puttalam District

6
34
66
7
113

Branches Offering 365 Days Banking
No. ofBranches Branch names
3

Kandy

1

Total

4

Mount Lavinia
Havelock Town
Rajagiriya
Kandy City
Center (KCC)

5

3

2

Western Province

52

28

56

7

Colombo District

33

14

40

8

Gampaha District

14

10

11

9

Kalutara District

5

4

5

Southern Province

11

9

7

10

Galle District

5

4

3

11

Hambantota District

4

4

3

12

Matara District

2

1

1

Central Province

10

8

9

13

Kandy District

7

5

6

14

Matale District

2

2

1

ATM and CRM Network

15

Nuwara Eliya District

1

1

2

Eastern Province

6

7

1

16

Ampara District

3

4

0

17

Batticaloa District

2

2

1

18

Trincomalee District

1

1

0

Uva Province

4

4

0

Total onsite ATMs
54
Total off-site ATMs
28
Total onsite CRMs
58
Total offsite CRMs
28
Total network of ATMs and CRMs 168

19

Badulla District

3

3

0

20

Monaragala District

1

1

0

Sabaragamuwa Province

7

7

4

21

Kegalle District

2

2

1

22

Ratnapura District

5

5

3

Manufactured Capital

While the footfall at branches continues to be impacted by thegrowing importance of digital platforms, the branch network
remains pivotal in driving customer relationships, enhancing
brand visibility and providing an effective platform for the deliveryof product/ service innovations as well as advisory support.
Key aspects of our branch strategy are given below:

Branch Operationsy Branch visits were conducted at all branches across thecountry and staff issues, service level gaps and required
infrastructure upgrades were identified and escalated
to relevant parties with remedial action takeny Emphasis was placed on standardising service delivery as
high staff turnover had an impact on the service levels
y Focus on driving process efficiencies and cost
optimisation was intensified
Enhancing the Customer Experiencey Structured QR -code-based platform placed across thebranch network in order to capture insights of walk-in
customers and measure their satisfaction levels
y Data on customer complaints, respond times and customer
service tracked and shared daily with the branches tostrengthen service
Brand Building

y Face-to-face interactions at branchesy Investments to drive digital transactions

Privilege Banking Centres

16

Number of Branches
Relocated During the Year1

Nuwara Eliyay Workshops and activities conducted through the Bank’s
branch network to promote the dedicated proposition
for the women’s market segment - NDB Araliya

OUTLOOK
The gradual reduction in customer footfall to branches along with
our ongoing focus on driving digital transactions is expected torationalise geographical expansion over the medium term. We
will leverage our existing branches located at strategic locations
to further penetrate customers and pursue selective growth
opportunities, while strengthening the product and service
propositions offered by the branches.
We will also continue to revamp and refurbish selected branches
as we strive to enhance the customer experience and upgrade ourbranch network. Plans are also underway to green our physicalfootprint through our premises solarisation project, which will
accelerate our journey towards net zero emission levels.

National Development Bank PLC

Annual Report 2023

79

Our Human Capital Inputs
� Team NDB comprising of 2,756 highly skilled, knowledge-based employees is a key
differentiator for the Group
� 43% female representation reflecting our efforts to create a gender balanced organisation
� The combined expertise and experience of our team over the years is a key component of ourorganisational knowledge

Value Drivers
� Providing opportunities for competency-based development through LKR 39.3 Mn investment in
training and development
� Remuneration, bonuses and increments were safeguarded in full despite the challenging
operating environment
� Ongoing efforts to nurture a diverse and inclusive organisational culture

Human
Capital� Comprehensive measures to ensure wellbeing of employees, particularly during the economiccrisis� Establishing tangible pathways for career progression

Value Created

The knowledge, skills and attitudeof Team NDB have been key todriving resilience and ensuring thesustainability of our business. Inturn, we remained steadfast in ourcommitment to supporting themwith a holistic value proposition,aligned to both personal andorganisational goals.

» LKR 2.4 Mn Value
addition per
Employee» 152,299
training hours» EDGE certified forworkplace genderequality» 581 promotions and
127 job upgrades

Strategic Focus Areas 2023
� Upskilling and reskilling of talent� Role repurposing
� Ensuring employee safety and wellbeing
� Maintaining proactive engagement
� Nurturing a performance-based culture

OUR MANAGEMENT APPROACH

HR GOVERNANCE STRUCTURE OF THE GROUPManagement of human capital at NDB isunderpinned by a comprehensive suiteof HR policies and procedures which arecompliant with the ISO 9001: 2015 standard andbenchmarked against industry best practices.
It seeks to promote inclusive employment inan environment conducive to dignity, mutual
respect and employee wellbeing.

Board of Directors

Board Human
Resources &Remunerations
Committee

All employees are required to adhere to the
Bank Code of Conduct which sets out the
professional and ethical conduct expectedfrom our employees.
The HR governance structure set out below is alsoa core aspect of Human Resource Management
and further supports the HR policies andprocedures in place to manage our people.

y

Responsible for implementing strategy andmanaging related risks

HR function

Responsible for implementing HR strategy of
the Group in line with the business strategy
and regulatory requirements

Employee bereavement leave policy
Policy revisions implementedy80

Responsible for assisting the Board indischarge of its duties by recommending
HR strategy, policy and monitoring
implementation of strategy and related risks

The CEO

Changes to the HR Policy
Framework in 2023
New policies introduced

Responsible for approving HR Strategy andmonitoring the implementation of strategy
and managing related risks

All policies relating to operational
allowances where required were revised
to reflect prevailing market conditions

National Development Bank PLC

While overall Group HR strategy and policies are formulated centrally, each subsidiary has its
own HR department, which is tasked with managing day-to-day operational matters. GroupHR plays only a consultative role on policy matters related to the subsidiaries on a needs basis.

Annual Report 2023

Employees
55 years by Contract & Genderabove

55 years 15 7
above

15 7

95 23

TraineeTEAM
31 PROFILE
- 55
years

887

31 - 55 887
years

504

504

Team NDB comprises 2,756 employees who are a key source of our competitive strength. As an equal opportunity employer, we do not discriminate
161
Contract- 30 256
18 - 30 670a level playing field for all
against18employees
based on gender, age,673 religion, race or any other factor, thereby ensuring
673 employees. All employees areyeas 670
yeas
engaged on a full-time basis. The profile of our team is presented below:
Permanent 01,293

100 300

600

Contract& GenderEmployees by Staff
Category& Gender
0

500

1,000

95 Age23
Contract& GenderEmployeesby& GenderNon-

Trainee
Executive

776 (52%)928 900

1,500

1,200

2,000

1,500

2,500

722 (48%)

NonExecutive

452 (37%)

Executive

95 23

55
years 15 7
Traineeabove
Executive
Contract 256
764 (63%)161

32 (76%)31 - 55 887
256
161
Contract
Senioryears
Permanent 1,293 10 (24%)
Management& above18 - 30 0670
100 500
300
Permanentyeas 1,293

504

1,000
600 673 9281,500
900

0100 500
300

1,000
600

1,500
900

2,000
1,200
2,000
1,200

2,500
1,500

1,200

1,500

722 (48%)764 (63%)452 (37%)

1,200

1,500

10 (24%)100 300

0

Male

600

900

FemaleEmployees by Category & Age

722 (48%)504

31 - 55 887
Executive
11%
88%
Executive
18years- 30 764 (63%)
673
yeas 670
32 (76%)
SeniorSenior18- 30 0 81% 100 300
600 673
Managementyeas 670 10 (24%)
Management& above& above
Employees 00by Staff100
Category&
Gender
20
40
300
600
100 300
0
600
18-30
years
31-55 years
Employeesby Staff& GenderMaleCategory
FemaleNon776 (52%)

Employees by Category & Age
Employees
Contract/RegionNon- by776(52%)

Executive
Executive 764 (63%)
Non- 74%
Executive 32 (76%)
Executive
Senior 764 (63%)
Western
10 (24%)
Management(76%)
Southern& above 32
Executive
Senior 11% 88%
0
300
10100
(24%)
Management
North Western& above
SeniorMale
CentralManagement 0 81% 100 300& above
Sabaragamuwa

1%504
452 (37%)

900
60
900
900

19%
1,200

80
1,200
1,200

1,500
%

74%

Executive

11%

SeniorManagement& above

81%

88%

1%

19%

20

40

18-30 years

1%

600

900

1,200

600

900

1,200
19%

1,500

60

80

100

1,500

%

55 years above
26%
26%

88%

26%

0

55 years above
722 (48%)452 (37%)

FemaleNonExecutive

100
1,500
1,500

26%

74%

North Central
Non- 74%
Uva
Executive
Executive 11%
Total

26%

722 (48%)452 (37%)

Employees by Category
& Age
Male
Female20
40
Northern 0
EmployeesbyCategory&Age
18-30 years
31-55 years
Eastern
NonExecutive

900

15 7

Non- 74%
55 yearsNon- 15776
7
Executive
above
31- 55 887 (52%)
Executive
years

Executive

600

776 (52%)

2,500
1,500

Employees
by Category& Age
Age & Gender
Employees
55 years by Staff Category & Genderabove

100 300

32 (76%)

SeniorManagement& above

928

Employees by Age& GenderFemale
Male

0

Employees by Staff Category & Gender

1%60

31-55 years

80

%

100

55 years above

Permanent

Contract

Trainee

Total

1,694
95
102
103
66
64
39
31
27
2,221

353
11
20
17
8
7

73
16
3
5
6
1
8
4
2
118

2,120
122
125
125
80
72
47
36
29
2,756

1
417

Executive
1%
Senior 11% 88%
19%Management 81%& above%
81% of the talent pool is engaged on a permanent basis while the remainder
is engaged on a contract and trainee basis for sales and non-critical functions.
Senior20
40
60
80 19%
100
Management 0 81%& above
We make every effort to recruit from communities surrounding our branches.
Over 20% of our staff and senior management are recruited from outside the%18-30 years

31-55 years

55 years above

18-30 years

31-55 years

55 years above

0
40
60
80
100
Western
Province,20
thereby promoting
regional
economicdevelopment.

MOVEMENTS IN OUR TEAM

45

Recruitment and retention of skilled employees remained a key
challenge during the year amidst the high levels of labour migration
due to the economic crisis in the country. Eight employees retired
during the year while a further 779 employees resigned, resulting in a
attrition rate of 21.9% during the year.

Staff
re-deployments

NDB took a strategic approach to addressing this challenge, undertaking
a re-sizing exercise to optimise available resources. Accordingly roles
were re-purposed and employees were upskilled to fill the vacuum
created by relatively high labour turnover. 71% of the roles left vacant
were filled internally through role re-purposing, re-deployments andpromotions. The exercise ensured that there were no redundancies
whilst providing exciting new opportunities for our existing employees.
Human Capital

708

Promotions
National Development Bank PLC

Annual Report 2023

81Movements in our team are graphically presented below:
Recruitment by Region

Recruitment by Gender

13 (2%)
26 (4%)
30 (5%)
34 (5%)

12 (2%)
11 (2%)
4 (1%)
2 (0.3%)

96 (15%)306 (49%)

Male
FemaleEastern
North Central
Uva

Turnover by Region

4 (1%)

317 (51%)491 (79%)

Western
Southern
North Western
CentralSabaragamuwa
Northern

Recruitment by Age

523 (84%)

Under 30 Years
Between 30 - 55 Years
Over 55 Years

Turnover by GenderTurnover by Age

22 (3%)

22 (3%)
33 (4%)
25 (3%)
29 (4%)

11 (1%)

14 (2%)
9 (1%)
6 (1%)

304 (39%)321 (41%)619 (79%)

Western
Southern
North Western
CentralSabaragamuwa
Northern

458 - (59%)

Male
FemaleEastern
North CentralUva

464 (60%)

Under 30 Years
Between 30 - 55 Years
Over 55 Years

REMUNERATION, RECOGNITION AND REWARDS
Remuneration and Other Benefits
We are able to attract talented individuals by ensuring transparent, unbiased and consistent remuneration and reward schemes that are on par withindustry best practices. The basic remuneration to permanent employees includes a variable pay component linked to employee performance inaddition to the guaranteed fixed pay component. In addition to the basic remuneration, we provide a host of statutory and other benefits designed toretain and motivate our employees. There is no statutory minimum wage for the entry level in the banking industry.

Supporting Employees
during the Economic Crisis

Employee expenses amounted
to LKR 6.6 Bn during the year

All employees salaries wereincreased to align with thecurrent market conditions
based on a salary survey
conducted in January 2023

Periodic salary surveys are
conducted to ensure alignment
to industry best practice
Additional benefits introduced
last year to combat challenges
posed by the economic crisis
were continued

82

National Development Bank PLC

Interest free Economic
Relief Loan was offered to
employees based on theirtenure of service

Annual Report 2023

Human CapitalRewards and Benefits
Guaranteed Pay and AllowancesyFuel/ travelling allowancey

Leave pay/ holiday allowancey

Job specific allowancey

Accommodation assistancey

Weekend/ holiday banking allowancey

Fixed Bonus
Reimbursable ExpensesyProfessional and club subscriptionsy

Education assistance for MBA’s
Retirement BenefitsyEPF/ ETF, Gratuity (higher contribution
to EPF than what is stipulated bystatutes)
Variable PayyPerformance bonusySales incentives and overtime
Other PrerequisitesyHoliday bungalow/ annual tripy

Medical insurance schemeyParental leavey

Toastmasters cluby

Recreational club
Subsidised Loan SchemesyHousing, vehicle, sundry loans

PERFORMANCE MANAGEMENT
A performance-based culture is driven within NDB, with all eligible employees being subject to anannual performance appraisal based on predetermined key performance indicators. Individuals
who meet targets are recognised and rewarded without any discrimination, thereby boosting
employee morale. Performance appraisal plays a key role in employee development, facilitating
discussions on career progression and identification of training requirements.
Percentage of Staff Receiving Regular Performance Appraisals
Specialised
Sales Force
Nonexecutive

85

15

52

48

Executive

62

38

Management

71

29

SeniorManagement

76

0

24

20

40

60

OPPORTUNITIES FOR
TRAINING AND DEVELOPMENT%

Providing opportunities
for continuous learningand development is a vital
component of our HR strategy.
Our training proposition centres
on a competency-based learning
approach with the aim of upskilling
our talent pool and equipping themwith the right technical, digital andsoft skills to drive organisational
success. Role-based competency
mapping was carried out for all
critical business functions, enabling
the identification of the required
skills and formulation of suitabletraining programmes.

Inductions &Orientations

Technical Training
Programmes

15

125

programmes

programmes

453

3,289

participants

participants

Digital andSkill Development

General Health,Awareness & Other

28

43

programmes

programmes

2,353

780

participants

participants

Leadership
Training

Type of training
programme% oftotal hours

On The Job Training

63

Inductions & Orientations

7

programmes

Strategic Development

6

1,228

Structured Development

5Soft Skills

4

Service4Compliance3

Branch Operations

2

Products

2

Other

4

30

participants

Human Capital

100

Percentage - Male
Percentage - Female

During the year, emphasis was
also placed on strengthening
the leadership capabilities of ourpersonnel and several programmes
were conducted in this regard.
A summary of training anddevelopment interventions for theyear is given below:

Of the above, holiday allowances,
weekend/ holiday banking allowances,
performance bonus, subscriptions andeducational assistance are not provided
to contract employees whilst different
schemes/conditions are applicable for
medical insurance.

80

National Development Bank PLC

Annual Report 2023

83

EMPLOYEE HEALTH AND WELLBEING
The total investment in
training amounted to
LKR 39.3 Mn, while a
total of 2,749 employees
underwent 152,299
hours of training during
the year.
Average training hours
per employee was 55.4.

Average Training Hours per Gender NDBPAL is a holistic employee
wellness proposition targeting both,the mental and emotional well-beingof our people. The proposition offers
counselling services targeted atemotional and financial wellbeing
as well as maintaining healthy
relationships in their personal lives aswell as in the workplace.

60.3
Average Training Hours per Category

82.40

Executive
Staff

21.00

SeniorManagement &
above

25.30

We are committed to providing a safe,
secure and healthy work environment for our
employees. Although the stringent healthand safety measures put in place during the
pandemic have been relaxed, we continued tomaintain basic hygiene and safety protocols.
Meanwhile, the Bank also continued its
employee wellness proposition, NDBPAL which
was introduced in 2022 and aimed at uplifting
employee wellbeing, particularly during the
economic crisis.

NDBPAL

49.1

Non-exective
Staff

Learning
Platforms
Used

No. ofHours

No. of No. of
Staff Hours(%)

E-learning

2,069.5

2,173

1.4

28.4

Physical149,350.5

5,041

98.1

65.9

Virtual

879.0

436

0.6

5.7

 Examples of NDBPAL support includes:

20

40

60

Hours

80

100

No. of
Staff(%)

Investment in Training
LKR Mn

50
40
30

39.26

17.00

19.63

18.67

50.00

20
10

84

2020

Formal grievance handling, whistleblower,and disciplinary process
Regular staff and team meetings ensure
effective communication

2021

2022

2023

National Development Bank PLC“Talk to HR” feature, on the Bank’s HCM(Human Capital Management System)
facilitates ongoing and real time connectivity
between employees and the HR teamMultiple formal and informal engagement
mechanisms are in place to address employee
concerns and maintain engagement. Whilecontinuing engagement via virtual platforms,
we increased physical engagement activities
during the year, which helped motivate
employees and strengthen morale given theuncertain operating environment.

 Social or professional relationships,
like conflict resolution, networking,relationship building, understanding
your emotions, managing job stress
etc.

Informal engagement mechanisms carriedout year-round to cultivate a work life balance
included the following:y

NDB Avurudu Kumarya/ Kumaraya 2023

 Family situations, such as premarital, marital issues, marriage,
childcare and pregnancy, sexual andreproductive health issuesyRegional sports days

 Financial related counselling

0
2019

Open-door policy encourages all employees
to come forward with any grievances,
concerns and suggestions

 This proposition is an element
under the bigger umbrella of NDB
Cares which extends to the familiesof employees as well as to thecommunity.
 Support is provided in partnershipwith a professional service provider
ensuring confidentiality andanonymity. It creates a safe spacefor employees to talk about issues
and better understand themselves,improve coping skills and develop
effective solutions to problems.

0

ACTIVE ENGAGEMENT Recovery from substance abuse andtraumatic events, like accidents or
the loss of a loved one

Annual Report 2023

Human Capitaly

NDB Speedup ChallengeyPoson Bhakthi Geetha Competitiony

NDB Dinner Dancey

NDB Christmas Carolsy

NDB Kids Party & Family Day Out

A Preferred Employer

Trade Union Relationships

Employee surveys offer valuable insights into the employee work environment and enable us to assess
employee satisfaction levels on an ongoing basis. It also affords the employees an opportunity to share
their candid feedback with anonymity. A Bank-wide survey was conducted during the year as a partof the re-certification process for EDGE – Economic Dividends for Gender Equality, an internationallyrecognised certification for work place gender equality.

The Bank does not have any collective bargaining
agreements in place. During the year underreview, there were no material issues relating toemployees or industrial relations which required
disclosure. All employees are given adequate
notice regarding any significant operationalchanges.

Additionally, the Bank relies on the globally accepted Great Place To Work® (GPTW) survey once in
two years, which offers valuable insights on employee concerns and areas for improvement. The
certification is purely on employee feedback and is a testimony to the high level of employee trust in
the organisation and the leadership team.

Gender Parity at NDB
We believe that a diverse and inclusive work environment enriches decision making through the combination of different
skills, ideas, and perspectives. As an equal opportunity employer, we continue to take measures to foster a conducive work
environment free from discrimination for all our employees. We strive for gender parity in our organisation and the wider
society by….

…developing policy and structural enablers to promote gender parity
Driving gender equality continues to be a key pillar of our HR strategy and we are committed to ensuring our policy framework, HR practices andorganisational culture reflect this stance. Our strategy to create a gender-balanced organisation begins with recruitment to retention of employees andbuilding their capabilities.
Conducive Policy Framework

Improvements in 2023

y Equal opportunity recruitment policyy Maternity leave increased from 84 to 100
working daysy Equal opportunity promotion policyy No discrimination in remuneration between gendersy Strict policy framework covering all forms of harassment at workplace
HR Practices

Improvements in 2023

y Flexi hours

y Driving the Fearlessly Female project
dedicated to empowering our female staff
membersy Work from Home arrangements enabled for over 1,500 staffy ‘Dignity at Work’ mailbox was launched for employees to raise concerns over behaviours that
constitute discrimination, bullying, harassment and sexual harassment…ensuring female representation at every level
Our workplace is conducive for individuals of both genders to achieve their career aspirations while maintaining a goodwork-life balance. We have maintained an enabling culture for women and explore alternate working arrangements suchas flexible working hours to provide women the flexibility to remain in the workforce even after childbirth.
Gender Representation by Grade

New Recruits

Nonexecutive

52

Executive

61

39

Mangement

71

29

SeniorManagement &
above

76

24

0

48

20

Male - Percentage
Female - Percentage

Human Capital

40

60

80

100

%

317

306

(51%)

(49%)

Promotions

261

447

(37%)

(63%)
Exits

321

(41%)

458

(59%)

National Development Bank PLC

Annual Report 2023

85

Maternity leave was increased to 100 working days during
the year to increase female participation in the workforce
Parental Leave

Male

FemaleEmployees entitled to parental leave

1,524

1,157

Employees that took parental leave

60

51

Number of employees that returned to work in the reporting period
after parental leave ended

60

28

Total number of employees that returned to work after parental leave
ended that were still employed 12 months after their return to work

47

47

Accolades
The Bank was recently honoured as one of the Most Outstanding Women Friendly
Workplaces in Sri Lanka at the third edition of the Women Friendly WorkplaceAwards (WFWA) 2023. The WFWA measures the wellbeing and progress of
women in the workplace and seeks to recognise organisations that empower andacknowledge contributions of women in the Sri Lankan workplace.

…actively driving change to close the Gender Gap
We are committed to closing the Gender Gap and encourage discussions on addressing
unconscious gender bias to drive meaningful change. We do not engage in any form of genderbased discrimination when determining reward structures or offering promotions. The ratio of
basic salary between women and men was 0.95 : 1.

86

National Development Bank PLC

Annual Report 2023

Human Capital…and communicating
a positive gendernarrative throughout theorganisation and the wider
community

Economic Dividends for Gender
Equality (EDGE) is the only global
certification standard available forgender equality at the workplace andis issued and administered by EDGE
certified foundation (Switzerland).
The certification drives organisations
to ensure a strong gender balanceat all levels, supported by a robust
workforce analytics approach andprovides a solid framework for effective
gender equality policies and practices
to ensure equitable career flows.

At NDB, we actively encourage female
participation in economic activity.
Translating this in to support for ourown staff, we were the first corporate
in Sri Lanka to receive the Economic
Dividends for Gender Equality (EDGE)
certification for workplace genderequality in 2018, as an initiative underthe Banking on Women pillar of theBank’s strategy. The Bank was
re-certified for EDGE in November 2023.
This certification is valid through two
more years.
The evaluation covered three criticalaspects, viz. HR statistics, infrastructure
policies and practices and a Bank
wide employee survey. The results
were audited and verified by aglobally authorised auditor for EDGE
certification, Flocert, Gmbh.

A rewarding work place, a winning team
The mark of a great company lies in its ability to attract and retain great managers who inspire, guide, and develop theirteams to achieve remarkable results!

NDB was recognised as a “Company with Great Managers” for 2022 (held in 2023). Thirteen senior leaders of the Bank also won awards at
the “Great Managers 2022”, Award hosted by the Colombo Leadership Academy for Leadership Excellence. The categories included Driving
Results & Execution Excellence, Aligning Organisational Vision, Coaching Others for Growth, Leadership Integrality & Holistic Approach andTeam Effectiveness & Collaboration. NDB Bank had the highest number of female managers recognised across all winning corporates for theyear 2022. The Bank has been producing Great Managers at this awards programme since 2019, and a total of 43 senior leaders have been therecipient of this awards since.

OUTLOOK
We will continue our holistic value proposition to employees in line with the overall Group strategy. Our focus will be on building a team that is skilled,
motivated and future fit to navigate the volatilities in the operating environment, while continuing to relentlessly drive our long-term strategy of
becoming the “Banking Group of Choice”.

Human Capital

National Development Bank PLC

Annual Report 2023

87

Our Intellectual Capital Inputs
� Brand value of LKR 9.2 Bn
� Unique base of tacit knowledge and experience of our team
� Dynamic organisational structures
� Robust systems, standards and processes

Value Drivers����Training investment of LKR 39.3 Mn
Nurturing a culture of learning and knowledge-sharing
Streamlining systems and processes to drive efficiency and productivity levels
Empowering decision makers with access to high quality, real time information to enabledata-driven decision making
� Cross-functional collaboration to drive synergies

Intellectual Capital

Value Created

Our intellectual capital is whatsets us apart, and remains a key
driver of our growth journey.
Ongoing efforts to nurture
intellectual capital enhances ourability to understand changing
customer preferences andrespond with innovative solutions,fostering the trust and confidenceof key stakeholder groups.

» Ascended to the15th position inbrand value asper Brand Finance
Lanka and LMD» Targeted customer
solutions» Increased social
media visibility» 3 new processcertifications

Strategic Focus Areas 2023
� Increasing brand stature through brand building initiatives
� Investing in training and development
� Driving service excellence� Providing unique customer experiences through innovation

MANAGING OUR INTELLECTUAL CAPITAL
We continued to nurture the Bank’s intellectual capital base by strengthening brand value, retaining and harnessing organisational tacit knowledge
and by driving innovation across all aspects of the operation.

A TRUSTED BRAND
The NDB brand has gone through significant
transformation over the years and is today
a leading national brand recognised for its
customer centricity, digital prowess and future
readiness. During the year we continued tostrengthen our brand value and enhancebrand ranking through targeted brand building
initiatives.
Awards and accolades further strengthened thebrand, reflecting our unwavering commitment
to pursuing excellence. (Please refer page
296 Awards and Recognition). Our brand isfrequently featured by independent parties
among the most valuable brands in the
country, reflecting the success of our brandbuilding initiatives.

ySecuring the prestigious Grand Prix
Award for the third time for Cross Platform
Integration at the SLIM Digis 2.3

yStrengthening digital presence by using a
multi-pronged approach including searchengine optimisation, working with social
media influencers and increasing presence
on social media

88

National Development Bank PLC

Brand Visibility

LKR 9.2 Bn

Empowering youth related sports including
school level rugby through sponsorships
to increase brand presence and strengthen
position as a national brand

Brand Value by Brand Finance
Sri Lanka & LMD

yRe-launching unique products including
NDB Shilpa children’s saving account andthe NDB Araliya proposition for women to
position ourselves as a lifestyle driven bankTotal awards won by the GroupyThird edition of the Sri Lanka
Vanithabhimana Awards Ceremony
concluded and the fourth edition launchedin collaboration with News 1st. This uniqueprogramme which aims to recognise andreward women for their contribution to
the society and the economy reflects ourbrand’s commitment to empowering
women in different spheres (Refer page 94
for more information)yLaunch of Sri Lanka’s first AI generated
calendar featuring futuristic visions ofchildren, and extending the initiative to acharitable act, thereby driving the brand as
a digi-savvy and an empathetic brandy

Key brand building initiatives carried out during
the year include:yCreating awareness on the Bank’s digital
capabilities including NDB NEOS, NEOSBIZ,
digital onboarding for digi-loans andaccount opening among others

Annual Report 2023

>90

571,345

488.8K+

10,417,337 Mn

Fans onSocial Media

Followers

2.2K+

Social MediaEngagements

Followers

66.4K+

9,046,242 Mn

Followers

Reach

10.4K+
Followers

3.6K+

254,598,369 Mn

Followers

Impressions

OUR SOCIAL MEDIA FOOTPRINT
LEVERAGING ORGANISATIONAL TACIT KNOWLEDGE

SYSTEMS AND PROCESSESThe invaluable base of tacit knowledge and collective experience underpins every aspect of ouroperations, enabling the Group to understand customer and market dynamics, drive strategy andfacilitate collaborations with business partners. We will look to further enhance this knowledgebase through continued investments in learning propositions and a culture of mentoring andknowledge sharing.

Process improvements and enhancements
to our systems have brought about greater
efficiency and flexibility to our operations.
Continuous investments in digital technology
have also contributed towards strengthening
our capabilities and sharpening ourcompetitive edge. This serves as reassurance
to our stakeholders regarding the stability
and integrity of our activities and businessprocesses.

Strong Learning
Propositions

LKR 39.3 Mn investment inTraining and Development
to enhance the skills of ourpeopleOrganisational
CultureThe knowledge sharing
culture within the Groupempowers employees intheir roles and enables
them to achieve service andoperational excellenceStrength of
Leadership TeamThe skills, experience andknowledge of our strong
leadership team enabled
us to swiftly identify andadapt to the volatilities in
the operating environment,
thereby supporting the longterm strategies

Intellectual Capital

Data Analytics Capabilities

Cross Functional Capabilities

The Bank has a dedicatedData Analytics Team which
engages in data mining,
behavioural analysis,
predictive analysis andprovides valuable insights
to the business units tomake data-driven decisionsy Cross-functional committees
with oversight responsibility
on specific functions serve as
an effective tool in poolingand sharing diverse views andknowledge within the Groupy Other cross functional
committees include IT Steering
Committee, Asset and Liability
Management Committee,
Procurement Committee
and Corporate Sustainability
Committee, among manyothersTenure of Servicey The years of knowledge andexperience gathered by ourteam has not only enabled us
to gain a competitive edge
but also contributed towards
industry growthy Over 600 employees havecompleted more than 10 yearsof service with us

CAPACITY FOR INNOVATIONOur capacity to continuously drive innovation
helps us to evolve and stay ahead of thecompetition. We promote a culture ofinnovation and empower employees tothink out of the box in anticipating customer
requirements, resulting in innovative new
products, primarily through our digitalofferings. (Please see page 61 for details of new
products and product relaunches introduced
during the year).

OUTLOOK
Enhancing brand equity will be a key focus
in this increasingly competitive and complex
operating landscape. Our brand building
strategy will focus on the customer journey,
customer centricity, promoting integrated
solutions and digital journeys. We will also
further strengthen our extensive base oforganisational knowledge by continuing tonurture a data and innovation driven culture.

National Development Bank PLC

Annual Report 2023

89

Our Social and Relationship Capital Inputs
� Customer Relationships

� Value Chain Partners

� The Wider Community» Over 300 Registeredsuppliers» Other business partners» Industry Stakeholders

Value Drivers
� Delivering unique value propositions which are aligned to the overall mission and strategy of
the Bank� Ongoing investments in community engagement initiatives

Social and
Relationship Capital� Enhancing the overall customer experience through improved service levels
� Greater engagement with business partners

Value CreatedWe are committed to nurturing
relationships with our customers,
value chain partners and thecommunity, actively engaging
with them to retain their trustand confidence. Our holistic
value proposition to stakeholders
generates mutual benefit,
ensuring we maintain our social
license to operate.

» 4.9 customer satisfaction rate » Industry collaborations to(Out of 5.0)
create a conducive industry
environment» LKR 6.5 Bn in payments to» LKR 8.6 Mn investment incommunity engagement

suppliers

Strategic Focus Areas 2023
� Enhancing
customer service

� Empowering
women
entrepreneurs

� Supporting SME
exporters andinnovators

� Community
engagement

CUSTOMER RELATIONSHIPS

Contact Centre
Satisfactory Rating

4.3 out of 5.0(excluding system
related issues)

First Response Time93%
Our comprehensive set of policies and robust
governance structure in place guide us inmanaging our social and relationship capital.
The unprecedented challenges stemming fromthe operating environment during the year
necessitated a strengthening of relationships
through various formal and informal engagement
platforms. We focused on sharpening our value
proposition to ensure satisfied customers, value
chain partners and communities.
During the year under review, there were noreported incidents of corruption and/or fraud
and no fines/penalties for non-compliancewith laws and regulations pertaining to socioeconomic compliance including customer healthand safety, marketing/ labelling information
and/or marketing communications. Where
relevant, the Bank makes its communications
in all three languages of Sinhala, Tamil andEnglish on products, services and other relevantannouncements.
National Development Bank PLC

We cater to a diverse customer base comprising individuals, corporates and SMEs through ourseamless digital channels and island-wide network of branches. Understanding and effectively
responding to customer needs remains an integral part of maintaining our competitive advantage.
The challenging operating environment during the year necessitated a re-alignment of our overall
strategy in the mid-term, with NDB mainly focusing on consolidating its existing customer base byenhancing the overall customer experience and service levels. Critical needs of our customers wereidentified and responded to, while ensuring their financial requirements were met with minimal
disruption.

Navigating the Economic Crisis

OUR MANAGEMENT APPROACH

90

� Responding to the needs of our customers through meaningful and informed engagement

Flexible Repayment
Schemes
Flexible repayment schemes
and reschedulements were
offered to customers facedwith financial difficulties
led by the Remedial
Management Unit

Improving
Accessibility
In ensuring continued accessibilityof the Bank’s services, we continued
to enhance the omni-channel
experience through innovation

Advisory andCustomer Support
The Bank maintained close
engagement with customers,
offering advisory andsupport through regional
programmes and forums

Special Training
for Staff
The Bank’s staff was trained
to handle customers with
empathy and route themto the correct channels for
remedial action

During the year, there were no instances of non-compliance on product and service
information and labelling or marketing communications.

Annual Report 2023

CUSTOMER EXPERIENCE &CONTACT CENTRENDB Contact Centre

Engaging with Our Customers

NDB’s Contact Centre extends round-the-clock support to customers poweredby state-of-the-art technology. The main objective of the Contact Centre is toincrease contact ability and offer seamless channels for customers to connect
with the Bank. Comprising an empathetic and well-trained team that is
supported by updated knowledge and training, the Contact Centre continued
its 24x7 service, despite high staff turnover during the year.

Excellence in customer service and experienceis a key value proposition we offer to ourcustomers as we constantly strive to enhancecustomer convenience. We maintain proactive
engagement with customers supported
by a year-round calendar of marketing andpromotional activities, a systematic process forhandling complaints and robust mechanisms tomeasure customer satisfaction levels.

Branch Network

NDB Contact Centre

Tele-marketing

The dedicated Contact Centre contributes directly and indirectly towards revenue generation
through tele-marketing, credit reminders to customers based on requests from the relevant
divisions and proactive customer engagement to promote new products and services basedon customer analytics.
Key Concerns in 2023

yHigh staff turnover of the front-line staff during the year had an impact on the service
aspect to the end customer and there was insufficient staff to serve customersyDifficulty in upskilling staff with all-round product and channel knowledge within shorttime framesyOther customer concerns included loan rate revisions and credit card issues

Our Response

Enhancing service efficiencies by improving the people skills of the front-line staff throughtraining

NEOS AppsyyYear-round refresher training programmes covering all service aspects

Dedicated E-mail addressyDuring stages of high call volumes, SMSs were sent to customers to initiate a WhatsApp
conversationy

Empowering the front-line staff by giving them standardised scripts for consistent levels ofservice

The Bank’s main customer touchpoint is throughthe island-wide network of 113 branches andall other touch points including Contact Centre.
Staff at our branches have direct access tocustomers and are provided with adequate
training in customer handling and service.
During the year, branch visits were completed
across all branches and departments after alapse of four years. Staff issues, service level gaps
and branch and department infrastructure issues
were identified and escalated to relevant parties
in order to find solutions.
In recent years, there has been a noticeable
shift in customer preference towards digitalchannels of engagement resulting in an
increased volume of requests flowing throughdigital channels. Therefore, focus was placed onenhancing our digital channels of engagement,
providing customers with convenience andseamless accessibility to our services.

y

Empowered front line staff with DAs to provide first call resolutionyAccreditation for dedicated quality supervisors to coach and develop competencies ofstaff membersyService recovery calls by dedicated agents to customers who rated the service below
standardyIntroduced service based Agent KPIs and incentives focusing on continuous improvementy

Educating staff on any new products that have been introduced, including key features,promotions, product guidelines etc.

yMonitoring of internal telephone etiquette standards via call surveys

Way ForwardyImplementation of Advanced Interactive Voice Response (IVR) to increase self-servicing
optionsy

Introduction of automated digital channels to improve service deliveriesyEmphasis on outbound & telemarketing calls to increase customer engagement/salesyOrganising more training sessions for new recruits in order to enhance service levels andincrease awareness on SOP guidelines

The Bank follows a standard process to escalate
any customer concerns or requests that may
arise. All concerns and requests are recordedon the Customer Service Request Management(CSRM) platform. This platform has a dashboard
which provides improved analytics and insights
allowing us to serve customers better.
Social and Relationship Capital

National Development Bank PLC

Annual Report 2023

91

CUSTOMER SATISFACTION

MEASURING SERVICE EXCELLENCE

We have in place a structured QR-codebased platform across the branch network
to seamlessly capture insights from walk-in
customers and measure their satisfaction levels.
Findings are tracked daily on the dashboard
and shared proactively with employees
through internal communication on a weekly
and monthly basis. The Bank sends a SMS linkto customers at the point of establishing new
accounts to gather service insights from thecustomer. Feedback from customers helps us toenhance the customer experience and drive theorganisation towards achieving its goals.

Service Indicator
Contact Centre

Service levels of theincoming calls
Abandon rate
Call quality effectivenessInternal Telephone Percentage of calls answered
Handling Standards within 3 rings (Average YTD)
Customer Requests Requests turnaround timeand Concerns
Handling
Concern turnaround time

Goals

Achievement

To maintain 80% or more

70%

To maintain below 5%
To maintain at 80%
80%

8%
79%
85.54%

80% to be resolved
within 5 working days
80% to be resolved
within 8 working days
Online Channels
NEOS and contact@ndb
80% or more to be
mailbox response time (TAT) responded within 3
working days
Customer Feedback Percentage of Very Good and 80%
QR and AccountGood responses received
Opening

73%
67%
EMC (email channel) 87%
NEOS (mobile app) 90%
Very Good and Good
response percentage
QR 99.33%
Account opening 92.38%

WAY FORWARD CUSTOMER EXPERIENCEyEnhancing staff morale to deliver superior customer service as well as to adhere to SOP
guidelines in order to achieve “Desired” level of service all throughout the organisation.

yArranging more training sessions for new recruits to enhance service levels as well as toincrease awareness on SOP guidelines.

OUR PRODUCT MAP
Striving to serve our customers better, NDB’s comprehensive product proposition to customers
across the different business lines is presented below.

STRENGTHENING OUR CUSTOMERSERVICE CAPABILITIESy

A new e-learning module was created torefresh the minds of existing employees
on important Standard Operating
Procedure (SOP) guidelines

y70 inspiring service stories whichcustomers shared with us were publishedin order to appreciate the superior service
provided by our staffyEncouraged cross functional feedback
among staff across the organisation inorder to boost the morale and team spirit
with the ultimate aim of providing the bestexperience for our valuable customersy

New EDMs (Electronic Direct Mail)
designed to increase the knowledge of
all staff and to strengthen their abilities
to provide a better customer experience
towards our valuable clients.

yImproved customer privacy and data
management systems

92

National Development Bank PLC

Lending Products

Investment
Products

Customer Service Week (CSW) was
celebrated in a more rewarding andenergetic manner in order to get
the involvement of all staff, thereby
celebrating togetherness in providing
service to external as well as internalcustomers

Other

y

RetailWholesale

Business Banking

y Savings accounts (women’s,
minor, youth)y Investment Planners
y Current accounts
y Fixed deposits
y Foreign currency deposits

y Current accounts
y Foreign currency
depositsy Fixed deposits
y Savings and calldepositsy Savings
y Time deposits
y Current accounts
y Foreign currency
depositsy Personaly Housingy Educationy Leasingy NDB GoodLife Credit
Cardy Term loansy CAPEX fundingy Working capitaly Leasingfinancey Trade services
y Trade services
y Cash managementy Leasingy Revolving andy Cash management structured working
y Trade card services capital fundingy Channel finance fory Distributor/
distributors
Supplier financing
y Industry specificworking capitalsolutionsy Term loans
y Islamic Banking for longterm financing
y Financing for leveraged
buy outsy Securitisationy Investment in listed
securitiesy Digital financial
solutionsy Custodian services
y Trustee services

y Services on debt syndications
such as lead arrangerfunctiony Facility agent function andEscrow agent function
y Custodian services
y IPO underwriting services
y Cash collection services
y Trade services
y Trustee services

y Salary
advancesy Solary Pawningy Vismithaloans

y NDB Debit cards
y NDB Travel Pal
y Privilege Banking
y Safe deposit lockers
y Remittancesy Bancassurancey Custodian services

Customer value
propositions

Annual Report 2023

y Credit cards
y Debit cards
y Bancassurancey Custodian services
y Trustee services

y NDB Araliya for the women’s market
segment
y NDB Aachara for senior citizens
y NDB ZEE for YouthSocial and Relationship Capital

PIF
y Savings
y Fixed deposits
y Foreign currency depositsy REPOy NDB Jayagamu Sri Lanka for exporters,
innovators and SMEs
y Islamic Banking solutions

CREATING OPPORTUNITIES – NDB JAYAGAMU SRI LANKA
The Group created opportunities for the country’s SME exporters, aspiring entrepreneurs and enthusiastic innovators to overcome the challenges
faced by the effects of the pandemic and the resultant economic downturn through its unique platform, NDB Jayagamu Sri Lanka. This is a holistic
value proposition, directly contributing towards the country’s economic recovery by aligning growth strategies to areas of critical national interest. The
programme takes a multi-faceted approach and continued to provide support and empowerment to the target audiences throughout the year 2023,
particularly in enhancing resilience at the face of challenges brought about by the economic crisis.
Financial assistanceNon-financial assistance

Ecosystem partnerships

Technology and IT support

y Dynamic loan schemesat concessionary rates
with expedited approvals;
working capital facilities,
pre and post export
finance, trade related
facilities and capital
expenditure facilities

y Curated products in supporting
unique needs of SMEs

y Partnerships with Export
Development Board, Ceylon
Chamber of Commerce,
Daraz, Maersk, CodeVus, ICTA,
ThinkCube Solutions, Cord
360, etc. to provide accessto markets, networking
opportunities and a range ofother services

y Cash management solutions
including gateway for
payments and trade relatedtransactionsy Concessions on charges
particularly on internationaltradey Trade desk to facilitate exportersy Access to foreign and local buyers
through online platforms
y Capacity building throughwebinars/ physical sessions
on topics such as businessregistration, gaining access tomarkets, financial managementy Advisory support in enhancing
business resiliencey Participating Financial
Institution (PFI) of National
Credit Guarantee Institution

y Payroll managementy ERP support
y Access to dashboards and realtime status of informationy NEOSBIZ Mobile App
dedicated for SMEs

BANKING ON WOMEN
As a bank that supports women empowerment, NDB continued to strengthen its targeted banking solutions to drivesocio-economic progress among its female customers and broader communities. Through its Banking on Women platform,
NDB goes beyond banking, providing access to affordable finance, skills development programmes and identifying solutions
to barriers which are often faced by women-owned businesses. Two distinct propositions offered are NDB Araliya and
Sri Lanka Vanithabhimana.
NDB Araliya
NDB’s women focused proposition Araliya was re-profiled and revamped during the year with several awareness programmes, workshops andcustomer engagement activities conducted across the country, via the branch network as well as via digital platforms. This proposition is especiallydesigned to enable females to do more under the theme, “Giving you more than what you want for yourself”.
Financial Services

Leveraging Partnerships

Female entrepreneurs canobtain a range of exclusivebanking solutions including
NDB Araliya Business Loans,credit/ debit cards and working
capital facilities which offer
preferential interest rates andinsurance covers.

NDB provides greater market accessand networking opportunities for
women through partnerships withthird parties such as Daraz,
Women’s Chamber of Industries &Commerce (WCIC) and the Bobbin
Group. The Bank has partnered with
Satyn magazine to share knowledge
on women-centric topics of interest.
NDB has also partnered with the
Asian Development Bank (ADB)
via the Government of Sri Lanka inextending advisory services andtraining on women empowerment
to small and medium sized
entrepreneurs

Non-financial Services

The proposition also provides
access to NDB Araliya
knowledge sharing forums,
mentoring and networking
sessions.

Social and Relationship Capital

Target women’smarket segments

NDB Araliya
Knowledge sharing forums

Home-makers

1,450

12

70,0002

Salaried employees
Entrepreneurs

participantsviews

National Development Bank PLC

physical forums
digital forums

Annual Report 2023

93

SRI LANKA VANITHABHIMANA
Sri Lanka Vanithabhimana (SLV) is NDB’s flagship initiative dedicated in discovering,empowering and recognising high performing females across multiple economic and social
landscapes in form of a competition and awards ceremony. The programme is a collaboration
with News 1st and takes a structured approach, comprising multiple rounds of evaluation of
applicants by an eminent panel of judges. In 2023, SLV marked two milestones viz. celebrating
winners of the 2022/2023 (Third edition) of SLV in a pinnacle awards ceremony and launching
the fourth consecutive edition for 2023/2024.
SLV affords high performing females across eight categories at both provincial and national
level to showcase their talents, namely Sports, Entrepreneur (Micro Scale), Entrepreneur (Small
Scale), Entrepreneur (Up Coming), Social Services, Arts and Literature, Education Services andYoung Leader. Additionally the Corporate Sector competition is tailored for professionals
in fields such as HR, Financial Management, Sales and Marketing, State Sector, Tourism, Art,
Sports and Entrepreneurship.
The main aim of SLV is to stimulate female participation in both economic and social activities
and accelerate their contribution to the socio-economic progress of the country. It also yields
numerous other benefits to participants such as opportunity to network, gain access to market
places, exposure on varies topics via workshops organised linked to SLV and gain access tofinancing and advisory support from the Bank.

SLV Third Edition
Impact24

Over 2,700
Total number of applicants
across 09 provinces

females recognisedwith awards

VALUE CHAIN PARTNERS
The mutually beneficial partnerships we havedeveloped with our value chain partners playa crucial role in linking us with customers as
we strive to broaden our reach and ensure
the smooth functioning of our operations. We
continued to work closely with our value chain
partners comprising an ecosystem of over
300 suppliers and 93 correspondent banks, inorder to drive greater synergies and come up
with innovative solutions to address challenges
faced during the year.

Meanwhile, the Bank’s Procurement Policy sets
out the economic, social and environmental
criteria to be considered when evaluating
suppliers. This enables NDB to propagate its
sustainability agenda across the supply chain.

The bulk of our suppliers are local corporates
and SMEs, through whom we procure a
range of IT equipment, office equipment andconsumables. The Procurement Committee
plays a vital role in selecting the right supplierswith potential vendors identified through acomprehensive supplier assessment which
considers factors beyond cost, such as quality,
reliability, sustainability and innovation.
Furthermore, we ensure that the selected
vendors align with NDB’s values and Corporate
Sustainability principles.

yNegotiating favourable terms and pricing,
exploring bulk purchasing and carrying out
market surveys to identify suppliers who
could give us quality products and services.

y

Dedicated channel for receiving suppliergrievances via ndbtenders@ndbbank.com
and a mechanism to resolve them.

94

National Development Bank PLC

Initiatives undertaken by the Procurement
Unit during the year:y

Shift to a completely paperless system

yIntroduction of vendor evaluation on aquarterly basis

The Bank adopts the following practices whenengaging suppliers.

yIntroduction of coding systemfor vendors

Comprehensive supply chain audits
conducted with findings used for processenhancements.

yIntroduction of Excel based Purchase
Order tracking system

yIntroduction of tender status tracking
system and weekly status update withall departmentsyAnnual Report 2023

Social and Relationship Capital

INDUSTRY COLLABORATIONSCORPORATE SUSTAINABILITY GOVERNANCE

We actively collaborate with industry
stakeholders with the aim of contributing
to the growth and development of theindustry. Further, we encourage our
employees to take part in numerous
forums and use these opportunities toshare knowledge with industry peers.
The Bank holds membership in a wide
number of industry associations to harness
strength and partner for the mutual
benefit of the industry. A few examples are
below:The Bank’s Corporate Sustainability (CS) Committee provides oversight on the Corporate
Sustainability initiatives of the Bank. Initiatives are prioritised and selected based on community
needs, resource availability and accessibility to relevant expertise, thereby ensuring alignment ofobjectives.

y

Sri Lanka Banks’ AssociationyInstitute of Bankers of Sri Lanka (IBSL)yThe Association of Professional Bankers
Sri Lanka (APBSL)y

Sri Lanka Forex AssociationyPayment Card Industry Association of
Sri LankayAssociation of Banking Sector Risk
Professionals of Sri LankayBiodiversity Sri Lanka (BSL)NDB believes that community involvement goes beyond core business activities. In nurturing acommunity-conscious culture, employees are encouraged to volunteer their time and effort forthese initiatives.
Key focus areas of our CS agenda are set out below:

Supporting
national
sustainable
development &UN SDGs‘Adopt an Ambulance’ Project - a National causey

NDB Bank reaffirmed its commitment
to community-driven initiatives
by joining forces with the 1990
Suwaseriya Foundation to support
their vital ‘Adopt an Ambulance’
programmes. In a significant step
towards enhancing emergency
medical services across the nation,
NDB Bank sponsored the operational
cost of one ambulance for an entire
year.

y

This collaborative effort aims toaddress the challenges faced by theSuwaseriya Foundation in funding
the operational expenses of theirisland-wide Pre-Hospital Care andAmbulance Services, particularly
amidst the economic difficulties they
are currently navigating.

ySocial and Relationship CapitalSpecial projects
to address
specificcommunity needs

Employeevolunteerism

There were no significant negative impacts on local communities through our operations during
the year. Progress made in delivering the CS agenda for 2023 is mentioned below.

UPLIFTED COMMUNITIESNDB’s CS initiatives are aligned to its triple
bottom line aspirations and designed to build
impactful relationships that create sustainable
shared value by delivering economic,
environmental and social benefits to the wider
community.

Protection andconservationof theenvironment

LKR 5.0 Mn
Investment

Over 100,000
Beneficiaries

The adopted ambulance, will
service the area of Hikkaduwa andwill play a crucial role in providing
free ambulance services to thecommunities in need in Hikkaduwa,
ensuring timely and efficient
emergency care.

National Development Bank PLC

Annual Report 2023

95

Supporting an Inclusive Culture on International Sign Language Day 2023

yInternational Sign Language Day 2023 was celebrated by the Department of Social Services(DSS) at Sethsiripaya, Battaramulla with over 250 participants including representatives fromthe deaf community, Government officials, sponsors, well-wishers and guests.

y

DSS is the main Government body that provides Sign Language interpretation services tothe deaf community in the country.

y

For the first time in Sri Lanka, the DSS published and ceremoniously launched a ‘Code of
Ethics’ Book for Sign Language interpreters and conducted an all island ‘Sign Language
Oratory Competition’ for deaf children and adults.

yAs part of NDB’s Corporate Sustainability activities, the Bank sponsored the publishingof the ‘Code of Ethics’ book and the prizes for the winners of the ‘Sign Language Oratory
Competition’.

yThis ‘Code of Ethics’ book is a vital tool to ensure that interpreters maintain high standardsof professional conduct in their capacity and identity as an interpreter.

y

To date there has been no legal document for Sign Language interpreters. Therefore,
the publishing of the ‘Code of Ethics’ book is a huge achievement on behalf of the deaf
community in Sri Lanka and is a forerunner to the proposed Act of Parliament pertaining
to Sign Language for the deaf community in Sri Lanka. The Bank will continue to supportand empower the differently-abled paving the way for an inclusive culture in our nation.

LKR 0.1 Mn
Investment

500,000

Supporting the differently
abled and less privilegedy As part of our commitment to upliftingand empowering the lives of the lessprivileged and differently abled, the Bank
extended a helping hand to ‘MotherCharitable Foundation’ in Moratuwa who
assists children and adults with disabilities,
the elderly, individuals living with HIV,cancer and thalassemia, and those whohave been socially ostracized.
y Essential groceries, stationery items, andthoughtful gifts including educational
toys were carefully selected to aid in skill
development and donated as part of thisinitiative.
y The donated stationery items will beutilised by the differently abled individuals
to craft decorative items which will not
only showcase their unique talents but
also serve as a means to raise funds fortheir own support.

Beneficiaries

Employee Volunteerismy

NDB’s ‘Employee Volunteerism’ initiative was implemented this year in connection with
the Bank’s ‘Life to Our Mangroves’ project (discussed in detail on page 97 Natural Capital)yVolunteers of the Bank, under the leadership of the Management and Corporate
Sustainability Committee, engaged in the planting of mangroves and assisted in a floral
survey for research purposes.

y

The Bank volunteers were joined by the officials from Biodiversity Sri Lanka (BSL), theDepartment of Wildlife Conservation (DWC) and the Wayamba University of Sri Lanka (WUSL).

y

A second Volunteer event was implemented towards the end of 2023, for the new recruitsof the Bank. Participation at this event was part of the Bank’s new recruits’ structured
development under ‘Employee Volunteerism’ with the objective of increasing employee
engagement, creating a more cohesive team, providing new experiences to broaden theirvision, teaching the importance of acting together to tackle the challenges of our time andmost importantly providing opportunities to give back to the society and environment.

LKR 0.4 Mn
Investment

Beneficiaries include 40
differently abled children andelders at the Mother Charitable
Foundation
Outlook
The Bank will seek to further strengthen its
relationships with customers by delivering
customer centricity and fulfilling lifecycle needs
throughout the customer journey. Enhancing
service levels will be a key focus and the Bank
will seek to adopt digital banking concepts
including the implementation of advanced
Interactive Voice Response (IVR) and Automateddigital channel interactions such as WhatsApp
and Facebook, along with the increased
customer shift to digital banking.

LKR 3.5 Mn
Investment for aperiod of 5 years
96

Empowering SMEs and the women’s market
segment will also be a key focus area while
continuing investments in community engagementand development initiatives, in line with the Bank’s
overall Corporate Sustainability agenda.

255

Hours of Employee
Volunteerism

National Development Bank PLC

Annual Report 2023

Social and Relationship CapitalOur Natural Capital Inputs
Water consumption

Material consumption

Energy consumption

40,457 m3

Usage of paper:
27,643 kg

Electricity consumption
from the National Grid:
5,879 MWh

Usage of fuel:96,740 L

Value Drivers
� Digitisation drive and automation of processes to reduce paper consumption within operations
� Reducing energy consumption and enhancing efficiencies in resource utilisation

Natural Capital� Encouraging responsible waste management

Being in the service industry,NDB does not rely heavily on
the use of natural resources
to conduct operations and its
direct environmental impact
is limited. However, having
understood the role it can playin supporting the transition to alower carbon economy, the Group
actively drives environmental
consciousness and propagatessustainable businesses throughresponsible business practices andenvironment positive decisions.

� Incorporation of E&S considerations to lending decisions to propagate environmental
sustainability among customers

OUR MANAGEMENT APPROACH

CLIMATE ACTIONNDB is committed to reducing its impact on
the environment, as implications of climatechange intensify. In addition to reducing
the carbon footprint of our operations andcontributing to the preservation of ecosystems,
we have embedded principles of green
financing to our lending strategy while working
with clients to support climate risk adaptationand mitigation.

Climate change is rising to the forefrontof the global business agenda, with wide
ranging implications both globally and locally.
The devastating consequences of risingtemperature, natural disasters, food and water
insecurity as well as economic disruption, hasmade it clear that unless bold and collective
action is adopted now, the cost of climatechange will be inevitable and irreversible.

Our approach to identifying, managing
and measuring our progress across ourenvironmental focus areas is guided by theGroup’s ESG agenda and a comprehensive
Environment and Social Management System.
The Bank’s Corporate Sustainability Committee
and Environment and Social Risk Management
Integrated Committee are tasked with
implementing the same.
The Bank is also a founder signatory to the‘Sustainable Banking Principles for Sri Lanka’ by
the Sri Lanka Banks’ Association developed incollaboration with leading European investors
such as DEG, Proparco, FMO and OeEB, which
set out guidelines on environment and social
considerations in decision-making.
During the year, there were no incidents of
non-compliance with environmental laws andregulations.

� Supporting the transition to low carbon economy by lending to renewable energy projects

� Eco system preservation through long term strategic projects
� Contribution to National Goals of Biodiversity Conservation and Climate Change Adaptation

Value Created» 27.85%
reduction in
Direct Emissions» 18%
reduction in paper
consumption» 453
employees
trained on ESG» LKR 1.68 Mn
investment
in ecosystempreservation

Strategic Focus Areas 2023
� Climate action

� Material and � Responsible
Waste management
lending� Ecosystem
Conservation

At NDB, we continue to deepen our
understanding of climate related opportunities
and risks by defining how they impact ourbusiness and how our business contributes
to adverse ecological effects and longterm climatic shifts. This enables us to takeproactive steps towards supporting sustainable
development and safeguarding our assets andinvestments from climate-related risks.

Climate-related Opportunities

Climate-related Risksy Potential lending opportunities inrenewable energy when transitioning toa low Carbon economyy Credit risk from lending exposure toindustries which are highly vulnerable toclimate change (such as agriculture andtourism)y Reduced cost through energy efficiency
y Improved resilience to business disruptions
y Improved reputation and access to global
capital markets

y Erratic weather patterns and natural disasters
can directly or indirectly disrupt the Group’s
operationsy More stringent scrutiny and regulations
relating to mitigating climate change may
impact our business model and key lending
decisions

National Development Bank PLC

Annual Report 2023

97

NDB has consistently invested in andimplemented measures to reduce
emissions through the enhancementof energy efficiency and optimisationof air conditioning systems. However,despite these efforts, the increase inelectricity usage in 2023 in comparison
to 2022 has led to a 2.71% increase inemissions.

OUR APPROACH TO COMBATTING
CLIMATE CHANGE
Managing our Carbon Footprint
Climate Conscious Lending

The main reason for the lower
electricity usage in 2022 was due to theprevailing power cuts in the country.

Biodiversity Conservation
Material and Waste Management

This also led to an increase in the fuelconsumption in generators in 2022 anda decrease in 2023.

MANAGING OUR CARBON FOOTPRINT
A key element of NDB Bank’s sustainability strategy
is measuring and reducing our carbon footprint.
The Bank has engaged the ‘Sri Lanka Climate Fund’operating under the Ministry of Environment toperform an independent third-party verification as
well as train the key internal stakeholders including
the Bank’s Leadership Team.

98

National Development Bank PLC

2022

kWh

5,878,651

5,179,499

LL
L

62,794
13,49020,45633,732
13,109109,006

YoY
Change (%)

2023

2022

-27.85
5.79
13.48
-8.52
38.63
13.74
2.71

355.005,155.00
3,112.16
1,636.92
97.40
307.805,510.00

492.004,873.00
2,742.59
1,789.22
70.26
270.635,365.00

Purchased electricity
Fuel consumption(Owned vehicles and fuel paid by the company
PetrolDieselDiesel consumption in generators
tCO2e

Direct GHG emissions - Scope 1
Indirect GHG emissions
Imported energy - Scope 2
Transportation - Scope 3
Products used - Scope 3
Other   - Scope 3
Total (Direct & Indirect) emissions* R-22 (HCFC) is a potent greenhouse gas regulated under the Montreal Protocol. Its production
and import were phased out as of 2020 due to its detrimental impact on the ozone layer. GHG
reporting framework provided in ISO 14064-1:2018 does not necessitate the calculation andreporting of emissions for R-22. Hence, it was excluded from the NDB inventory, effective from2023 and this has also been removed from the inventory for FY 2022 in the above table in orderto enable a fair comparison.

Direct and Indirect Emissions

2,042.12
3,112.16
2,043.26

355.002,130.11

2022

The inventory is worked out relying on the
primary data provided by the divisions/branches of the Bank. The methodologies
and factors appropriate to computation ofemissions are obtained from the IPCC Guideline- 2006, the latest Energy Balance Reportpublished by Sustainable Energy Authorityof Sri Lanka and the emission factor databasepublished by Department of Environment,
Food and Rural Affairs (DEFRA).

2023

2023

The Bank calculates its annual GHG emissionsin accordance with the requirements
provided in ISO 14064-1: 2018 – Specification
with guidance at the organisation level for
quantification and reporting of greenhousegas emissions and removals. The organisation
boundary established for this reporting has
been expanded this year to include all theoperationally controlled business operationsof National Development Bank PLC (including
the Head Office, office complex at Dharmapala
Mawatha, 113 branches islandwide andother operationally controlled properties).
The Bank expanded the boundary for GHG
reporting for the FY 2023 by considering the
GHG emissions of the properties leased to the
Bank where the Bank has operational control,
thereby covering the full boundary of theorganisation. Furthermore, in order to maintainthe consistency of GHG reporting, the GHG
inventory for the FY 2022 has been recalculated
to reflect this boundary expansion.

Unit

2,742.59
492.00

0

500

1,000

Scope 1

Scope 2

Scope 3

Annual Report 2023

Natural Capital

1,500

2,000

2,500

3,000

3,500

tCO2e

CLIMATE CONSCIOUS LENDING
NDB is committed to combating climate change, actively seeking to promote projects andactivities that contribute to a greener, more sustainable economy in Sri Lanka.
The Bank is a key lender to the country’s renewable energy sector emerging as an industry leader
in directing funds towards reduction of national reliance on fossil fuels, funding approximately 25%of the country’s total installed capacity of renewable energy since 2017. Renewable energy is a key
contributor in driving reductions in the Carbon Footprint, through avoidance of harmful emissionsof gases such as Carbon Dioxide (CO2), Sulphur Dioxide (SO2) and Nitrogen Oxide (NOx).
Investment by
NDB (LKR Mn)

Capacity(MW)

GHG emissions and otherharmful gases avoided (tCO2e)

Solar – groundmounted

2,313

41

34,793

Solar – mounted

4,259

44

48,254

Mini hydro

5,663

137

389,690

Wind

8,635

115

266,527

Bio mass

1,992

10

22,862

347

Total

739,264 tCO2e
GHG emissions and otherharmful gases avoided throughRenewable Energy Projects

The Bank’s renewable energy
portfolio includes investments
in solar, mini-hydro, wind, andbiomass energy with a capacityof 347 MW, nearing

LKR 23 Bn.

739,264

NDB’s Environment and Social Risk Management (ESRM) blueprint

Board approved ESRM Policy and Manualoutlining comprehensive processes to befollowed

Oversight of the Board Integrated Risk
Management Committee

Dedicated full-time Associate Manager
overseeing ESRM procedures

Clearly established mandatory pre-requisites
to be met at each approval level

Continuous training and development to all
connected staff members

Partnerships and networking for learning on
best practices

Capacity Building Programmes for Staff
Evaluation of Environment and Social Risks in the lending portfolio

Over 453 employees, across 1,042.5 training hours from related functions, including businesslines participated in these programmes which covered a wide range of topics including
sustainable financing, environmental and social safeguard policies and regulations, overview ofESMS and its purpose and global trends, etc. Training sessions were augmented with a visit to achosen factory which has excelled in ESG practices.
Relevant employees also completed the e-Certification on Sustainable Banking Principles of Sri
Lanka Bank’s Association

Natural Capital

National Development Bank PLC

Annual Report 2023

99

BIODIVERSITY CONSERVATIONNDB is fully committed to protecting and nurturing the environment and continues to support a range of biodiversity conservation and natural
ecosystem preservation projects. The flagship project launched in 2022 is themed “Life to our Mangroves”. This collaborative project focuses onachieving nationally significant outcomes in the realm of mangrove and coastal ecosystem conservation and aims to contribute towards the national
goals of biodiversity conservation and climate change adaptation.
Life to Our Mangroves project

Action items in 2023

A Public-Private-Community Partnershipand a Multi-Partner Project receiving
support from eight private sector member
companies including NDB
Project implementer

Biodiversity Sri Lanka
Other collaborating parties

The Department of Wildlife Conservationand the University of Wayamba
Time span

Five years
Project scope

Restoration of 10 hectares of degradedmangrove forest within the Anawilundawa
Ramsar Wetland Sanctuary throughaccelerated natural regeneration process
Impact and recognition

� 60 nursery-reared true mangrove plants plantedwith the assistance of community members andthe voluntary cooperation of NDB
� In 2023, approximately 6,000 true mangrove
species were established through communitydriven mangrove planting efforts, employing
both direct planting and seed dispersal
methods. Of these, 1,400 were Rhizophoramucronata, 1,300 were Bruguiera cylindrica, and
3,000 were Avicennia marina
� Canal excavation allowing natural conditioning,
showcasing successful seed establishment andthe flourishing of authentic mangrove species� On-going field surveys conducted bi-annually
covering diverse studies, including flora andfauna surveys, water quality measurements,
butterfly monitoring, plant measurements,
mangrove phenology observations, and soil
carbon estimations
� Water quality surveys were conducted inmangrove restoration areas and vicinity

Project details

In 2020, the Bank partnered with the
Department of Forest Conservation on afive year project to reforest a degraded
forest area of 5 ha in the Hibiliyakada
Forest in Matale.
3,000 trees planted
Expected outcomesy100

Increase forest cover and enrichbiodiversity

National Development Bank PLC

exploring various disciplines at theAnawilundawa mangrove restoration site
� NDB volunteers visiting the site andparticipation in plant measuring activities

In February 2024 Sri Lanka was recognised as one of the seven UN World Restoration Flagships
for its ambitious initiative to restore/ expand mangrove cover by over 50%. This features one of
the best examples of large-scale and long-term ecosystem restoration in any country or region,
embodying the 10 Restoration Principles of the UN Decade on Ecosystem Restoration. ‘Life to Our
Mangroves’ project is part of this initiative and NDB is proud to be a part of this impactful initiative.

Adopt a Beach

Progress made in other projects
during the year is mentioned below
Let’s Grow Campaign

� Seven undergraduate research projects

Project details

The Bank became the 1st local bank topartner with ‘Clean Ocean Force Lanka’ (COF)to ‘Adopt a Beach’. The Bank has adopted astretch of beach at ‘Kapumgoda’, ensuring
daily cleaning while encouraging employees
to volunteer for the clean ups.
1,159 kgs of pollutants removed since theproject inception in November 2023
Expected outcomesyMarine life conservation and improving
the ecosystemyContributing to the livelihood
development of the women in thecommunityyPreserving our natural environment

Annual Report 2023

Natural Capital

MATERIAL AND WASTE MANAGEMENTNDB’s increased
thrust towards
implementing a digital
workplace continues to contributetowards creating a green atmosphere
within the organisation. Ongoing
efforts to automate and digitise bothcustomer-facing and internal processes
have not only resulted in a considerable
reduction in paper consumption
within the organisation but also
contributed to minimising
downstream carbon
emissions.

Customer Processes

11% increase in numberof digital transactions
23% increase in NEOS
registrations across all
platforms

Internal Processes

Close to 30 processes
automated through RPA
Over 60 processes automatedthrough and workflow solutions

PAPER CONSUMPTION AND RECYCLING
We also continue to practice recycling extensively across our operation. Paper waste is collected and sent to an approved third-party recycler forrecycling, while e-waste is segregated and responsibly disposed off through third party recyclers.
Quantifying our Impact
Annual Paper Consumption
kg '000-2-14
34.524

30
20
10
0

-18
27.64340

33.88850

40.087

757.055

%

60

-30

2019

2020

Annual paper consumption - kg

2021

2023

2022

10
5
0
-5
-10
-15
-20
-25
-30
-35

6,737 litres

40 MT

Litres Oil Saved

Timber Saved

2.94 Mn

81 m

Litres Water Saved

Total Landfill Saved

3

89.6 kMWElectricity Saved

YoY reduction - %Three-year impact analysis of paper recycling
2023

2022

2021

Paper masskg

31,90331,70923,600Timber Saved

MT

40

39.5

30

Electricity Saved

kWh

89.6

89

66.7

Oil Saved

Litres6,737.3

6,700

5,014

Water Saved

Litres2,944,000

2,938,000

2,191,125

Landfill Saved

m3

81

80

60.28

Carbon Footprint Saved

MTCO2

24

23.7

17.86

Natural Capital

Note : Based on the recommendations givenin the ISO 14064 standard, an updated EIA Tool
(Environmental Impact Assessment Tool) wasused to calculate the impact for 2023, and inorder to maintain consistency in reporting,the calculations for 2022 and 2021 have beenrecalculated using this new tool.

National Development Bank PLC

Annual Report 2023

101

Our ESG Agenda
THE ESG FRAMEWORKESG GOVERNANCE

The Group’s ESG framework supports the Roadmap for Sustainable Finance issued
by the Central Bank of Sri Lanka by embedding policies, strategy, structures andsystems that enhance resilience against environmental, social and governance(ESG) risks.

POLICY FRAMEWORKAs is evident in the disclosures thus
far on how we created value to ourdiverse stakeholders along sevendistinct capitals, environment, social andgovernance aspects have been intricately
embedded to them. Furthermore,as a systemically important bank in
the country we are cognisant of thesignificant role we can play in promoting
a more sustainable environment andeconomy for future generations.
Sustainability has thus always been apart of NDB’s DNA, and we have strived
to integrate ESG considerations into
all aspects of our operation througha holistic Sustainability Policy. ESG
considerations however now gowell beyond moral obligation andare increasingly seen as a business
imperative. Regulation pertaining to
ESG is tightening in response to growing
global challenges and systemic risks
to organisations whilst stakeholders
are placing increasing emphasis on ESG
issues. We therefore continue to alignour sustainability strategy to respondto emerging issues whilst strengthening
our systems, processes and capabilities todrive our sustainability agenda forward.

Lending Activities

Corporate Sustainability Activities

A dedicated Environment and Social Risk
Management Integrated Committee (ESRMIC)
with representation from all business lines
and related enabling functions such as
Human Resources, IT and Legal ensure that
all connected stakeholders within the Bank
are aligned towards responsible lending.
The ESRMIC receives guidance from the top
management, as well as from the Board of
Directors, as the Bank’s ESRM function comesunder the purview of the Board Integrated Risk
Management subcommittee.

The Bank’s Corporate
Sustainability Committee
comprising top management
and cross-functional
representation drives the
Bank’s sustainability agenda.
The Committee works closely
and collectively in selecting,
implementing and monitoring
relevant sustainability projects.

Board approved ESRM Policy and
ESRM Manual

Environment andSocial (E&S) Risk Rating System

Developed based on international bestpractices the Board approved Environment andSocial Risk Management (ESRM) Policy and ESRM
Manual ensures environmentally and socially
responsible lending practices whilst strategicallysupporting businesses that are financially,socially, and environmentally sustainable.

The E&S Risk Rating system which
categorises customers based on
their E&S impact enables the Bank
to mitigate environmental andsocial lending risks and proactively
support customers minimise and/or eradicate the identified E&S gaps.

ESG INTEGRATION

Three-pronged ESG Strategy

102

The Group’s ESG strategy which
revolves around three key pillars aims
to address pressing socio-economic
challenges and directly contributes
to several of the United Nations
Sustainable Development Goals(UNSDGs)

Environmental Priorities

Capacity Building Diversity and inclusivity

Organisation-wide capacity building
programmes are carried out with theaim of nurturing an E&S-conscious risk
culture. Such capacity building initiatives
are structured in line with a specificallydeveloped curriculum and the Bank has
allocated dedicated internal resource
persons to drive E&S learning anddevelopment amongst its staff. NDB also
partners with E&S experts and facilitates
E&S training programmes regularly.

 Women empowerment

National Development Bank PLC

Annual Report 2023

 Renewable energy Reducing direct and indirect carbon footprint Climate positive projects
 Environment literacy

Social Priorities

 Meaningful community engagement projects
 Financial inclusion

Governance Priorities Corporate governance and ethics
 Responsible lending practices
 Compliance Climate-related risk identification

ESG Score Card
Environment
2023

2022

Reducing carbon emissions

The Bank computed and verified its GHG emissions inventory in partnership with the Sri Lanka
Climate Fund towards formulating its action plan for achieving net zeroy

Carbon footprint

tCO2 e

5,510

5,365

y

Carbon intensity

tCO2 e/ LKR Mn

0.04

0.05

No. of trees

3,000

3,000

Climate positive projects

Let’s Grow reforestation project at Himbiliyakada Matale(trees planted in 2020 nurtured to maturity till 2024)
Environmental literacy programs

The Bank conducts awareness sessions to address contemporary environmental issues.
ySessions conducted (both physical and virtual)

No.

N/A

66

y

Beneficiaries

No.

N/A

>7,000

2023

2022

%

24

31

No.

>2,700>3,500Social Priorities
Diversity and Inclusivity

The Bank has obtained and continues to comply with the EDGE Certification for gender equality
at the workplace.
yFemale representation at senior management levels

Women empowerment

Through the Banking on Women initiative and Sri Lanka Vanithabhimana initiative the Bank drives
women’s socio-economic empowermentyParticipants from across the country

Financial inclusion

The Bank drives socio-economic empowerment through lending to unbanked/underprivileged
sections.
yFirst time mortgage customers

No.

130

200

y

Lending to first time mortgages

LKR Mn

977

2,018

y

Lending to small-business owners

LKR Mn

2,095

3,654

LKR Mn

8.6

8.0

2023

2022

100

100

Community EngagementyInvestment in community empowering projects

Governance Priorities
Responsible lending practices

The Bank has implemented a comprehensive ESMS system to embed social and environmental
consciousness to lending decisionsyPercentage of loans screened%yEmployees trained on ESMS

No.

453

650

y

Employee training hours on ESMS

Hours

1,042.5

786

Our ESG Agenda

National Development Bank PLC

Annual Report 2023

103

Way Forward

Prepared for
the Road Ahead
Strategic evolutions during the last
decade aimed at building digital readinessand a future-fit workforce together asustainability mindset have placed us well toembark on our next stage of growth. Today,
we proudly stand as an agile, innovative,
and future-focused bank, backed by thefinancial strength to weather challenges andcapitalise on emerging opportunities. As weembark on the next stage of growth, ourstrategic foundations position us to lead inan era of transformative change, deliveringvalue to our stakeholders and contributing
positively to the communities we serve.

Digital ReadinessWe have achieved significant progress in our
digitisation drive, through ongoing investments
in digital technologies to enhance customer
experiences, streamline operations, and offer
innovative services through digital channels.
These farsighted investments in strengthening
our digital infrastructure as well as AI and big
data capabilities strongly position us to adapt to
the rapidly evolving financial landscape, foster
innovation, and deliver cutting-edge solutions
that empower our customers and elevate theiroverall banking experience.

Future-fit Workforce
Our holistic employee value proposition andcomprehensive training and development
strategy has equipped our employees withthe skills, knowledge and attitudes required
to thrive in the workplace of the future. Thishas been supported by sustained efforts
to build and strengthen a strong leadershippipeline well equipped to lead the Bank into
the future.

Sustainability Mindset
As ESG considerations increasingly take center
stage, our strong ESG framework that is closelyaligned to the Roadmap For Sustainable
Finance issued by the Central Bank Of Sri
Lanka gives us a competitive edge in terms ofregulatory compliance, enhanced reputation,access to funding opportunities, andpositioning as a market leader committed tosustainable and responsible banking practices.

104

National Development Bank PLC

Annual Report 2023

Independent Assurance Report on Integrated Reporting

INDEPENDENT PRACTITIONER’S ASSURANCEREPORT TO THE BOARD OF DIRECTORS OF
NATIONAL DEVELOPMENT BANK PLC ON THE
INTEGRATED ANNUAL REPORT 2023
Scope

modifications that need to be made to the Subject Matterin order for it to be in accordance with the Criteria, andto issue a report. The nature, timing, and extent of theprocedures selected depend on our judgment, including
an assessment of the risk of material misstatement, whether
due to fraud or error.

We have been engaged by National Development Bank
PLC to perform a ‘limited assurance engagement,’ asdefined by Sri Lanka Standard on Assurance Engagements,
here after referred to as the engagement, to report on
National Development Bank PLC’s Information on how it’s
strategy, governance, performance and prospects, in thecontext of its external environment, lead to the creation,
preservation or erosion of value over the short, medium
and long term (the “Subject Matter”) contained in National
Development Bank PLC’s (the “Entity’s”) Integrated Annual
Report for the year ended 31 December 2023 (the “Report”).

We believe that the evidence obtained is sufficient andappropriate to provide a basis for our limited assurance
conclusions.

Other than as described in the preceding paragraph, whichsets out the scope of our engagement, we did not performassurance procedures on the remaining information
included in the Report, and accordingly, we do not express
a conclusion on this information.

EY also applies International Standard on Quality
Management 1, Quality Management for Firms that
Perform Audits or Reviews of Financial Statements, orOther Assurance or Related Services engagements,
which requires that we design, implement and operatea system of quality management including policies
or procedures regarding compliance with ethicalrequirements, professional standards and applicable legal
and regulatory requirements.

Criteria applied by National Development Bank
PLC
In preparing the Subject Matter, National Development
Bank PLC applied the Integrated Reporting Framework(<IR> Framework) issued by the International Integrated
Reporting Council (IIRC) (“Criteria”):
Such Criteria were specifically designed for the purpose of
assisting in determining whether the capital management,
stakeholder engagement, business model, strategy,organisational overview & external environment outlookpresented in the Integrated Annual Report is presented inaccordance with the relevant criteria; As a result, the subject
matter information may not be suitable for another purpose.
National Development Bank PLC’s responsibilities
National Development Bank PLC management is
responsible for selecting the Criteria, and for presenting
the Subject Matter in accordance with that Criteria, in allmaterial respects. This responsibility includes establishingand maintaining internal controls, maintaining adequate
records and making estimates that are relevant to the
preparation of the subject matter, such that it is free frommaterial misstatement, whether due to fraud or error.
Ernst & Young’s responsibilities
Our responsibility is to express a conclusion on thepresentation of the Subject Matter based on the evidence
we have obtained.
We conducted our engagement in accordance with the
Sri Lanka Standard for Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information(SLSAE 3000 (Revised), and the terms of reference for thisengagement as agreed with the National Development
Bank PLC on 19 February 2024. Those standards requirethat we plan and perform our engagement to express
a conclusion on whether we are aware of any material

Our independence and quality management
We have maintained our independence and confirm
that we have met the requirements of the Code of Ethics
for Professional Accountants issued by the Institute ofChartered Accountants of Sri Lanka (CA Sri Lanka) andhave the required competencies and experience toconduct this assurance engagement.

Description of procedures performed
Procedures performed in a limited assurance engagement
vary in nature and timing from and are less in extent than fora reasonable assurance engagement. Consequently, the levelof assurance obtained in a limited assurance engagement issubstantially lower than the assurance that would have beenobtained had a reasonable assurance engagement been
performed. Our procedures were designed to obtain a limited
level of assurance on which to base our conclusion and do notprovide all the evidence that would be required to provide a
reasonable level of assurance.
Although we considered the effectiveness of management’s
internal controls when determining the nature and extent
of our procedures, our assurance engagement was notdesigned to provide assurance on internal controls. Our
procedures did not include testing controls or performing
procedures relating to checking aggregation or calculation ofdata within IT systems.
A limited assurance engagement consists of making
enquiries, primarily of persons responsible for preparing
the subject matter and related information and applying
analytical and other appropriate procedures.

y Conducted interviews with the selected key
management personnel and relevant staff and obtained
an understanding of the internal controls, governancestructure and reporting process relevant to theIntegrated Report.
y Obtained an understanding of the relevant internal
policies and procedures developed, including those
relevant to determining what matters most to thestakeholders, how the organisation creates value, theexternal environment, strategy, approaches to putting
members first, governance and reporting.
y Obtained an understanding of the description of
the organisation’s strategy and how the organisation
creates value, what matters most to the stakeholders
and enquiring the management as to whether thedescription in the Integrated Report accurately reflects
their understanding.
y Checked the Board of Directors meeting minutes during
the financial year to ensure consistency with the content
of the Integrated Report.
y Tested the relevant supporting evidence related
to qualitative & quantitative disclosures within the
Integrated Report against identified material aspects.
y Read the Integrated Report in its entirety for consistency
with our overall knowledge obtained during theassurance engagement.
We also performed such other procedures as we considerednecessary in the circumstances.
Emphasis of matter
Economic, Environment, Social and Intellectual capitalmanagement data/information are subject to inherent
limitations given their nature and the methods used for
determining, calculating and estimating such data. Suchinherent limitations are common in Sri Lanka.
We also do not provide any assurance on theassumptions and achievability of prospective
information presented in the Entity’s Annual Report.
Conclusion
Based on our procedures and the evidence obtained, weare not aware of any material modifications that should
be made to the information contained in the Integrated
Annual Report of National Development Bank PLC for
the year ended 31 December 2023, in order for it to be inaccordance with the Criteria.

Our procedures included:y Performed a comparison of the content of the Integrated
Annual Report against the Guiding Principles andContent Elements given in the Integrated Reporting
Framework (<IR> Framework).
y Checked whether the information contained in the
Integrated Annual Report – Financial Capital element
information has been properly derived from the audited
financial statements.

Ernst & Young
Chartered Accountants
20 February 2024
Colombo

National Development Bank PLC

Annual Report 2023

105

Independent Assurance Report on Sustainability Reporting

INDEPENDENT PRACTITIONER’S ASSURANCEREPORT TO THE BOARD OF DIRECTORS OF
NATIONAL DEVELOPMENT BANK PLC ON
THE SUSTAINABILITY REPORTING CRITERIAPRESENTED IN THE INTEGRATED ANNUALREPORT FY 2023
Scope
We have been engaged by National Development
Bank PLC to perform a ‘limited assurance engagement,’
as defined by Sri Lanka Standard on Assurance
Engagements, here after referred to as the engagement,
to report on National Development Bank PLC’s
Economic, Environment, Social and Governance (EESG)
indicators (the “Subject Matter”) contained in National
Development Bank PLC’s (the “Entity’s”) Integrated
Annual Report/ Annual Report/ Sustainability Report for
the year ended 31 December 2023 (the “Report”).
Other than as described in the preceding paragraph,
which sets out the scope of our engagement, we did
not perform assurance procedures on the remaining
information included in the Report, and accordingly, we
do not express a conclusion on this information.
Criteria applied by National Development Bank PLC
In preparing the Subject Matter, National
Development Bank PLC applied the following criteria(“Criteria”):
y The Global Reporting Initiative’s (GRI) Sustainability
Reporting Guidelines, publicly available at https://www.globalreporting.org
Such Criteria were specifically designed for the
purpose of assisting you in determining whether
Entity’s Economic, Environment, Social andGovernance (EESG) indicators contained in the Entity’s
Report is presented in accordance with the relevant
criteria; As a result, the subject matter information may
not be suitable for another purpose.
National Development Bank PLC’s responsibilities
National Development Bank PLC management
is responsible for selecting the Criteria, and forpresenting the Subject Matter in accordance withthat Criteria, in all material respects. This responsibility
includes establishing and maintaining internal controls,
maintaining adequate records and making estimatesthat are relevant to the preparation of the subject
matter, such that it is free from material misstatement,
whether due to fraud or error.
Ernst & Young’s responsibilities
Our responsibility is to express a conclusion on thepresentation of the Subject Matter based on theevidence we have obtained.

106

National Development Bank PLC

We conducted our engagement in accordance with
the Sri Lanka Standard for Assurance Engagements
Other Than Audits or Reviews of Historical Financial
Information (SLSAE 3000 (Revised), and the terms ofreference for this engagement as agreed with the
National Development Bank PLC on 19 February 2024.
Those standards require that we plan and perform
our engagement to express a conclusion on whether
we are aware of any material modifications that need
to be made to the Subject Matter in order for it to bein accordance with the Criteria, and to issue a report.
The nature, timing, and extent of the procedures
selected depend on our judgment, including anassessment of the risk of material misstatement,
whether due to fraud or error.
We believe that the evidence obtained is sufficientand appropriate to provide a basis for our limited
assurance conclusions.
Our independence and quality management
We have maintained our independence and confirm
that we have met the requirements of the Code of
Ethics for Professional Accountants issued by theInstitute of Chartered Accountants of Sri Lanka (CASri Lanka) and have the required competencies andexperience to conduct this assurance engagement.
EY also applies International Standard on Quality
Management 1, Quality Management for Firms that
Perform Audits or Reviews of Financial Statements, orOther Assurance or Related Services engagements,
which requires that we design, implement andoperate a system of quality management including
policies or procedures regarding compliance withethical requirements, professional standards andapplicable legal and regulatory requirements.
Description of procedures performed
Procedures performed in a limited assurance
engagement vary in nature and timing from andare less in extent than for a reasonable assurance
engagement. Consequently, the level of assurance
obtained in a limited assurance engagement issubstantially lower than the assurance that would
have been obtained had a reasonable assurance
engagement been performed. Our procedures were
designed to obtain a limited level of assurance on
which to base our conclusion and do not provide all
the evidence that would be required to provide a
reasonable level of assurance.
Although we considered the effectiveness ofmanagement’s internal controls when determining
the nature and extent of our procedures, ourassurance engagement was not designed to provide
assurance on internal controls. Our procedures
did not include testing controls or performing
procedures relating to checking aggregation or
calculation of data within IT systems.

Annual Report 2023

A limited assurance engagement consists of making
enquiries, primarily of persons responsible forpreparing the subject matter and related information
and applying analytical and other appropriate
procedures.
Our procedures included:y Validated the information presented and checked thecalculations performed by the organisation throughrecalculation.
y Performed a comparison of the content given in
the Report against the criteria given in the selectedsustainability standards/frameworks.
y Conducted interviews with relevant organisation’s
personnel to understand the process for collection,
analysis, aggregation and presentation of data.
Interviews included selected key management
personnel and relevant staff.
y Read the content presented in the Report forconsistency with our overall knowledge obtained
during the course of our assurance engagement andrequested changes wherever required.
y Provided guidance, recommendations and feedbackon the improvement of the sustainability reporting
indicators to improve the presentation standard.
We also performed such other procedures as we
considered necessary in the circumstances.
Emphasis of matter
Economic, Environment, Social management data/
information are subject to inherent limitations given
their nature and the methods used for determining,calculating and estimating such data. Such inherent
limitations are common in Sri Lanka.
We also do not provide any assurance on theassumptions and achievability of prospective
information presented in the Entity’s Report.
Conclusion
Based on our procedures and the evidence obtained,
we are not aware of any material modifications
that should be made to the information on the
Economic, Environment, Social and Governance(EESG) contained in the Integrated Annual Report ofNational Development Bank PLC for the year ended
31 December 2023, in order for it to be in accordancewith the Criteria.

Ernst & Young
Chartered Accountants
20 February 2024
ColomboRisk Management and Corporate Governance

Shin

(sky)
The source of all energy

Soe(Earth)The foundation of
growthTai(Human)The embodiment of life

A Perfect Structure
Our longstanding structures are precise, flexible and balanced, thereby creating athree-pronged focus on harmony, vitality and stability.
Across the various schools of ikebana, a triangular layout principle is utilised. It serves as a strong foundation for precision,and a core framework upon which endless possibilities can be built.

Risk Management Overview
APPROACH TO RISK MANAGEMENT

PRINCIPLES OF OUR IRM FRAMEWORKThe Group adopts an enterprise-wide
approach to risk management andhas implemented an Integrated Risk
Management (IRM) Framework, clearlysetting out the governance structures,
policies, processes, and procedures for
managing risks in a manner that balances
profitability and financial stability. This
framework has continued to serve theGroup well amidst the unprecedented
challenges of recent years, supporting
strategic foresight and agility.

Risk Appetite and Strategy

Formulated in line with the nature, type and level of risk the Board is willing to take inachieving its strategic aspirations.

Capital Management

Driven by the Group’s strategic agenda, regulatory requirements and stresses in theoperating landscape.

The Bank’s Board of Directors holds
apex responsibility for risk management
and is supported by the Integrated Risk
Management Committee (IRMC) andthe Audit Committee (AC) in discharging
its risk-related duties. Risk management
is underpinned by the Three Lines of
Defence Governance model, which
drives accountability and ownershipwhile facilitating an appropriate level of
independence and segregation of duties.

Governance and Oversight

Clear and effective governance structures promoting judicious empowerment.

Risk Culture

Risk conscious culture that nurtures professional, responsible and ethical behaviour.

RISK LANDSCAPE IN 2023

Risk Policies and Processes

The risk landscape for the banking sector
in 2023 remained highly volatile amidst
uncertainty surrounding restructuringof sovereign debt, persisting volatility inmacroeconomic variables and continued
economic and policy uncertainty. Credit
Risk remained elevated during theyear due to the lingering effects of theeconomic crisis, while foreign currency
Liquidity Risk continued to persist during
the year, albeit lower than 2022. The sharp
decline in interest rates also impacted therisk landscape during the year.

Effective, robust and stringent framework of policies.

Infrastructure

Adequate resources and systems infrastructure.

KEY DEVELOPMENTS IN 2023
Strengthened the risk appetite framework toreflect emerging stresses
Proactive management and optimisation offoreign currency liquidity
Enhanced stress testing to reflect economic
developments

Kintsugi-style Ikebana is a unique fusion of two Japanese
art forms: Kintsugi and Ikebana. Kintsugi is the art ofrepairing broken pottery with lacquer dusted or mixed
with powdered gold, silver, or platinum, highlighting theimperfections rather than hiding them. Ikebana, on theother hand, is the Japanese art of flower arrangement,
which emphasises minimalism, balance, and harmony.

108

National Development Bank PLC

Organisation-wide focus on preserving credit
quality through deployment of increased
resources to the Remedial Management Unit
Frequent cash flow projections to mitigate
Liquidity Risk

Annual Report 2023

KEY RISKS IN 2023

CreditRisk

Macro-economic
Risk

Key risksDevelopments and metrics

Response and mitigating action in 2023

y Continued macro-economic uncertainty with broad-based
implications for the banking sectory Proactive monitoring of emerging developments in the socio-economic
and political landscapey Pace of recovery dependent on political will andcommitment to implement much needed reforms andprogress in External Debt Restructuring Programmey Managing foreign currency liquidity to optimise the returns in foreign
currency assetsy Ongoing assessment of impacted portfolios and stress testingy Potential implications on profitability stemmingfrom impairment of investments in foreign currency
denominated government securitiesy Continued pressure on credit quality due to economic
contraction, escalation in cost of living and sharp increasein taxes

y Proactive management of Stage 2 portfolio with a dedicated Task Forceto analyse customer specific strategies on an ongoing basis to prevent
deterioration into non-performing assets

y Impaired loans (Stage 3) ratio increased to 8.58% (2022:
6.24%)y Risk Elevated Sectors reviewed on a quarterly basis and monitoredaccordingly
y Repurposed lending portfolio based on the Return on Risk Adjusted
Capital (RORAC) modely Implemented pre-emptive rehabilitation solutions through theRemedial Management Unit (RMU)

MarketRisky Strengthened recovery efforts by providing additional resources andinfrastructure to support the Recoveries teamy Inevitable pressure on foreign exchange position due torepayment of specific Government foreign currency debts
in LKR terms
y Pressure on maintaining a healthy net interest margin in a
declining interest rate environmenty Strengthened stress tests and scenario analysis
y Daily sensitivity analysis of foreign currency net open positionsy Timely re-pricing strategies

y Structural Balance Sheet management with close monitoring of
maturity mismatchesy Majority of losses during the year categorised as highfrequency / low impact risks

y Close monitoring of potential areas at risk by revisiting the vulnerable
processes and introducing new/ improved controls as appropriate

y Zero instances of significant data breaches and disruptions
to the system

Climate related
Risks

Liquidity
Risk

y Managing the Balance Sheet amidst of excess LKR liquidity
due to growth of deposits being higher than the growth ofloans

Operational
Risky Explored alternative investment opportunities based on careful risk andreturn analysis

IT and Cyber Security
Risky Lack of alternative investment opportunities in foreign
currency assets

y Proactive real-time monitoring of foreign currency position includinginternal limits, daily cash flows and regulatory developmentsy Daily cash flow forecasting to optimise foreign currency liquidity
y Decline in foreign currency liquid assets with the repayment y Daily monitoring of exposure to market liquidity, deposit mix, portfolioof specific Government foreign currency debts in LKR termsof marketable securities and movements in loans and advancesy All department level business continuity plans were reviewed andapproved including the Bank’s Business Continuity Plan (BCP)y Stringent cyber-security measures to avoid cyber -attacks/ security
threatsy Continuous vulnerability assessments and penetration testingy Security solutions for prevention of data leakage and privileged accountmonitoringy Frequent awareness programmes on social engineering and otherongoing scams for customers and employeesy Environmental risks continue to rank among the top global
risks affecting humanity over the next decade due to rising
impacts of climate change (World Economic Forum)y Increasing risks of climate change on several key sectors
including agriculture, power and energy and tourismy Possible disruptions to operations stemming from natural
disasters and erratic weather patternsy Further improved the Bank’s Environment and Social Risk Management(ESRM) Policy and ESRM Manualy Appointment of an Environment and Social Management System (ESMS)
coordinator to the RMU
y Ongoing learning and development programmes on ESMS/ ESRM toenhance the capacities of the staff members involved in lending andcredit procedures of the Banky Improved internal and external Environmental and Social Governance(ESG) related communication

Risk Management Overview

National Development Bank PLC

Annual Report 2023

109

Corporate Governance
Chairman’s Message on Corporate Governance

Dear Shareholders,
NDB Group continues to keep pace with
developments in corporate governance,
ensuring they are fit for purpose and address
the concerns of our stakeholders. As aregulated entity, sound governance andcompliance are the solid foundations that we
depend on to build a business that can thrive,
without fear of lapses in compliance.
COMPOSITION IS KEY
The collective skills, experience andknowledge of the Board are key toeffectiveness of the Board in providing
leadership to the Group. Accordingly,
we strengthened the Board with theappointment of 2 independent,
non-executive directors and also appointed a
new Chief Executive Officer with effect from
1 February 2024, following the resignation of
Mr. Hiran Perera and Mr. Dimantha
Seneviratne relinquishing office. Accordingly,
we welcomed to the Board. Ms. Shweta
Pandey whose career spans continents andindustries with relevant experience in IT,
payments and fin-tech that will be invaluable
in taking the Bank to a new era. We also
welcomed Mr. Hasitha Premaratne who is
the Managing Director of the Brandix Group
who brings valuable financial expertise andperspectives from the private sector of thecountry.
Mr. Kelum Edirisinghe brings 30 years ofbanking experience with expertise in risk
management having served as Chief Risk
Officer of HSBC in Sri Lanka and the Maldives.
He took over as Chief Executive Officer on
1 February 2024. I take this opportunity tothank Mr. Dimantha Seneviratne, the former
CEO, for his leadership of the Bank over the
past seven years.
All members of the Board of Directors satisfy
the fit and proper criteria stipulated in the
Corporate Governance Direction of CBSL,
Listing Rules of the Colombo Stock Exchange
and the Code of Best Practices on Corporate
Governance (2023).

110

National Development Bank PLC

BOARD PRIORITIESGOVERNANCE MATTERS

Moving into 2023 with high rates of inflation,interest rates and exchange rates coupledwith elevated credit risk, the Board remained
vigilant to ensure that profitability andfinancial stability were balanced. Accordingly,
performance oversight was at the topof the Board agenda and ensuring thatmaterial, useful information was available tofacilitate decision making including resource
allocation.

The Board reviewed the Listing Rules
on Corporate Governance issued by the
Colombo Stock Exchange and have in placea road map to ensure compliance by the
specified dates. It was encouraging to notethat there were only a few areas that needed
to be addressed, bearing testament to therobust corporate governance framework
already existing in the Bank, in line with
the industry standards. The Board is also
cognizant of the revised Code of Best
Practice on Corporate Governance issued
by the Institute of Chartered Accountants of
Sri Lanka in December 2023 and is pleased
to note the Bank’s proactive approach inensuring compliance with the same. The Bank
continues to have a zero-tolerance policy for
non-compliances, bribery and corruption.

Asset quality was a concern and the Board
monitored credit risk exposures and progress
made on recovery initiatives throughout theyear with a view to supporting the revival of
businesses. Capital and liquidity management
were also areas where Board exercised regular
oversight, maintaining comfortable levels
above regulatory requirements.
IT Governance was another priority as theGroup’s digital transformation strategy moved
centre stage with the core-banking system
upgrade. The Board continued to strengthen
this aspect, allocating necessary resources
for the purpose as reliability of information,
safeguarding of digital assets and customer
data privacy are critical to the smooth
operations of the Bank.
Integrating ESG principles into our strategy
and processes is a key area of focus assustainable finance gains increasing focus
from stakeholders including regulators.
NDB Bank has commenced its journey withEnvironmental and Social Management
Systems institutionalised as part of the credit
evaluation process while it also monitors a
number of non-financial indicators to manage
the Bank’s carbon footprint. NDB has beenat the forefront of sustainability reporting,gaining recognition for its reports andinitiatives. The Board will continue to monitor
developments in this area to support theGroup’s transition as a responsible corporate
citizen.

COMPLIANCE
This Report details the “Factual Finding
Report” submitted by the External Auditors
in relation to the compliance with the
Banking Act Direction No 11 of 2007 on
Corporate Governance issued by the Central
Bank of Sri Lanka (Corporate GovernanceDirection). Further as stipulated by therevised Code of Best Practices on Corporate
Governance issued by the Institute ofChartered Accountants of Sri Lanka (CA Sri
Lanka) in 2023, I affirm that I am not aware ofany material violations of any provisions theinternal Code of Corporate Governance for
Directors and Key Management Personnel
and the Bank’s Code of Conduct for
Employees and of any activities of the Bank
which contravenes laws and regulations. I also
hereby confirm that the Bank’s current stateof affairs is not harmful to the business of the
Bank in any form.

Mr. Sriyan Cooray
Chair, Board of Directors
20 February 2024
Colombo

Statement of ComplianceCorporate Governance reporting: The subsequent discussion provides a high-level overview of
how the Board created value to the Organisation during the year, including its key area of focus,
operations and deliverables during the year. Detailed information regarding the Bank’s extent ofcompliance with the requirements of the Corporate Governance Direction of CBSL, the Listing
Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance(2023) are available from page 298 to 336 of this Report.

Annual Report 2023

BOARD OF DIRECTORS 2023
As the highest governance body, the Board provides leadership, strategic guidance and sets the tone at the top for the Bank and the Group. Their collective
strength lies in the diversity of skills, experience, perspectives and objectivity enabling them to exercise their independent judgment on matters set before theBoard as set out below.

Mr. Sriyan Cooray

Mr. Bernard Sinniah

Mr. Sujeewa Mudalige

Chair, Board of Directors/
Independent/Non-Executive Director

Non-Independent/Non-Executive Director

Independent/Non-Executive Director

Appointed in August 2018

Appointed in March 2019

Appointed in January 2020

Value added to Board: Expertise in Banking,
Finance, Risk Management and Management

Value added to Board: Banking, Sales/Retail,Management, Treasury, Entrepreneurship and IT

Value added to Board: Accounting, Auditing,
Financial Analysis and Management

Mr. Kushan D’Alwis, PC

Ms. (Fay) Piyachatr Chetnakarnkul

Ms. Chandima Dilrukshi

Independent/Non-Executive Director

Non-Independent/Non-Executive Director

Non-Independent/Non-Executive Director

Appointed in July 2020

Appointed in May 2021

Appointed in June 2021

Value added to Board: Law (Litigation/Banking,Corporate, Commercial and Administrative Law)

Value added to Board: Economics,
IT and Business Investments

Value added to Board: Accounting and
Financial Management

Ms. Kasturi Chellaraja

Ms. Shweta Pandey

Mr. Hasitha Premaratne

Independent/Non-Executive Director

Independent/Non-Executive Director

Independent/Non-Executive Director

Appointed in October 2022

Appointed in April 2023

Appointed in June 2023

Value added to Board: Retail/Consumer Sector
Experience, Accounting, Financial Analysis andManagement

Value added to Board: IT, Economics, Payment
Systems, Fintech & Entrepreneurship

Value added to Board: Accounting & FinanceManagement, Textile/Apparel Sector Expertise

Mr. Kelum Edirisinghe

Mr. Dimantha Seneviratne

Mr. Hiran Perera

CEO - Non-Independent/Executive Director

Former CEO - Non-Independent/Executive Director

Non-Independent/Non-Executive Director

Appointed in February 2024

Appointed in January 2017
Ceased to be a Director in January 2024

Appointed in April 2020
Resigned in February 2023

Value added to Board: Strategic Leadership in
Banking, Finance and Management

Value added to Board: Banking, Credit Review,
Risk Management, Treasury and Corporate FinanceValue added to Board: Risk Management,
Commercial Banking, Fund Management, Debt
Re-structuring, Financial Analysis, Branch Banking
Nominations and Governance Committee

Audit Committee

Integrated Risk Management CommitteeStrategic Issues Committee

Credit Committee

Digital Transformation Committee

Human Resources and Remuneration Committee

Related Party Transactions Review CommitteeDiscretionary and Capital Expenditure Committee

Corporate Governance

National Development Bank PLC

Annual Report 2023

111

Corporate Governance Highlights
Highlights 2023/2024

Strength in Diversity

Governance Mechanisms

Board Composition

Appointment of Directors
Ms. Shweta Pandey appointed as NonExecutive Independent Director in April 2023
Mr. Hasitha Premaratne appointed as NonExecutive Independent Director in June 2023
Appointment of CEO
Appointment of Mr. Kelum Edirisinghe as
Chief Executive Officer with effect from 1
February 2024, following
Mr. Dimantha Seneviratne relinquishing
office with effect from 31 January 2024
Capital Augmentation
Raised LKR 5.0 Bn through the issue of BaselIII compliant rated unsecured subordinatedredeemable debentures with a non-viability
conversion at a par value of LKR 100 each in
December 2023
Listing of 19,369,640 ordinary voting sharesissued as a scrip dividend in May 2023
Reporting to Shareholders
Quarterly financial reporting to shareholders
through the CSE on 21 February, 12 May, 14
August and 14 November 2023
Eighteenth Annual General Meeting washeld on 30 March 2023

Payment Systems, Fintech

1/10

Risk Management

1/10

Audit

1/10

Treasury

1/10

Economics

2/10

Retail/Consumer Sector and Sales

2/10

Entrepreneurship

2/10

Business Investment

1/10

IT

3/10

Law

1/10

Textile/Apparel Sector Expertise

1/10

Finance , Accounting and Management

7/10

Banking

3/10

Specific Skills

Internal Code of Corporate Governanceapplicable to Board and Key Management
Personnel
Systematic process to obtain andassess Director information to ensure
independence and avoid conflicts ofinterest
Recommended a Code of Conduct &Ethics for Group Company Directors, in linewith the corporate governance standardsof the Bank
Complemented the Whistle blowing
policy by establishing an external
independent mechanism, known as the“NDB Ombudsperson”

General Skills

9/10 Directors are Non-Executive Directors

Board Balance

Equal voting rights for all shareholders
61

Independent
Non-Executive
Directors(Including
Chairman)

Executive
Director/CEO

3

Self-assessments of Board, subcommittees

Non-Independent& Non-Executive
Directors

Proactive year-round stakeholder
engagement programmes

Tenure on the Board

Nineteenth Annual General Meeting isscheduled for 28 March 2024
Board Effectiveness> 5 Yrs - 20%< 1 Yr - 20%

2 Directors

2 Directors

3-5 Yrs - 50%

1-2 Yrs - 10%
1 Director

5 Directors

Board appraisals were conducted in January2023 and results were discussed by the
Chairman at the March meeting
All subcommittees conducted appraisals of
their effectiveness and results were discussed
by the respective Chairpersons during 2023

Unique organisational culture centering on
sincerity, integrity and transparency

Commitment to integrate ESG
considerations

Strategic Pillars
Customer Solutions

Age Diversity
Below
45 Years - 20%

Above 60 Years - 20%
2 Directors

2 Directors

Business Focus

Board Committees
The Nominations Committee was renamed
as the Nominations and GovernanceCommittee

Between50-60 Years - 30%

Most Committees were reconstituted during
the year

Board Composition

Between45-50 Years - 30%

New Committee was formed as Discretionary
and Capital Expenditure Committee

Organisational Realignment

60%
40%

112

National Development Bank PLC

Digital & Data as Transformers

3 Directors

3 Directors

Annual Report 2023

Empowered Staff

Corporate GovernanceGOVERNANCE PHILOSOPHYThe Group’s corporate governance is shaped by the legal enactments, regulatory requirements and voluntary frameworks and standards set out below. They form
the basis of internal governance mechanisms and policy framework which go beyond mere legal and regulatory requirements to articulate sound corporate values
which uphold stakeholder rights while also safeguarding the reputation, assets and other business interests of the Group, carefully balancing interests.

Governance Framework
Key changes during the year to the framework included the following:� Issue of Section 9 of the CSE Listing Rules on Corporate Governance - Road map prepared for compliance in full by 3Q 2024.

See pages 330 - 336 for the Statement of Compliance with Section 9 of the Listing Rules.
� Issue of a new Code of Best Practice on Corporate Governance by the Institute of Chartered Accountants of Sri Lanka in

December 2023 – The Bank is proactively ensuring full compliance with the Code along with the revised Listing Rules
See pages 314 - 329 for the Statement of Compliance with the Code of Best Practices on Corporate Governance (2023).

� Appointing a Discretionary Expenses Committee of the Board in compliance with CBSL regulations.
� Issue of Reguation on Financial Consumer Protection

See page 119 for detailed status of compliance.
� Issue of IFRS Sustainability Standards S1 and S2This standard is yet to be issued locally and will be considered for adoption in 2024.
Steering Instruments of the Governance Framework
Regulations

Voluntary Standards

Internal Frameworks/Standards

Internal Mechanisms

y Companies Act No.7 of 2007y Banking Act No.30 of 1988 (as amended) andall Directions, Guidelines issued thereundery Laws and Regulations related to Anti-Money
Laundering and Countering the Financingof Terrorismy Corporate Governance Direction No.11 of2007 (as amended) issued by the Central
Bank of Sri Lankay Listing Rules of the Colombo Stock
Exchange (CSE)y Securities and Exchange Commission of
Sri Lanka Act. No 19 of 2021
y Banking (Special Provisions) Act, No. 17 of 2023
y Financial Consumer Protection RegulationsRegulations No. 01 of 2023

y Code of Best Practice on
Corporate Governance issued by
CA Sri Lanka (2023)
y Gender Parity Reporting
Framework (2019) of CA Sri Lankay Integrated Reporting Framework
published by the IIRC
y Global Reporting Standards ofthe Global Reporting Initiative
y Standards issued by the
Sustainability AccountingStandards Boardy Articles of Associationy Internal Code of Corporate
Governance for Board and Key
Management Personnel
y Charters/Terms of Reference of
subcommittees and Management
Committeesy Code of Conduct for Employeesy Comprehensive suite of internal
policies (Refer page 117)

y Stakeholder
engagementy Strategic planningy Budgeting and Financey Investor Relationsy People Managementy Risk Managementy IT Governance

Governance Principles
Structure and delegation

Effective and ethical leadership

114

Robust control environment

112, 115 - 117

Good corporate citizenship

117 - 118

119

Founded on our Corporate Values
Integrity

Creativity

Excellence

Sincerity

Accountability

Dependability

Key aspects of our Governance Framework
Board Governancey Board structurey Rotationy Committee
chartersy Policies
y Boardevaluation
y Culture & ethics

Financial GovernanceRisk Governance

Sustainability Governancey Budgeting and financial controly Capital allocationy Performance managementy Taxationy Risk managementy Internal controlsy Internal audit
y Compliancey Sustainability Policyy Environmental and Social
Management System

Contribution to creating and preserving value in 2023
Guidance and oversight on
strategic direction
110

Corporate GovernanceOversight on compliance andrisk management
124

Shaping the organisational culture
through the right tone at the top

Stakeholder engagement and
ESG integration

125

National Development Bank PLC

125

Annual Report 2023

113

114

National Development Bank PLC

Annual Report 2023

Corporate Governance

Board of Directors

Shareholders

Regulators

Determine and review
the Human Resources
and Remuneration
policies and set goals
and targets relating
to Directors, Chief
Executive Officer (CEO)and Key Management
Personnel (KMPs) of
the Bank.

Identify individuals
qualified to become
Board members andKey Management
Personnel (KMPs)
and review andrecommend
the Corporate
Governance
Framework of NDB.

Generaloversightof financial
reporting,internal controls
and functions
relating tointernal andexternal audit.

Elected/Appointed by

Reporting/Engage

Assess,approve,monitor andreview all theoutsourcing
arrangements.

Corporate &Branch Credit
Committees
Review andapprovefacilities withindelegated limits
and monitor
portfolios.

Defining
strategies forbalance sheet
planning in
optimisingrisk-returndynamics.

Determine
Human
Resources (HR)strategies andpolicies andrecommend
solutionsto improve
effectiveness ofthe HR function
at the Bank.

Outsourcing
Committee

CreditCommittee

Asset and
Human
Liability
Resource
Management Committee
Committee

Internal Audit

Human Resources
and Remuneration
Committee

Nominationsand GovernanceCommittee

Audit
Committee

Facilitateprocurementof goods
and services
ensuring fairness,transparency
and consistency
when assessing
suppliers.

Procurement
Committee

Evaluate andrecommend strategic
investments,
divestments, Strategic,
Business and capitalplans and strategic
decisions of a regular
as well as of an ad hoc
nature and recommend
any action the Board.

Evaluate all transactions withrelated parties of the Bank inorder to ensure that relatedparties are treated on parwith other shareholders andconstituents of the Bankin terms of the Corporate
Governance Direction, LKAS
24 and Listing Rules of the
CSE.

Assesseffectivenessof operationalrisk policies
and review
the Bank’s
operational risk
profile.

Operational
Risk
Management
Committee

Provideguidance anddirection on
IT strategy
to ensurebusiness
objectives
are achieved.

IT Steering
Committee

Regularly
assess theCredit/Market/Liquidity risk
policies of theBank.

Credit &MarketRisk Policy
Committee

Management Committees

The Leadership Team

Environmental & Social
Risk Management
Integrated Committee
To implement
environmental andsocial governance risk
aspects in relation to
Identify new market
responsible lending as per
opportunities and areas
the environmental andto improve operational
efficiencies, cost savings social risk management
framework and theand customer service
while owning and driving environmental and social
management system.
the implementation ofthese projects.

Discuss daily operations
and implement value
added solutions.

Management
Committee

Evaluating nonessential and/or
non-urgent
expenditure orcapital expenditureby the Bank in linewith CBSL Direction
01 of 2023
Drive the Bank’s
initiatives
towards
delivering
better client
experienceand bring
operational
efficiency acrossall business lines
Review
the Credit
Proposals
submitted by
the Business
Line, its risks
and adequacyof pricing or
covenants tomitigate theidentified risks.

Assess all risks andspecify risk appetite
faced by the Bank,
its subsidiaries andassociate companies,
through appropriate
risk indicators, dashboards and management
information.

The apex managementlevel body responsiblefor information security
and technology
resilience of the bank.
The Committee shallbe responsible for both
strategic and operational
aspects of information
security and technology
risk management

Information
Security Committee

Risk Management and Compliance

Discretionary andCapital Expenditures
Committee

DigitalTransformation
Committee

CreditCommittee

Integrated Risk
Management
Committee

Chief Executive Officer/Executive Director

Strategic Issues
Committee

Related Party Transactions
Review Committee

Board subcommittees

The Board is collectively responsible for creating and delivering sustainable shareholder value. The Board determines the strategic objectives and policies of the NDB Group to deliver
such long-term value by providing overall strategic direction within a framework of reward incentives and controls

External Auditors

Governance structures facilitate balance of power and authority, accountability, transparency, and performance oversight. The Board of Directors has set in place a fit for purpose governance structure
founded on these principles which facilitate value creation for stakeholders.

STRUCTURESAND DELEGATIONSTRUCTURESAND DELEGATIONRESPONSIBILITIES OF THE BOARD
The Board of Directors serves as the custodianof the Bank’s corporate governance framework
and practices. The Internal Code of Corporate
Governance clearly sets on the responsibilitiesof the Directors, which has supported highperformance strategic leadership and ensured
that greater value is derived from the Board andsubcommittee activities.

Powers retained by the Board
Steering and setting strategic direction
Stakeholder engagement
including reporting
Identification of risks and opportunities

Measures taken to improve structures and delegation in 2023
y The Bank reviewed and approved theDelegation of Authority
y Board and Board subcommittees conducted
self-assessments at both Board andsubcommittee to level to ensure the required
focus, oversight and guidance is provided tothe management.
y The Board was expanded during the year by
one taking the total number of directors to 10
y Subcommittee reports were prepared in linewith the requirements of the new CSE rules.

y The Nominations Committee was renamed
as the Nominations and GovernanceCommittee and its scope was expandedy The Terms of Reference for Audit
Committee, Related Party Transactions
Review Committee, Human Resources andRemuneration Committee and Nominationsand Governance Committee were amended
to ensure conformity with Section 9 of the
CSE Listing Rules

BALANCE OF POWER
Composition of the Board and clear segregation of responsibilities facilitate an appropriate balanceof power, which is essential for good performance and effective control. We have therefore
established clear delineations between the role of Directors and the executive management.
Chairman (Independent, Non-Executive Director)
Provides leadership to the Board and ensures its’ integrity and effectivefunctioning with good corporate governance.

Ensure integrity of internal controls
Retention of human capital and succession
planning

CEO (Executive Director)
Leads the Bank towards the achievement of its strategic objectives and ensures the Board
receives timely, accurate and clear information on the Group’s performance and position.

Independent Directory Determining the strategic objectives andpolicies of the NDB Group to deliver longterm value and providing overall strategic
direction within a framework of reward
incentives and controls.
y Making decisions on matters that havesignificant strategic, financial, or reputational
implications to the NDB Group as a whole.
y Providing effective leadership within aframework of prudent and effective controls
for the operations of the Bank which
demonstrates and nurtures the collective
vision of NDB’s purpose, values, culture, andbehaviour.
y Ensuring that management strikes anappropriate balance between promoting
long term growth and delivering short term
objectives.
y Ensuring that accurate, timely, clear andpertinent information is obtained, andclarification is sought where necessary.
y Presenting a balanced and understandable
assessment of the Bank’s position andsatisfying itself on the integrity of the Bank’s
financial statements.
y Engaging with and considering the opinionsof shareholders and other stakeholders.
y Assessing the Board’s effectiveness througha comprehensive self-assessment as detailedon page 116
Corporate Governance

Provides independent judgement through objectively and constructively challenging the Board
and Management.

BOARD SUBCOMMITTEES
Nine (9) subcommittees have been established by the Board to dedicate additional time and resources
to specific areas of focus. This includes five (05) mandatory subcommittees and four (04) additional
committees, aligned to the Group’s strategic aspirations and regulatory requirements. Subcommittees
Terms of Reference (TOR) define the responsibilities and scope of each Committee. Please refer to theReports of the subcommittees from page 139 to page 155 of this Report for further information.

Board Subcommittee

Link to Strategy

Link to Capital

Mandatory Committee
Audit Committee

FC

MC

IC

Nominations and GovernanceCommitteeHC

Human Resources andRemuneration Committee

FC

HC

Related Party Transactions
Review Committee

FC

SC

Integrated Risk Management
Committee

FC

DC

HC

SC

Strategic Issues Committee

FC

DC

HC

SC

Credit Committee

FC

SC

Digital Transformation
Committee

FC

DC

Discretionary and Capital
Expenditures Committee

FC

NC

Discretionary Committee

Please refer page 7 for Navigation Icons
National Development Bank PLC

Annual Report 2023

115

COMPANY SECRETARY
The Bank has appointed the Company Secretary as prescribed by applicable laws andregulations and in accordance with the Bank’s Article of Association. The Company
Secretary exclusively serves in the capacity of Company Secretary and does nothold simultaneous employment in another capacity within the Bank. The Company
Secretary ensures that proper Board procedures are followed in line with applicablelaws, rules and regulations. All directors have access to the advice and services of theCompany Secretary, and she assists the Chairman and CEO in setting the agenda for
the Board meetings and is responsible for maintaining sufficiently detailed Board
minutes in consultation with the Chairman. Board minutes are circulated to the Board
well before the next monthly meeting providing adequate time for consideration.

Board Minutesy Summary of information used for Board deliberations
y Matters considered by the Boardy Fact finding discussions and issues of content or dissent
y Testimonies and confirmations from the Senior
Managementy Board knowledge and understanding of risk
to which the Bank is exposedy Decisions and Board resolutions

AN EFFECTIVE BOARD
Appointments, Re-election & Retirements
The Nominations and Governance Committee
considers potential nominees and recommends
them to the Board who will review andrecommend to shareholders or appoint if it
is to fill a casual vacancy. All appointmentsof new directors are approved by the Central
Bank of Sri Lanka and the Securities andExchange Commission (on account of thelicences held by the Bank) who apply the fit
and proper criteria to such appointments. The
Nominations and Governance Committee also
applies the fit and proper criteria in terms of
the Corporate Governance Direction of CBSL,
the CSE Listing Rules and the Code of Best
Practices on Corporate Governance (2023) on
account of the licences held by the Bank, prior
to recommending candidates to the Board. An
announcement is made to the Colombo Stock
Exchange on receipt of approval together withthe profile of the director including whether
the director is executive or non-executive andindependent or non-independent.
The Board focuses on balancing the needto maintain continuity and bringing in fresh
perspectives through an enhanced succession
framework. As per the Articles of Association,
1/3rd of the Directors (except the CEO, any
Director appointed to fill a casual vacancy
and any Nominee Director of the Ministry of
Finance) should retire at each AGM and be
subject to re-election.
The Board has also complied with the rules on
Related Party Transactions issued by the CSE.

Rotation guidelines as per the Articles
Retirement age

Board tenure

Board self-assessment

Director Induction and Training
Directors have continued access to training
and knowledge, which enables them toeffectively discharge their duties. A process isin place to carry out inductions and orientation
for all new directors upon joining the Board.
Directors receive opportunities for upgrading
knowledge and their professional skills
throughout their tenure and timely information
is provided to assist them keeping abreast of
economic, regulatory and industry trends. As
necessary, the cost for such sessions are borneby the Bank. Additionally, circulars, directions,and guidelines issued by the regulators are
circulated to the Directors on a quarterly basis
for their information. Management also makes
representations to the Group on relevant
matters from time to time.

2023

National Development Bank PLC

Directors also have unrestricted access to the
management team, Group information as
well as other resources required to effectively
execute their responsibilities. Access to external
professional advice is available to Directors
at the Bank’s expense and directors have on
several occasions, availed of same in 2023.

Board Appraisals
The Board and subcommittees engage in anannual self-assessment to identify the potential
areas of improvement to board practices andperformance. The evaluation findings focus on
the Board as a whole and the performance ofindividual Directors.
In 2023, noting the rapidly evolving economic,
regulatory landscape, the Board noted theneed to enhance opportunities to increaseawareness and education for the directors. The
need to focus more on talent management andsuccession planning at the Bank was noted asanother area requiring focus.

How we assessed Board
effectiveness in 2023
Self-assessment questionnaires filled in
by Directors
Review of responses by Chairman

Inductiony Overview of the Bank’s operationsy Provided a board pack containing
comprehensive information on Board
meetings of the last seven years

The Board continues to focus on
the collective skills and experience
required to achieve its strategic
goals while ensuring its fiduciary
duties are discharged effectively.
116

Board access to information

Annual Report 2023

Corporate Governance

Report feedback to the Board
Formulation of remedial action plan andreview of progress against planIndependence

Policy Framework

All Directors are required to submit annual declarations of independence or non-independence inaccordance with the stipulations of the Corporate Governance Direction of CBSL, the Listing Rulesof the CSE and the Code of Best Practice on Corporate Governance (2023).
y Directors submit annual declarations of independence with focus on directors’ interests,
position, association or relatives
y Directors disclose subsequent changes as and when they occur

Criteria

Assessment

Resultsy 6 out of 10 deemed Independent on
Corporate Governance Direction of CBSLy Corporate Governance Direction of CBSLy 9 out of 10 deemed Independent basedon CSE Listing Rulesy Code of Best Practice on Corporate
Governance (2023)

y 8 out of 10 deemed Independent basedon Code of Best Practice on Corporate
Governance (2023)

Conflicts of interest
The Bank’s Internal Code of Corporate Governance, the Articles of Association, the Corporate
Governance Direction of CBSL, and the Listing Rules of the Colombo Stock Exchange require each
Director to determine and disclose whether he/ she has a potential or actual conflict of interest.
Multiple channels are in place to disclose potential conflicts of interest or any material interests
in contracts involving the Bank, including during onboarding, post on-boarding, annual updateof the disclosures, during the quarterly update of the Bank’s related party disclosures and/or as
and when such conflicts arise. The Company Secretary maintains a record of such details which
are disseminated through an established process to the business lines to ensure management ofconflicts of interest and arm’s length dealings. When such matters are discussed at Board level the
relevant director refrains from participating in the discussion and abstains from voting.
Key mechanisms in place to mitigate the risk of such conflicts of interest arising include,y Information Security Policyy Information Security Compliance Policyy Data Classification Policyy Acceptable Usage Policyy Electronic Data Retention and Destruction Policy
Ethics and Integrityy Corporate Governance Codey Code of Conduct for Employeesy Group Securities Trading Policyy Group Anti-Bribery and Corruption Policyy Whistleblowing Policyy Ombudsperson Policyy Disclosure Policyy HR Manualy Fraud Risk Management Policy
y Procurement Policyy Corporate Social Responsibility Policy
y Related Party Transactions Policyy Codes of Ethics & Standard of Conduct for
Treasury Front office, Treasury Operations andTreasury Middle Officey Anti-Money Laundering, Suppression of Terrorism
Financing and Sanctions Policy and Procedures
Risk Management

y Directors are required to maintain strict arm’s length basis when initiating new businessy Due consideration is given in assessing Director’s interests, position, association, or relatives indecision-making
Accordingly, it has been confirmed that none of the Directors or their close family members havematerial business relationships (as defined in the CSE Listing Rules) with other Directors of the Bank.

CONTROL ENVIRONMENT
The Board ensures that risk management, compliance and controls are embedded across all key
processes, which facilitates an appropriate balance between realising opportunities for gain andmitigating the potential negative impacts of risks. The Group’s control environment comprises anenterprise-wide suite of internal controls and risk management frameworks, processes and activities
that provide a solid foundation for navigating internal and external dynamics.
The Group’s policy framework (set out below) provide reasonable assurance on the effective
delivery of the Group’s strategic aspirations. Policies are reviewed and revised annually to ensure
applicability to evolving operating conditions.
In line with the recent revisions to the CSE Listing Rules, the Bank is in the process of further
strengthening its policy framework and improving transparency in relation to several key policies.
This exercise is expected to be completed in the Third Quarter of 2024.
Corporate GovernanceHR manual including,y Diversity and Inclusion Policyy Harassment Policy and the Harassment Redressal
Policyy Health and Safety Policyy Staff Account Operations and Monitoring Policyy Consequence Management Frameworky Grievance Policy
Technology & Digital (DC)

Independence determined against threecriteria;y CSE Listing Rules

Human Resources (HC)y Credit Risk Related Governance Policyy Impairment Policyy Market Risk Management Policyy Operational Risk Management Policyy Fraud Risk Management Policyy Foreign Exchange Risk Management Policy
y Liquidity Risk Management Policyy Stress Testing Policy and Frameworky Internal Capital Adequacy Assessment Process
Documenty Risk Model Validation Policyy Expenses Management Policyy MIS Policy
Investment Policyy Investment Policyy Bank’s Exposure to Stock Market Activities
Communicationy Communication Policyy Disclosure Policyy Complaints Handling Policy.

National Development Bank PLC

Annual Report 2023

117

COMBINED ASSURANCE

Policies revised in 2023
The following policies were reviewed and revised in 2023
1. Related Party
Transactions Policy
2. Corporate GovernanceCode
3. Policy on Bank’s Indirect
Exposure to Stock Market
Activities
4. Agent Selection Policy
and Risk Management
Framework
5. Operational Risk Policy

11. Code of Conduct
and Ethics for Group
Company Directors

21. Compliance Risk
Management Policy andFramework

12. Remuneration Policy for
Directors & KMPs

22. Communication Policy

13. Revised Procedurefor Selection andAppointment of Directors
14. Code of Conduct andEthic for Group Company
Directors

6. Bank Counterpart Limit
Assessment, Repurchase/
Reverse Repurchase
Limits And Haircut Rules

15. Stress Testing Policy &Framework for 2023

7. Remedial Management
Policy and Procedure
Guideline

18. Policy on Payment
Related Mobile
Applications

8. Compliance Charter
9. Procedure for Selection &Appointment of Directors
10. Amendments to Group
Audit Procedure Manual

16. Treasury Policy
17. Credit Policy Manual

23. Internal Audit Procedure
Manual
24. Market Risk
Management/Middle
Office Policy
25. Liquidity Risk
Management Policy
26. Investment Policy
27. Asset Liability
Management Policy
28. Liquidity Contingency
funding Plan

118

Management functions
Risk and ComplianceIndependent Risk Management andCompliance functions, Integrated Risk
Management Committee
Independent Internal Assurance
Internal Audit, Audit Committee

19. Group Anti-Bribery &Corruption Policy

30. Liquidity Contingency
Funding Plan – TOR

Independent External Assurance

20. NDB Group Securities
Trading Policy

31. Impairment Policy
33. Information Security
Policies

Meetings of the Board and subcommittees– These provide a regular platform forcommunicating critical concerns to the Board.
In particular, independent lines of reporting
established for the Chief Risk Officer to IRMC,
the Compliance Officer to IRMC and the Headof Internal Audit to the Audit Committee
strengthen this mechanism. Additionally, criticalconcerns maybe circulated via a Board paper
to the Board or subcommittee if it is deemedsufficiently important and time sensitive.
Whistleblower Policy – This is an effective
mechanism available for any employee toraise important matters/concerns to identified
Board and management personnel of theBank. All whistle blowing complaints received
during the year have been evaluated and as
appropriate, investigated and action taken via
a process managed by the AC.

National Development Bank PLCyy

Ombudsperson Policy –This is an independent mechanism
available for any employee or third party toconfidentially highlight important concerns/
matters to an independent individual
appointed to this position. There is a process
in place for the Ombudsperson to evaluate
and recommend further steps/investigations/inquiries as may be needed in a processestablished with the Board.
Company Secretary – Shareholders may
contact the Company Secretary to bringcritical concerns to the attention of the Board
which are then informed to the Chairman forsuitable action.

Annual Report 2023

External Auditors

32. ESRM Policy & Manual

The Board has set in place a number of mechanisms to facilitate communication of critical concerns
to the Board as follows;y

Executive Management

29. Market Risk Treasury
Middle Office – TOR

COMMUNICATION OF CRITICAL CONCERNS TO THE BOARDy

The Group adopts a combined assurance
framework, integrating the assurance obtained
from both internal mechanisms and external
providers. This approach has enhanced theintegrity of internal controls and information
used for reporting to both internal and external
stakeholders.

Internal Audity Independent and objective assurance functiony Serves as the third line of defence in the Bank’s
risk management structurey The Head of Internal Audit reports directly to the
Audit Committee
Audit Committeey Responsible for ensuring the integrity of theCompany’s financial statements as well asinternal controls and compliancey Skill profile represents extensive experience infinance, accounting and auditingy The Terms of Reference of the Audit Committee
complies with the recommendations of theCode of Best Practice on Audit Committees
issued by ICASL and guidelines stipulated by the
CSE. (Please refer pages 147 to 148 for the Report
Audit Committee.)

External Audity Measures in place to ensure the independence
and objectivity of the External Auditors as
discussed furthermore in the Audit Committee
Report on pages 147 to 148.
y The Group’s External Auditors are Messrs. Ernst
and Young and the principal/consolidator
auditor has not engaged in any services which
are in the restricted category as stipulated by the
CSE for External Auditors.

Corporate GovernanceCORPORATE CITIZENSHIPORGANISATIONAL ETHICS
The Board of Directors hold apex responsibility
in driving ethical leadership and nurturing anorganisational culture founded on commonly
accepted set of values of Integrity, Excellence,
Creativity, Accountability and Sincerity.
The Group’s ethical foundation is built on
key policies including the Internal Code ofCorporate Governance, Code of Conduct for
Employees, Group Anti-Bribery and Corruption
Policy and Whistleblowing Policy among
others.

APPROACH TO ANTI-BRIBERY AND
CORRUPTIONNDB Group has zero tolerance for bribery andcorruption and is firmly committed to actingwith integrity, professionalism and fairness in all
its business dealings and relationships.
The Bank has developed Board approved
Anti-Bribery and Corruption (ABC) policy inaccordance with these commitments as wellas in adherence to the applicable laws andregulations with a view to promote a cultureof compliance. The policy forbids Directors,
Employees, and third parties operating on its
behalf from making any form of facilitation
payments and on behalf of NDB Group, no
political contributions may be given to politicalaction committees, political parties, elected
officials, or candidates for public office. The
Bank’s appetite towards Political Donations
is zero. In line with regulatory requirements,
the Bank has also rolled out an anti-money
laundering, Suppression of Terrorism Financing
policy and process across the Group.
In 2023, a set of training sessions on ABC
were conducted to a specific group of Bank
employees in collaboration with Transparency
International Sri Lanka (TISL).

Meanwhile clearly defined and communicated grievance mechanisms are in place to identify
negative impacts of the Bank/Group on employees, business partners and communities. The Bank
has also established an external informational mechanism, known as the NDB Ombudsman tofurther strengthen the whistleblowing mechanism.

FINANCIAL CONSUMER PROTECTION REGULATIONS (FCPR)The FCPR regulations encompass a wide range of requirements and good practices designed toensure that individuals and businesses dealing with financial products and services of regulated
financial institutions are treated in a fair and transparent manner with improved service levels
enabling them to take well informed decisions on their financed activities with confidence. Latest
developments in the fields of digital financial services and customer data protection; as well as
requirements of financial consumers with special needs have also been incorporated into theseRegulations.
In line with the above regulatory requirements, the Bank formed the Financial Consumer Protection
Unit and Key Management Personnel and Operational Management Personnel were appointed in
2023 to oversee the FCPR’s implementation alongside the pertinent units. The Bank will continued
to maintain financial system integrity in line with the Regulation.

Ethics in Action
Personal Conduct

Market Conduct

y Directors and KMP are guided by theInternal Code of Corporate Governancey The Group Anti-Bribery and Corruption
policy sets out the minimum standards
expected by all Directors, employees andthird-party service providers engaged by
the NDB Groupy All other employees are bound by the
Code of Conduct for Employees which
provides a roadmap aligning the values
to behavioural, ethical, and practicalcompliance aspects of our businessy The Whistleblower and Ombudsperson
Policies encourages employees and third
parties to come forward and voice theirconcerns anonymously, thereby nurturing
a culture of transparency.
y The Gifts and Entertainment Policy
which is part of the Code of Conduct for
Employees clearly articulates the Banks
stance on accepting and giving gifts.
Further it provides threshold for seasonal
gifts and the disclosure requirements
applicable.

SUSTAINABILITY GOVERNANCE

CREATING AND PRESERVING VALUE IN 2023

The Board has integrated sustainability and ESG
considerations into the Group’s strategy anddecision-making, institutionalising sustainability
reporting processes to monitor and manage
impacts. The Group’s Environmental andSocial Sustainability Framework sets on triple
bottom line aspirations and is driven by the
Corporate Sustainability committee-which
includes Leadership Team and multi-functional
representation (refer to page 102 for further
information).

The following section provides an overview
of how the Board of Directors’ contributed
to creating and preserving value during theyear. The persistent and evolving challenges
that have prevailed in recent years have tested
the robustness, strength and agility of theGroup’s governance mechanisms and practices,which served as an anchor in navigating theunprecedented operating conditions of 2023.

Corporate Governancey Codes of Ethics & Standard of Conduct
for Treasury Front Treasury Operations
and Treasury Middle Office are inplace with the prevailing regulations tostrengthen market conduct and practices
for treasury operations and to strengthenmarket risk management systems.
Societal Conduct

y Environmental and Social
Sustainability framework provides
guidance on contributing to the wider
community through meaningful andimpactful engagements

Strategy, Performance and Reporting

Oversight on Risk Management

Shaping organisational culture

Embedding Sustainability and ESG

National Development Bank PLC

Annual Report 2023

119

STRATEGY, PERFORMANCE AND REPORTING
The Directors have unfettered access to the Leadership Team and have ongoing interactions across various functions and levels in the organisation,
enabling a deep understanding of the business. Board oversight on strategic implementation is facilitated through engagement during strategy
sessions and Board/Subcommittee meetings where KMPs attend by invitation.

How the Board engaged with the business in 2023y

All 10 Directors serve on Board subcommittees, enabling engagement with KMPs on specific mattersyDebate and approval of the Bank’s strategic frameworky

The Board has access to first-hand insights on the activities of the subsidiaries through common directorsyAttendance at investor forums and roadshowsyOnsite visits to various Bank operations and business unitsyAssessment of regular performance reportsyDigital engagement

TIME SPENT BY THE BOARD IN 2023

A

45%

20%

20%

10%

5%

A

B

C

D

E

Monitoring the evolving
economic landscape, managing
divergent challenges andnavigating the business of the
Bank including critically reviewing
the financial performance of the
Bank and Group and the funding,capital, liquidity needs etc of the
Bank and considering and rollingout key changes, initiatives and a
Mid-term strategy and Budget for
the Bank - 45%

B

Reviewing IT / digitaldevelopments,
upgrading systems
and structures toensure internal andexternal stakeholder
service and satisfaction
- 20%

C

Oversight andguidance on controls,
risk management,
governance,compliance anddisciplinary matters
- 20%

D

Employee wellbeing,
evaluation of structuralchanges needed,senior executive review& talent Management/ succession Planning
- 10%

E

External reporting &stakeholder Interest &management - 5%

MATTERS DISCUSSED BY THE BOARD IN 2023
Areas of focus

Matters discussed

Monitoring the
evolving operatinglandscape andpotential impact

y Keeping a close eye on the economy of the country considering the volatility in the FX situation, liquidity situation, DDR,ISB restructuring dynamics and proposals etc and following closely on the directions of the Central Bank of Sri Lanka
y Focus on recovery from the Pandemic and the prevalent economic conditions, Asset quality, restructuring, remedial(& NPL) management and deliberating all options that could be considered by the Bank- including timely policy
implementation/changes and evaluating emerging risks and approving the Recovery Plan.
y Reviewing the Bank’s financial position, cash flow management and aggressively managing escalating costs with indepth review/justifications and introducing alternative routes/automation to better manage same.
y Considering and advising on the capital management, forecasting capital augmentation plans including approving a
Tier 2 Debenture Issuance to strengthen Capital.
y Consideration and approval of the Bank’s Internal Capital Adequacy Assessment Process (ICAAP)120

National Development Bank PLC

Annual Report 2023

Corporate GovernanceAreas of focus

Matters discussed

Monitoring the
evolving operatinglandscape andpotential impact(Contd.)y Detailed assessment of the financial and business performance of the Bank, including controls in place in relation to theoperations of the Bank and improving control processes and policies.
y Reviewing and guiding the Bank’s business strategies / key new initiatives resulting in a critical review of the Bank’s
financial performance vis a vis its peers and rolling out of a new Mid-term Strategy for 2024-25 to better navigate thecurrent economic/performance challenges facing the Bank including advising on new focus areas and mindset change.
y Providing insight and guidance on specific business line strategies and ways forward for CASA, Retail Banking, Marketing
and Treasuryy Approval of and reviewing the annual Budget to ensure applicability with the changing economic situation and strictly
monitoring / advising on the performance of the Bank in the circumstances with specific focus on the impact andmanagement of multiple industry/local/global challenges.

y Oversight and guidance on the core banking system upgrade, follow up on post migration issues and standards with a
Reviewing IT / digital
view to ensuring a smooth transition to the upgraded system to improve internal and external stakeholder services anddevelopments, security,
satisfaction and oversight on IT security and risks
upgrading systems andstructures
Oversight andguidance on controls,
risk management,
governance,compliance anddisciplinary matters

y Focus and deliberation on ensuring good governance, regulatory compliance and related in depth review of andimprovements to policies and procedures of the Bank.
y Ensuring thorough investigation and inquiry into whistle blowing, customer and other complaints and ensuring
disciplinary, corrective actions are taken and required process and policy changes are implemented.
y Focus on compliance requirements including regulatory compliance and risk assessment.
y Introducing new policies / reviewing all major policy documents of the Bank to strengthen the governance and control
environment of the Banky Review and approval of Board subcommittee deliberations and recommendations, conducting board andsubcommittee level self-assessments etc to ensure the required focus, oversight and guidance is provided to the
management of the Bank and to the Board.

Employee wellbeing,
evaluation of structuralchanges needed,senior executive review& talent Management /succession Planningy Deliberating and devising structural changes appropriate for the Bank’s smooth operation and future strategy and focus.
y Assessing the Fitness of Directors and KMPs of the Bank, setting of the Goals and Targets for the Board & KMPs for theyear in line with the overall strategy and direction of the Bank and discussing self-assessments to aptly identify gaps
and areas for improvement and identifying suitable Board & KMP replacements and new infusions to strengthen the
structure brining in the required new expertise in line with the strategy of the Bank.
y Approving/reviewing employee talent review, infusion, management, retention and succession needs of the Bank with aview to strengthening the organisation structure.
y Consideration of the Bank’s employee wellbeing in the current economic - social backdrop and introducing several
measures to address same

External reporting &stakeholder Interest &managementy Keeping a close eye on the economy of the country considering the volatility in the FX situation, liquidity situation, DDR,ISB restructuring dynamics and proposals etc and following closely on the directions of the Central Bank of Sri Lankay Reviewing and guiding the Bank’s business strategies / key new initiatives resulting in a critical review of the Bank’s
financial performance vis a vis its peers and rolling out of a new Mid-term Strategy for 2024-25 to better navigate thecurrent economic/performance challenges facing the Bank including advising on new focus areas and mindset change.
y Focus on recovery from the Pandemic and the prevalent economic conditions, Asset quality, restructuring, remedial(& NPL) management and deliberating all options that could be considered by the Bank- including timely policy
implementation/changes and evaluating emerging risks and approving the Recovery Plan.
y Focus and deliberation on ensuring good governance, regulatory compliance and related in depth review of andimprovements to policies and procedures of the Bank.
y Ensuring thorough investigation and inquiry into whistle blowing, customer and other complaints and ensuring
disciplinary, corrective actions are taken and required process and policy changes are implemented.
y Focus on compliance requirements including regulatory compliance and risk assessment.
y Introducing new policies / reviewing all major policy documents of the Bank to strengthen the governance and control
environment of the Bank

Corporate Governance

National Development Bank PLC

Annual Report 2023

121

BOARD MEETINGSThe Board strengthened engagement given the rapidly changing operating landscape and potential stresses on the Group’s operations. The Board
convened 16 times during the year, while 72 subcommittee meetings were also held. (Please refer below table on meeting held during 2023 and page 124
for subcommittees attendance). Clearly defined guidelines and processes ensure the effectiveness of Board meetings.

Beginning of the year
y Board meetings are scheduled and duly informed to the Board at the end of the previous calendar year.
y Meeting modes and venues are agreed upon.

Setting the agenda
y Directors are entitled to include matters and proposals in the agenda for discussion
y Chairman draws up the agenda in coordination with the CEO and with the assistance of the Company Secretary

Circulation of Board papers
y Formal notice of meetings, the agenda and Board papers related to each Board meeting are circulated at least 7 days in advance of the Board meetingy Documents are uploaded through a secure connection to the tablets of all directors in order to ensure that Board members have access tocomplete information prior to Board meetingsy Board members prepare in advance to ensure effective and robust discussions on key matters.

During Board meetingy The Chairman encourages and facilitates constructive dialogue during Board meetingsy If a Director has a conflict of interest in a matter to be considered by the Board, such matters are disclosed and discussed at the Board
meetings, where Non-Executive Independent Directors who have no material interest in the transaction, are present. The relevant Director
excuses himself from the meeting during such discussions
y Directors are also given the opportunity to participate through electronic means

After Board meetingy Board minutes are prepared by the Company Secretary and circulated among Directors as soon as possible within 2 weeks of the meetingy The Board minutes contain adequate details appropriate to the matters dealt with during Board meeting including dissenting views

MEETINGS HELD

16
Main Board
Meetings

Number of Subcommittee Meetings Held122

Number of Management Committee Meetings Held

Nominations and Governance Committee

12

Asset and Liability Committee

17

Human Resources and Remuneration Committee

06

Credit and Market Risk Committee

04

Integrated Risk Management Committee

05

Operational Risk Management Committee

04
98
59
99

Audit Committee

07

Related Party Transactions Review Committee

04

Credit committees
Corporate Credit Committee
Branch Network Credit Committee

Strategic Issues Committee

07

Procurement Committee

Credit Committee

12

IT Steering Committee

03

Digital Transformation Committee

05

Human Resources Committee

06

Discretionary and Capital Expenditures Committee

14

Outsourcing Committee

06

National Development Bank PLC

Annual Report 2023

Management Committee (MANCO)-

Environmental & Social Risk Management Integrated Committee

02

Information Security Committee

02

Corporate GovernanceTHE STRUCTURE, COMPOSITION AND ATTENDANCE OF THE BOARD AS AT 31 DECEMBER 2023
Name of Director

Independent/
Independent/
Non-Independent
Non-Independent
under CBSL Direction under ICASL

Independent/Non
Independent under
CSE Listing Rules

Date ofAppointment

Number of Board
Meetings Eligible
to Attend

Number of
Meetings
Attended

Mr. Sriyan Cooray
Chair, Board of Directors

Independent

Independent

Independent

10.08.2018

16

16

Mr. Bernard Sinniah

Non-Independent

Independent

Independent

28.03.2019

16

16

Mr. Sujeewa Mudalige

Independent

Independent

Independent

06.01.2020

16

16

Mr. Kushan D'Alwis, PC

Independent

Independent

Independent

06.07.2020

16

16

Ms. (Fay) Piyachatr
Chetnakarnkul

Non-Independent

Non-Independent

Independent

25. 05.2021

16

16

Ms. Chandima Dilrukshi

Non-Independent

Independent

Independent

21.06.2021

16

16

Ms. Kasturi Chellaraja

Independent

Independent

Independent

03.10.2022

16

15

Ms. Shweta Pandey
Independent(Appointed w.e.f. 28.04.2023)

Independent

Independent

28.04.2023

1010

Mr. Hasitha Premaratne(Appointed w.e.f. 15.06.2023)

Independent

Independent

Independent

15.06.2023

98

Mr. Dimantha Seneviratne(CEO)(Ceased to be Director
w.e.f. 31.01.2024)

Non-Independent

Non-Independent

Non-Independent

01.01.2017

1212

Mr. Hiran Perera(Resigned w.e.f. 14.02.2023)

Non- IndependentNon- Independent

Independent

23.04.2020

1

1

Status

DOA

C

27.03.2023

Mr. Sujeewa Mudalige

M 21.06.2022 M

22.03.2022 M 19.02.2020 M 19.02.2020 C 18.02.2020 M 19.02.2020

Mr. Kushan D'Alwis, PC

M 21.06.2022

M 22.07.2020
M 22.06.2021

Ms. Chandima Dilrukshi
Ms. Kasturi Chellaraja

M 20.08.2021
M

Mr. Hasitha Premaratne(Appointed w.e.f. 15.06.2023)
Mr. Dimantha Seneviratne(Ceased to be Director
w.e.f. 31.01.2024)

01.05.2019

M

30.04.2021

22.07.2020
M

29.10.2021

M 22.06.2021

20.06.2023

Ms. Shweta Pandey(Appointed w.e.f. 28.04.2023)

DOA

20.06.2023

M 19.02.2020

StatusDOA

M 25.10.2022 M

C 01.07.2022 C 01.05.2019 M 01.09.2018

19.02.2020

DOA

Status27.03.2023

DOA

M

20.08.2021

M 19.02.2020 M

M

M 20.06.2023
M

18.07.2023

M 20.06.2023

Discretionary
and Capital
Expenditures
Committee

01.10.2022

C 20.08.2021 C

Mr. Bernard Sinniah

C

DigitalTransformation
Committee

M 22.06.2021 M 22.06.2021 M

Mr. Sriyan Cooray

Ms. (Fay) Piyachatr
Chetnakarnkul

CreditCommittee

StatusStatus01.09.2018

DOA

StatusC

DOA

Integrated Risk
Management
Committee

StatusAudit
Committee

DOA

Strategic
IssuesCommittee

StatusNominations
Human
Related Party
andResources and Transactions
Governance Remuneration
ReviewCommittee
Committee
Committee
DOA

Name of Director

StatusDETAILS OF MEMBERS OF THE BOARD SUBCOMMITTEES AS AT 31 DECEMBER 2023

C

19.06.2023

M

30.04.2021

M 20.06.2023
M 23.07.2019

Mr. Hiran Perera(Resigned w.e.f. 14.02.2023)

M

01.07.2017 M

01.06.2017

M

01.05.2020

DOA - Date of Appointment   Status - C - Chairman/ M - Member

Corporate Governance

National Development Bank PLC

Annual Report 2023

123

Attended

Eligible toAttendAttended

Eligible toAttendMr. Sriyan Cooray

12

12

6

6

4

4

7

7

7

7

5

5

-

-

-

-

-

-

Mr. Bernard Sinniah

12

10

6

6

-

-

7

7

-

-

-

-

12

12

5

4

-

-

Mr. Sujeewa Mudalige

12

12

6

6

2

2

7

7

7

7

5

5

-

-

-

-

-

-

Mr. Kushan D'Alwis, PC

12

11

-

-

4

4

-

-

-

-

-

-

12

11

-

-

-

-

Ms. (Fay) Piyachatr
Chetnakarnkul

-

-

-

-

-

-

7

6

-

-

5

3

-

-

5

3

-

-

Ms. Chandima Dilrukshi

-

-

-

-

4

4

-

-

7

6

5

4

12

11

-

-

14

13

Ms. Kasturi Chellaraja

-

-

1

1

-

-

-

-

-

-

5

5

6

3

-

-

14

14

Ms. Shweta Pandey(Appointed w.e.f. 28.04.2023)

-

-

-

-

-

-

-

-

3

1

-

-

-

-

4

4

-

-

Mr. Hasitha Premaratne(Appointed w.e.f. 15.06.2023)

-

-

1

1

2

2

-

-

-

-

2

1

-

-

-

-

-

-

Mr. Dimantha Seneviratne(Ceased to be Director
w.e.f. 31.01.2024)

-

-

-

-

-

-

7

7

-

-

5

5

12

11

5

5

-

-

Mr. Hiran Perera(Resigned w.e.f. 14.02.2023)

-

-

-

-

-

-

-

-

-

-

-

-

2

1

-

-

-

-

Attended

Attended

Eligible toAttendEligible toAttendDiscretionary
and Capital
Expenditures
Committee

Attended

DigitalTransformation
Committee

Eligible toAttendCreditCommittee

AttendedIntegrated Risk
Management
Committee

Eligible toAttendAudit
Committee

Attended

Strategic
IssuesCommittee

Eligible toAttendRelated Party
Transactions
ReviewCommittee

Attended

Human
Resources andRemuneration
Committee
Eligible toAttendNominations
andGovernanceCommittee
Attended

Name of Director

Eligible toAttendNUMBER OF MEETINGS HELD AND ATTENDANCE OF THE BOARD SUBCOMMITTEES AS AT 31 DECEMBER 2023

OVERSIGHT ON RISK MANAGEMENTManaging emerging risks emerged as a key priority during the year, reflecting increasing complexities of external headwinds and escalating macroeconomic stress. The Audit Committee and the Board Integrated Risk Management Committee played a vital role in monitoring changes to the Group’s
risk landscape. Key areas of focus are summarised below while further details are provided in the Risk Management Review from page 337 to 340 of thisAnnual Report.
Credit Risk Management
Emphasis on supporting customers through the crisis by offering restructuring and remedial opportunities

Liquidity Risk Management

Foreign Currency Risk Management

Structured balance sheet management topreserve liquidity

Ongoing and proactive engagement with Treasury to
optimise foreign currency position in serving customers

Operational Risk Management
Environmental and Social Risk Management

Focus on supporting retention levels throughemployee well-being, talent development andengagement

Ongoing training and awareness building on theGroup’s ESMS Framework.

Managing IT and Cyber- Security Risks
The Group is cognisant of its’ increased exposure to IT and cyber security risks stemming from the thrust towards digitalisation. A framework ofrobust IT policies & procedures, clear demarcation of responsibilities and a highly skilled IT team ensure that IT risks and vulnerabilities are managed
in a holistic and consistent manner through the three lines of defence governance model. During the year, the Bank further strengthened its IT risk
framework through successfully obtaining the ISO/IEC 27001 Information Security Management Standard and increasing the investments in the data
center infrastructure, access controls, data loss prevention controls and firewalls among others. Further, creating awareness amongst staff and key
stakeholders also considered as priority areas in managing information security and related risks.
124

National Development Bank PLC

Annual Report 2023

Corporate GovernanceSHAPING ORGANISATIONAL CULTURE

SHAREHOLDER ENGAGEMENT

The Board of Directors set the right tone at the top aligned to NDB’s corporate values. This culture
has been a key factor in ensuring resilience and agility amidst the unprecedented challenges thathave prevailed over the recent years. During 2023, Board oversight and monitoring of culture was
supported by the following engagements:

2. Organisational Transparency – The Bank champions sustainability reporting, going beyond
regulatory requirements to voluntarily report its impacts in line with international best practice

We are committed to preserving the rights ofour shareholders and ensure that all ordinary
shareholders of the same class of shares issued
by the Bank are treated equitably. The Group
conforms to the principle of one share, one
vote and one dividend and currently there areno non-voting shares in issue. We also adopt
an array of measures to ensure that shareholder
views are heard and fully considered.

3. A comprehensive policy framework including the Ombudsman Policy and Whistleblowing PolicyyAnnual General Meeting: The AGM
provides shareholders the opportunity
to contribute their views and engage
with the Board of Directors, including the
Chairpersons of certain subcommittees andmembers of senior management. The Bank’s
AGMs are generally well attended, and
we encourage shareholders to participate
in fostering a constructive dialogue.
Resolutions requiring shareholder approval
are tabled separately for adoption at theAGM. The Bank held its AGM physically on
the 30 March 2023 with nearly 54% of theshareholding represented.

yDissemination of information: The
Bank provides shareholders with timely
information on performance and any othermaterial developments, including pricesensitive information. Numerous platforms
are in place to disseminate information
amongst shareholders and analysts; theseinclude investor presentations, press releases,
email notifications, market announcements,
online investor webinar, road shows and theinvestor relations webpage within the Bank’s
corporate website.

yInvestor Relations: A dedicatedInvestor Relations function ensures thatshareholders are kept aware of emerging
developments

1.

Anti- Bribery and Corruption – The Code of Conduct of the Bank includes provision on this key
topic which all employees are required to comply with.

4. Financial reporting – Quarterly financial reporting to shareholders through the CSE
5. Reporting on Gender and Non Discrimination – The Gender Report on pages 85 to 87 of thisAR provides insights into this vital topic.
6. Reporting on Procurement related to Government Contract/Tenders

Organisational change management

Employee well-being

Embedding the aspirations of Voyage
2025 in the organisational culture throughtraining and ongoing engagement

Focus on employee mental well-being to
mitigate anxiety and stress given prevalentsocio-economic challenges

Talent Review
Competency based mapping
and training

Digitalisation of work
Emphasis on how the Group’s digital transformation
can enhance the meaningfulness of work, byautomating mundane and repetitive process,thereby driving increased employee fulfillment

RESPONSIBLE CORPORATE CITIZENSHIP
Our organisational culture emphasizes the importance of driving excellence in relationships, bothwith our internal and external stakeholders. This is nurtured in the way we engage with, respond toand drive meaningful value creation to our stakeholders. As described on pages 47 to 49, the Groupmaps its material stakeholders based on their level of influence, tailors the engagement strategy anddelivers it through formal and informal platforms. The frameworks which govern the communication
with stakeholders is set out alongside.
Communication Policy

Grievance Mechanisms

y Ensures the effective and consistentcommunication of internal and external
communication of corporate informationy Customer complaints handling: Outlines
the complaints handling policy of the Bankand governs the procedure through which
complaints are tracked, monitored andresolved

Disclosure Policyy Supports the dissemination of timely,
accurate and balanced regulatory
disclosures based on applicable laws andregulations.
Corporate Governancey Employee grievance handling: Transparent
mechanism encouraging employees tobring forward any grievances

Treatment of minority shareholders
The rights of the Group’s minority shareholders
are preserved through the following
mechanisms:yAll shareholders have equal voting andtransfer rightsyEfficient voting mechanisms to protect
minority shareholdersyProcess for engaging with minority
shareholders- All shareholders have directaccess to the Company SecretaryyAll avenues available to minority
shareholders in line with the laws andregulations and facilitatedNational Development Bank PLC

Annual Report 2023

125

Disclosure and transparency
The Group has embraced international best practices in both financial and non-financial reporting. Our key publication to stakeholders is the Group’s
Integrated Annual Report, which adheres to several voluntary reporting frameworks such as the Global Reporting Initiative and the SASB guidelines(refer to page 388 to 396 for full list). The financial and non-financial information included in the Report as well as the Integrated Reporting process, hasbeen externally assured. The content included in the Annual Report is determined through a comprehensive materiality assessment and all relevant
developments pertaining to these material topics are disclosed in a full and transparent manner.

ESG INTEGRATION
Shifting risk landscapes and evolving stakeholder needs have compelled organisations to view ESG considerations strategically, integrating social andenvironmental considerations into the business. The Group’s sustainability strategy is set out on pages 102 to 103 of this Report, along with the progress
made in each of the Group’s priority areas.
Key measures taken to support implementation of the Group’s ESG strategy during the year are listed below:
Reporting

Implementation of ESMS Frameworky Approval of the Group’s Integrated
Annual Report in 2023

y Policy framework updated and approved
at Board Level to drive Sustainable Financey Verification of the Group’s carbon
footprint through engagement with
Climate Fund Sri Lankay Revision of credit formats in capturing
criteria for sustainable finance

Capacity buildingy Capacity building through training
propositions

y Evaluation of Environmental and Social
risks through ESMS Framework

REMUNERATION REVIEWOUR APPROACH TO REMUNERATIONROLE OF THE HRRC

The Group’s approach to Remuneration aims
to attract, motivate, and retain employees ofhigh-calibre, with the right mix of experience,skills and knowledge to deliver strategy anddrive business performance. Our framework
also reinforces a culture of ethical behaviour,
by linking rewards to individual and collective
value creation objectives. The Bank’s
Compensation Policy is structured basedon job evaluation using the compensablefactors such as knowhow/job complexity,
communication and coordination/customer
interaction, supervision exercised and risk
impact/ consequences. Key principles of ourRemuneration Framework are,

The Bank’s Human Resources and Remuneration Committee plays a pivotal role in determining the
Human Resource and Remuneration policies (salaries, allowances and other financial payments)
relating to Directors, Chief Executive Officer and Key Management Personnel of the Bank. The
committee comprises exclusively of non-executive directors, a majority of whom are independent
directors , and processes are in place to ensure that no Director is involved in determining his or her
own remuneration.

yRecognising sustainable financial
performance and business resultsyAs an equal opportunity employer, we
do not discriminate between ethnicity,
gender or other form of diversity when
determining remunerationyBalance between fixed and variable
componentsyPerformance appraisals enable theidentification of talent at all levels thereby
resulting in fair remuneration

126

National Development Bank PLC

The Committee’s responsibilities include,y

Determining the remuneration policy relating to the directors, CEO and KMPs of the Banky

Evaluating the performance of the CEO and KMPs against the set goals and targets periodicallyand determining the basis for revising remuneration, benefits and other payments ofperformance-based incentives.

yDiscussing and assessing with the Management the overall remuneration expenditure on
all staff and their distribution among different categories and obtaining information on the
remuneration and benefits paid/given to consultants engaged by the Bank.
(Please refer to pages 142 to 143 for HRRC Report)

Annual Report 2023

Corporate GovernancePROCESS TO DETERMINE COMPENSATION
The process to determine compensation of the Non-Executive and Executive Directors are given below:
Non-Executive Directors

Executive Directors

Director remunerations review initiatedby HRRC

Review of Executive Director initiatedannually by HRRC

Competitor/market information iscollated to review director remuneration
and benchmark to peers

The HRRC reviews director remuneration
and benchmarks to peers

HRRC reviews information gathered
and makes recommendations to Board
regarding non-executive directors as awhole, keeping in line with principles of
non-discriminatory pay practices

Evaluate performance of Executive
Director against set goals andcontribution

Board makes determination on NonExecutive Director compensation as a whole

Board makes determination on Executive
Director compensation

Factors considered by the committee include:

Factors considered by the committee include:

y the need to ensure that compensation
is sufficiently attractive to attract andretain directors with the requisite skills,
experience and attributesy Performance against set goals for the year
y Ethics, integrity and adherence tocorporate values

y oversight responsibilities with regard to
subcommittees

SUMMARY OF COMPENSATION SCHEMES
Total employee remuneration includes salaries and bonus, terminal benefit charges, share-based
payments, and other related expenses. Despite the conditions that prevailed during the year, theGroup maintained full remuneration for all employees, even paying bonus rewards earlier. Further
details on each of these elements is available on page 195, Note 14 to the Financial Statements.
A summary of the Group’s remuneration/personnel expenses during the year are given below;
2023
Bank
LKR’ 000Group
LKR’ 000

94,509106,904

Salary and bonus

5,219,419

5,823,543

Contribution to EPF and ETF

585,454

640,650

Contribution to defined benefit plan

164,562

189,850

Others663,920

725,149

Directors’ emoluments
Personnel expenses

Corporate Governance

National Development Bank PLC

Annual Report 2023

127

Compliance Disclosures
Further to the Annual Report of Board of Directors presented on pages 14 to 15, and as required by Section 168 of the Companies Act No. 7 of 2007, thefollowing information is disclosed in this Annual Report prepared for the year ended 31 December 2023.
Information required to be mandatorily
disclosed as per Section 168 of theCompanies Act No. 07 of 2007

Reference to theCompanies Act

The nature of the business of the Bankand the Group together with any
change thereof during the accounting
period.

Section 168 (1) (a)2

Signed Financial Statements of the
Bank and the Group for the accounting
period completed.

Section 168 (1) (b

The Financial Statements of the Bank and the Group for the year
ended 31 December 2023.

166 - 174

3

Auditor’s Report on Financial
Statements of the Bank and the Group.

Section 168 (1) (c)Independent Auditor’s Report.

166 - 1684

Accounting Policies and any changes
therein (Group also included).

Section 168 (1) (d)Notes to the Financial Statements: Significant Accounting Policies
adopted in the preparation of the Financial Statements of the Bankand the Group.

176 - 290

5

Particulars of the entries made in theInterest Registers of the Bank and its
Subsidiaries during the accounting
period.

Section 168 (1) (e)All Directors have made declarations as required by Section 192 (1)and (2) of the Companies Act aforesaid and all related entries weremade in the Interest Register during the year under review.

1

Disclosure reference for compliance closure reference

Pages

Note 01 to the Financial Statements –Corporate Information.

176

Nature of businesses of the Company and its subsidiaries / theclasses of business in which the Bank has an interest.

40 - 53

Confirmation that the state of affairs of the Bank will not be harmful
to the business of the Bank.

Directors’ Dealing in shares and Debentures.

371 - 375

The Interest Register is available for inspection by shareholders or
their authorised representatives as required by Section 119 (1) (d) of
the Companies Act No. 07 of 2007.
6

Remuneration and other benefits
paid to Directors of the Bank and its
Subsidiaries during the accounting
period.

Section 168 (1) (f)Note 52 to the Financial Statements : Related Party Disclosures.

252

Note 14 to the Financial Statements –Other Expenses.

195

Corporate Governance report - Director’s and Executive
remuneration.

320

Note 14 to the Financial Statements –Other Expenses.

195

List of Board of Directors of the Bank.

22 - 29, 123

New Appointments and Resignations.

123

List of Directors of Subsidiaries of the Bank.

404
195

7

Section 168 (1) (g)Total amount of donations made by
the Bank and its Subsidiaries during theaccounting period..

8

Names of persons holding office as
directors as at the end of accounting
period and names of persons whoceased to hold office.

Section 168 (1) (h)9Separate disclosure on amounts
payable to the Auditors as Audit Fees
and Fees for other services renderedduring the accounting period by the
Bank and its Subsidiaries.

Section 168 (1) (i)Note 14 to the Financial Statements – Other Expenses.

10

Auditor’s relationship or any interest
with the Bank and its Subsidiaries.

Section 168 (1) (j)148
The Financial Statements of the Bank for the year ended 31
December 2023 have been audited by Messrs Ernst & Young,
Chartered Accountants. They also function as the auditors of theBank’s subsidiary companies namely, NDB Capital Holdings Limited,
NDB Wealth Management Limited, NDB Securities (Private) Limited,
NDB Investment Bank Limited, Development Holdings (Private)
Limited, and NDB Zephyr Partners Lanka (Private) Limited.

128

National Development Bank PLC

Annual Report 2023

Information required to be mandatorily
disclosed as per Section 168 of theCompanies Act No. 07 of 200710

Reference to theCompanies Act

Auditor’s relationship or any interest
with the Bank and its Subsidiaries.
(Contd.)Disclosure reference for compliance closure reference

Pages

Based on the declaration provided by Messrs Ernst & Young,
Chartered Accountants, and as far as the Directors are aware,
the Auditors do not have any relationship with or interest in the
Bank that in our judgement may reasonably be thought to havea bearing on their independence within the meaning of theCode of Professional Conduct and Ethics issued by the Institute ofChartered Accountants of Sri Lanka, applicable on the date of thisreport.

403

The Auditors have indicated their willingness to offer themselves
for reappointment. The Audit Committee and the Board of
Directors have recommended the reappointment of the Auditors.
A resolution appointing Messrs Ernst & Young as Auditors andauthorising the Directors to fix their remuneration will be proposedat the Annual General Meeting.
11

Acknowledgement of the Contents ofthis Report / Signatures on behalf of
the Board.

Section 168 (1) (k)Complied as stipulated on page 15 of the Annual Report.

15

Other Disclosures as required by the Central Bank of Sri Lanka Directions, Listing Rules of the Colombo Stock Exchange, Code of Best Practice on
Corporate Governance 2023 (ICASL Code) issued by the Institute of Chartered Accountants of Sri Lanka, Other Laws and Regulations and Good
Governance Disclosures as followed by the Bank.
Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

Central Bank of Sri Lanka Directions (CBSL Direction)

12

Disclosures required to bemade by the Board in termsof the Corporate GovernanceDirections

CBSL Direction
No 11 of 2007 (asamended)The Board has ensured that the required disclosures have been made.

298 - 313

The classification of Directors as Executive, Non-Executive, Independent
and Non-Independent as at 31 December 2023 is provided.

111, 123

13

Annual Corporate Governance
Reports

3 (1) (xvi)

An annual Corporate Governance report setting out the compliance with 110 - 127,
Direction 3 of these Directions.
128 - 136

14

Audited Financial Statements

3 (8) (ii) (a)A statement to the effect that the annual audited financial statements
have been prepared in line with applicable accounting standards andregulatory requirements, inclusive of specific disclosures.

15

Internal Control Mechanisms

3 (8) (ii) (b)157, 158
A report by the Board on the Bank’s internal control mechanism that
confirms that the financial reporting system has been designed to provide
reasonable assurance regarding the reliability of financial reporting
and that the preparation of financial statements for external purposes
has been done in accordance with relevant accounting principles andregulatory requirements.

16

Factual Findings Report

3 (8) (ii) (g)110
A confirmation that all the findings of the ‘Factual Findings Reports’ of
Auditors issued under ‘Sri Lanka Related Services Practice Statement 4750’
have been incorporated in the Annual Corporate Governance Report.

17

Compliance with Laws

3 (8) (ii) (h)A report setting out the details of compliance with prudential
requirements, regulations, laws and internal controls that affected the
Bank.

313

18

Regulatory Supervisory Process

3 (8) (ii) (i)A statement of the regulatory and supervisory concerns on lapses in the
Bank’s risk management, or non-compliance with these Directions thathave been pointed out by the Director of Bank Supervision of the CBSL.

313

Compliance Disclosures

National Development Bank PLC

156, 159,
177

Annual Report 2023

129

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

Listing Rules (LR) of the Colombo Stock Exchange

19Statement of Compliance9.1

Bank has published a statement confirming the extent of compliance with
the CSE Corporate Governance Rules, in the Annual Report of the Entity.

14, 110,330-336

20

Waivers from compliance with
the Internal Code of businessconduct and ethics

9.2.2
w.e.f 1st October
2024

Disclosure requirement not applicable.

N/A

21

List of Policies required by the
Listing Rules and details

9.2.3
w.e.f 1st October
2024

Disclosure requirement not applicable and pending compliance.

N/A

22

Shareholder communications
and relations policy

9.4.2
w.e.f 1st October
2024

Disclosure requirement not applicable and pending compliance.

N/A

23

Policy governing matters relating
to the Board of Directors

9.5.2
w.e.f 1st October
2024

Disclosure requirement not applicable and pending compliance.

N/A

24

Director fitness and propriety

9.7.5

Following statements on director fitness and propriety have been includedin the Annual Report.
a) A statement that the Directors and CEO of the Listed Entity satisfy the110
Fit and Proper Assessment Criteria stipulated in the Listing Rules of theColombo Stock Exchangeb) Any non-compliance/s by a Director and/or the CEO of the Listed
N/A
Entity with the Fit and Proper Assessment Criteria set out in these Rules
during the financial year and the remedial action taken by the Listed
Entity to rectify such noncompliance/s.

25

Number of independent
directors

9.8.5

The Non-Executive Independent Directors are detailed in this report.

26

Director disclosures

9.10.4

Bank has made the requisite disclosures regarding Directors in the Annual
Reporta) name, qualifications and brief profile;24 - 28b) the nature of his/her expertise in relevant functional areas;

111c) whether either the Director or Close Family Members has any material
business relationships with other Directors of the Listed Entity;

117d) whether Executive, Non-Executive and/or independent Director;

111e) the total number and names of companies in Sri Lanka in which the
Director concerned serves as a Director and/or Key Management
Personnel;

24 - 28

f)

123

130

number of Board meetings of the Listed Entity attended during theyear;g) names of Board Committees in which the Director serves as
Chairperson or a member;123h) Details of attendance of Committee Meetings of the Audit, Related
Party Transactions Review, Nominations and Governance andRemuneration Committees. Such details shall include the number of
meetings held and the number attended by each member.; and,

124

i)

27

111, 123

The terms of reference and powers of the SID (where applicable).

N/A

Chairperson and members of Nominations and Governance Committee
are identified in the Annual Report139

Chairperson and members ofNominations and GovernanceCommittee

9.11.4w.e.f. 1st October
2024

National Development Bank PLC

Annual Report 2023

Compliance Disclosures

28

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

Nominations and GovernanceCommittee report

9.11.6Chairperson and members of Nominations and Governance Committee
are identified in the Annual Report
The following disclosures have been made in the Nominations andGovernance Committee report.
(a) the names of the Chairperson and members of the Committee andthe nature of directorships held by such members)(b) the date of appointment to the Committee;(c) whether a documented policy and processes are in place whennominating Directors;(d) whether all directors should be required to submit themselves for reelection at regular intervals and at least once in every three (3) years;e) a disclosure on Board diversity in the range of experience, skills, age,and gender as an essential factor for effective Board performance(f) Details to demonstrate effective implementation of policies andprocesses relating to appointment and reappointment of Directors.
(g) The following information regarding directors who are re-elected orbeing proposed for re-election during the year:
y Board Committees served on (as a member or Chairperson),y Date of first appointment and last re-appointment
y Directorships and other principal commitments both present andover past 3 years in other Listed Entities; and,y Other relationships with directors material shareholders etc.
(h) Whether periodic evaluations have been conducted on theperformance of the Board of Directors and the CEO of the Bank as
specified in Rule 9.11.5

139 - 141(i) Processes adopted by the Listed Bank to inform the Independent
Directors of major issues relating to the Bank;(j) Induction programs/orientation programs conducted for newly
appointed Directors on corporate governance, Listing Rules, securities
market regulations and other applicable laws and regulations, or an
appropriate negative statement;(k) Annual update given to existing Directors on Corporate Governance,
Listing Rules, securities market regulation and other applicable laws
and regulations, or an appropriate negative statement.
(l) A statement that the Directors of the Bank meet the criteria for
determining independence.
(m) A statement that the Corporate Governance requirements stipulated
under the Listing Rules of the CSE have been met and where theBank’s fail to comply with any provisions of such Rules, a statement
explaining the reason for such noncompliance and the proposed
remedial action taken for the rectification of such noncompliance.
29

Remuneration Committee
disclosures/report

9.12.8The following have been disclosed in this Annual Report, as required.
(a) Names of the Chairperson and members of the Remuneration
Committee and the nature of directorships held by such members(b) A statement regarding the remuneration policy

142 - 143(c) The aggregate remuneration of the Executive and Non-Executive
Directors

Compliance Disclosures

National Development Bank PLC

Annual Report 2023

131

30

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Audit Committee Report

9.13.5w.e.f. 1st October
2024

The following have been disclosed in this Annual Report, as required.

Pages(a) the names of the Chairperson and the members of the Audit Committee,
and the nature of directorships held by such members (or persons in theparent company’s committee in the case of a group company)(b) The status of risk management and internal control of the Bank and as
a Group (where applicable)(c) A statement that it has received assurance from the CEO and the CFOof the Bank’s operations and finances(d) An opinion on the compliance with financial reporting requirements,
information requirements under these Rules, the Companies Act and 147 - 148
the SEC Act and other relevant financial reporting related regulations
See IRMC
and requirements.
Report on(e) whether the Bank has a formal Audit Charter;
pages(f) the manner in which internal audit assurance is achieved and a
144 - 146
for item (b)summary of the work of the internal audit function(g) Details demonstrating the effective discharge of its functions andduties for that financial year of the Bank(h) a statement confirming that written assurance was obtained from theexternal auditors approved by the SEC, confirming that they are and havebeen independent throughout the conduct of the audit engagement(i) a statement confirming that the Audit Committee has made adetermination of the independence of auditors and the basis of suchdetermination and such other details specified in 9.13.5
31

Related Party Transactions

9.14.8Disclosures in the Annual Report- to be made on recurrent and nonrecurrent related party transactions.

32

Related Party Transactions
Committee Report

9.14.8The Annual Report shall contain a report by the Related Party Transactions
Review Committee, setting out the following:

N/A

1. The names of the Directors comprising the Committee;
2. A statement to the effect that the Committee has reviewed theRelated Party Transactions during the financial year and has
communicated its comments/observations to the Board of Directors.
149 - 150
3. The policies and procedures adopted by the Committee for reviewing
the Related Party Transactions.
An affirmative declaration by the Board of Directors in the Annual Reportthat these Rules pertaining to Related Party Transactions have been
complied with or if the Entity has not entered into any Related Party
Transaction/s a negative statement to that effect.
33

Additional Disclosures

9.16

Additional Disclosures to be included in the Annual Report, by the Boardof Directors to the effect that:(i) they have declared all material interests in contracts involving in the
Bank and whether they have refrained from voting on matters inwhich they were materially interested;(ii) they have conducted a review of the internal controls covering
financial, operational and compliance controls and risk management
and have obtained reasonable assurance of their effectiveness andsuccessful adherence therewith;(iii) they made arrangements to make themselves aware of applicablelaws, rules and regulations and are aware of changes particularly to
Listing Rules and applicable capital market provisions;(iv) disclosure of relevant areas of any material non-compliance withlaw or regulation and any fines, which are material, imposed by any
government or regulatory authority in any jurisdiction where theEntity has operations.

132

National Development Bank PLC

Annual Report 2023

Compliance Disclosures

137 - 138

157 - 158

15352

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

Code of Best Practice on Corporate Governance 2023 (the “Code”)

34

Statement of Compliance with
the Code of best Practice on
Corporate Governance 201735

Senior Independent Director/
Chairman and CEO

36

All required disclosures have been made and status of compliance has
been detailed.

14, 110,314 - 329

A.2.1 and A.5.7

The Bank is not required to appoint a Senior Independent Director, hence
this requirement is not applicable.

N/A

Board Balance

A.5.5

Non-Executive Independent directors are identified and disclosed.

111, 123

The Bank has not declared any Directors as “nevertheless independent”.

N/A

37

Appraisal of Board Performance

A.9.4

The Bank has disclosed how performance evaluations have been
conducted.

116

38

Board related disclosures

A. 10.1

The Bank has disclosed the required Director details in this Annual Report. See item 26

39

Disclosure of Remuneration

B.3 and B.3.1

A statement of remuneration policy;
Details of remuneration of the board as a whole;Names of directors comprising the remuneration committee, scope andnumber of meetings held.

142 - 143

40

Major and Material Transactions

C.3, C.3.1 and
C.3.3

Bank has no major transactions to disclose in 2023.

Nil

41

Code of Business Conduct andEthics

D.6.1,D.6.4 andD.6.7

Noting the new requirements and timelines stipulated by the Colombo
Stock Exchange, the Bank is in the process of establishing a Code ofBusiness Conduct and Ethics

N/A

Communication withshareholders

C.2.2C.2.7

Noting the new requirements and timelines stipulated by the Colombo
Stock Exchange, the Bank is in the process of establishing a Policy on
Communication with Shareholders.

N/A

Contact person for shareholder communication.

404

The process to make all directors aware of major issues and concerns ofshareholders.

140, 118

42

43

Cyber Security

G. 5

Process to identify and manage cyber security risks

124

44

Sustainability: ESG Disclosures

H.5, H.5.2 H.5.3

Information on the Bank’s commitment to sustainability and integrating
ESG consciousness.

97 - 103

45

Financial Statements

D. 1.5

Statement of responsibility by the Board of Directors for the preparationand presentation of financial statements.

156

Auditor’s statement on reporting responsibility

166

D.1.5
D.2.1.7
D.2.2.1
D.4.5

Statement on risk management and internal control.

157 - 158

Report of the Integrated Risk Management Committee.

144 - 146

46

Risk Management and Internal
Control

47

Related Party Transactions

D.1.8

The Board has disclosed the related parties and related party transactions
as specified by SEC/ Sri Lanka Accounting Standards/Sri Lanka AuditingStandards and similar regulations

252 - 256

48

Management Report

D.1.6

Management Discussion and Analysis Report

54 - 104

49

Related Party Transactions
Review Committee Report

D.5.3

Report of the Related Party Transactions Review Committee

149 - 150

50

Audit Committee Report

D.4.5
D.3.3 Schedule F

Report of the Audit Committee

147 - 148

51

Remuneration Committee Report B.3.1

Report of the Human Resources and Remuneration Committee

142 - 143

Compliance Disclosures

National Development Bank PLC

Annual Report 2023

133

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

14

Report of the Board of Directors

52

Report of the Board of Directors

D.1.4

Statement that the Annual Report and Financial Statements are fair,balanced and understandable to all stakeholders.

53

Compliance with Laws

D.1.4

14
Statement of compliance with all applicable laws and regulations in
conducting its business and has not engaged in any activity contravening
the relevant laws and regulations.

54

Material Interests in contracts

D.1.4

Declaration of all material interests by Directors in contracts involving the
Bank and refrained from voting on matters in which they were materiallyinterested.

117,
137 - 138

55

Best practices of corporate
governance

D.1.4

A confirmation that the Directors have complied with the best practicesof corporate governance.

110

56

Internal Controls

D.1.4

A confirmation that the Board has conducted a review of internal controls 157 - 158
covering financial, operational and compliance controls, risk management
and have obtained a reasonable assurance of their effectiveness andproper adherence.

57

Plant and Property

D.1.4

The Bank has reported Property, Plant and Equipment at fair value, andwhere it differs from fair value, adequate disclosures are made.

222

58

Equitable treatment toshareholders

D.1.4

Disclosure on how the Bank ensures equitable treatment of allshareholders.

125

59

Going Concern

D.1.4

The Board of Directors is satisfied that the Bank has adequate resources
to continue the business activities in the foreseeable future. Therefore,
the Bank has adopted a ‘going concern’ basis in preparing these Financial
Statements.

156, 179

Other Laws and Regulations

60

Duty of the Board of Directors to S 150 - 153 of the Board of Directors acknowledges its responsibility to prepare the Financial 156
Statements of the Bank and the Group, which reflect a true and fair viewprepare the Financial Statements Companies Act(CA) No. 7 of 2007 of the financial position and performance of the Bank and the Group.
of the Bank and the GroupIn this regard, the Board of Directors wishes to confirm that the Income
Statement, Statement of Comprehensive Income, Statement of Financial
Position, Statement of Changes in Equity, Statement of Cash Flows, andSignificant Accounting Policies and Notes thereto have been preparedand presented in conformity with the requirements of the Sri Lanka
Accounting Standards as mandated by the Sri Lanka Accounting and
Auditing Standards Act No. 15 of 1995 and the Companies Act No. 07 of2007 and amendments thereto.

61

Dividends on Ordinary Shares

S 56 of the CA No. Note 19 to the Financial Statements – Dividends and Events after the
7 of 2007
Reporting period
Financial Capital

59

62

Appointment of Auditor,
Auditor’s fees, duty to avoid
conflict of interest etc

S 154, 155, 162 &163 of the CA No.
7 of 2007

The Bank’s External Auditors, Messrs Ernst & Young, who were appointed
in accordance with a resolution passed at the 16th Annual General
Meeting held on 9th April 2021have expressed their opinion in thisAnnual Report. The details on the remuneration of External Auditors havebeen disclosed in this Annual Report. As far as the Directors are aware,
the Auditors do not have any other relationship with the Bank, or anyof its subsidiaries and its associate. The External Auditors do not have
any interest in contracts with the Bank, or any of its subsidiaries and its
associates.

166 - 168,195,
147 - 148

63

Insurance and Indemnity

S 218 of the CA
No. 7 of 2007

Pursuant to a decision of the Board, the Bank obtained an Insurance Policy 316
to cover Directors’ liability. The Bank has accordingly paid an insurance
premium in respect of the said insurance policy for the benefit of the
Bank and the Directors and certain employees of the Bank and related
body corporates as defined in the insurance policy.

National Development Bank PLC

Annual Report 2023

134

Compliance Disclosures

199

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

64

Own share purchases

CA s.64

The Bank has not purchased its own shares

N/A

65

Taxation

Laws related totaxation

Note 15 and 17 to the Financial Statements

195 - 196

66

Statutory payments

Laws andregulations
related toall statutory
payments

The Directors, to the best of their knowledge and belief, are satisfied thatall statutory payments in relation to the Government of Sri Lanka and theemployees have been made up to date.

156

The Bank and the Group practices high ethical standards in carrying out
their business activities in line with the vision of the Bank.

119

All employees of the Bank abide by the Bank’s Code of Conduct and the
Directors and the Key Management Personnel of the Bank additionallyabide by the Code of Corporate Governance of the Bank.

110

A review of the operations of the Bank and the Group are discussed
in the Chairman’s Message, Chief Executive Officer’s Review and theManagement Discussion and Analysis.

16, 18,56 - 106

Good Governance Disclosures as followed by the Bank (GGD)

67

Vision, Mission and Corporate
Conduct

GGD

68

Review on Operations of theGroup and the Bank and future
developments

GGD

Note 51 to the Financial Statements: Segmental Analysis - Group

250

69

Changes to the Group structure

GGD

There were no changes to the group structure during the year.

176

70

Gross Income

GGD

Note 04 to the Financial Statements – Gross Income.

184

71

Performance of the Bank and the GGDGroupStatement of Profit and Loss.

169

72

Reserves & appropriations

Statement of Changes in Equity.

172 - 173

Note 44 and 46 of the Financial Statements –Statutory Reserves, Retained
Earnings and Other Reserves.

241, 242

GGD

73

Investment Property

GGD

Note 31 to the Financial Statements - Investment Property.

221

74

Capital commitments

GGD

The Bank has a Capital commitment totalling approximately LKR 50 Mn
over the next 12 months.

246

Note 48.2 to the Financial Statements

219

75

Issue of Shares and Debenturesby the Subsidiaries andAssociates during the year

GGD

Note 29 and 30 to the Financial Statements.

220

76

Disclosure of Director’s Dealing
in shares and Debentures

GGD

Section 6.0 and Section 14.0 of the Section on “Investor Relations”

371 and375

77

Environmental Protection

GGD

The Bank and the Group have not engaged in any activity thatis detrimental to the environment, and have complied with theenvironmental laws and regulations at all times. Specific activities carriedout during the year to protect the environment are detailed in theManagement Discussion and Analysis.

102 - 103,
97 - 101

78

Events Occurring after the Dateof the Statement of Financial
Position

GGD

There have been no events that require adjustment to the Financial
Statements or disclosure in the Financial Statements that has occurred
subsequent to the date of the Statement of the Financial Position of the Bank.

256

Note 53 to the Financial Statements.
79

Human Resources

Compliance Disclosures

GGD

The Human Resources activities carried out during the year to focus
on the strategic objectives are detailed in the Human Resources andRemuneration Committee report and Management Discussion andAnalysis.

National Development Bank PLC

80 - 87

Annual Report 2023

135

Other Disclosures

Reference to therelevant statute/rule

Disclosure reference for compliance

Pages

80

Operational Excellence

GGD

Operational Excellence is also a key Strategic Objective of the Bank andfocusses on increasing efficiency and managing operational costs. The
Bank has on going initiatives to drive policy and process standardisationand to optimise the use of existing technology platforms.

75 - 77

81

Outstanding Litigations

GGD

In the opinion of the Directors and the Bank’s lawyers, pending litigations
against the Bank disclosed in the Financial Statements will not havea material impact on the financial position of the Bank or its future
operations.

246

82

Corporate Social Responsibility
(CSR)

GGD

CSR Initiatives 2023.

90 - 96

83

Sustainability

GGD

All Business strategies are formulated considering the sustainability
aspects of the Bank including Sustainability practices and reporting.

13, 47 - 50,
102 - 103

84

Technology

GGD

All processes of the Bank are improved focusing superior customer
services through imbedding state-of-the-art technology to all its
processes and products.

75 - 77

National Development Bank PLC

Annual Report 2023

Note 48.3 to the Financial Statements.

136

Compliance Disclosures

Directors’ Interests in Contracts with the National Development Bank PLC
The Bank in its ordinary course of business, conducts transactions on an arm’s length basis with entities, where the Chairman or any Director of the
Bank maintain a relationship with such entities as listed below.
Relationship

Company

Accommodation Granted,
Deposits & Investments

Balance
Outstanding
as at 31 December 2023
LKR ‘000

Balance
Outstanding
as at 31 December 2022
LKR ‘000

Mr. Sriyan Cooray

Director

Orient Finance PLC

Deposits & Investments

208

5,091

Loans & Receivables

325,383

416,700

Deposits & Investments

Mr. Dimantha Seneviratne

ChairmanDevelopment Holdings (Pvt) Limited

341,321343,330

Loans & Receivables

01

Off -Balance Sheet
Accommodations

702-

Director

The American Chamber of Commerce in
Sri Lanka

Deposits & Investments

27,00022,773

Director

NDB Capital Holdings Limited

Deposits & Investments

35,137218,282

Off -Balance Sheet
Accommodations

12,11245,951

Director

NDB Wealth Management Limited

Deposits & Investments

8,382

8,943

Director

NDB Investment Bank Limited

Deposits & Investments

15,438

10,186

1

11

Director

NDB Securities (Pvt) Limited

Deposits & Investments

4,144

8,381

Loans & Receivables

6,438

4,542

Off -Balance Sheet
Accommodations

100,000

100,000

Loans & Receivables

DirectorNDB Zephyr Partners Lanka (Pvt) Limited

Deposits & Investments

5,064

9,296

DirectorNDB Zephyr Partners Limited, Mauritius

Deposits & Investments

2,043

2,268

Director

Codevus (Pvt) Limited

Deposits & Investments

654

644

Director

NDB Capital Holdings Limited

Deposits & Investments

35,137218,282

Off -Balance Sheet
Accommodations

12,11245,951

Deposits & Investments

4,144

8,381

Loans & Receivables

6,438

4,542

Off -Balance Sheet
Accommodations

100,000

100,000

Mr. Bernard Sinniah

Director

NDB Securities (Pvt) Limited

Director

NDB Wealth Management Limited

Deposits & Investments

8,382

8,943

Director

NDB Investment Bank Limited

Deposits & Investments

15,438

10,186

1

11

5,064

9,296

Loans & Receivables
DirectorNDB Zephyr Partners Lanka (Pvt) Limited

Deposits & Investments

National Development Bank PLC

Annual Report 2023

137

Relationship

Company

Accommodation Granted,
Deposits & Investments

Balance
Outstanding
as at 31 December 2023
LKR ‘000

Balance
Outstanding
as at 31 December 2022
LKR ‘000

Mr. Sujeewa Mudalige

PwC (Pvt) Limited(retired w.e.f. 27 October 2023)

Deposits & Investments

N/A

1,800

Managing Partner PwC Partnership(retired w.e.f. 27 October 2023)

Deposits & Investments

N/A

120

Director

Chairman of theCommittee

Mercantile Services Provident Society(MSPS)

Deposits & Investments

1,090,304

1,090,304

Director

CIC Holdings PLC

Deposits & Investments

113,238

116,144

Director

Sherwood Capital (Pvt) Limited

Deposits & Investments

24-

Director

Mahindra Ideal Finance Limited

Deposits & Investments

586

350

Loans & Receivables-

90,000

Director

Link Natural Products Limited

Deposits & Investments

28

28Committee
Member

The Ceylon Chamber of Commerce

Deposits & Investments

2,330,611

2,322,208

Deposits & Investments-

18,750

Mr. Kushan D’Alwis, PC

Director

Ceylon Tobacco Company PLC

Ms. Kasturi Chellaraja

Director

Atlas Axillia Co. (Pvt) Limited

Deposits & Investments

32,88910,717

Director

Far Shipping Agency Lanka (Pvt) Limited(Resigned w.e.f. 12 December 2023)

Deposits & Investments

N/A

211,595

Loans & Receivables

N/A

102,436

Director

Forbes Air Services (Pvt) Limited

Deposits & Investments

637,005

452,097

DirectorHemas Capital Hospital (Pvt) Limited

Deposits & Investments

1,202,958

794,896

Group CEO

Hemas Holdings PLC

Deposits & Investments

2,801

2,712

DirectorHemas Hospitals (Pvt) Limited

Deposits & Investments

888,318

467,046

DirectorHemas Manufacturing (Pvt) Limited

Deposits & Investments

1,797,712

1,884,197

DirectorHemas Pharmaceuticals (Pvt) Limited

Deposits & Investments

24,233

97,193

DirectorHemas Transportation (Pvt) Limited

Deposits & Investments

7,147

292,673

TrusteeHemas Wellness Trust

Deposits & Investments

45,371

47,168

DirectorMorison Limited

Deposits & Investments

984

209

Board Member/ Committee
Member

The Ceylon Chamber of Commerce

Deposits & Investments

2,330,611

2,322,208

Deposits & Investments

4,665,528

N/A

Off -Balance Sheet
Accommodations

5,890,356

N/A

32,068N/A

Mr. Hasitha Premaratne

Director

Director

Ocean Lanka (Pvt) Limited

Teejay Lanka PLC

Deposits & Investments

For Related Party Disclosures as per the Sri Lanka Accounting Standard – LKAS 24: Related Party Disclosures, please refer Note 52 to the Financial
Statements on page 252 of this Annual Report.

138

National Development Bank PLC

Annual Report 2023

Directors’ Interests in Contracts with the National Development Bank PLC

Nominations and Governance Committee Report
CHARTER OF THE NOMINATIONS AND
GOVERNANCE COMMITTEE

Mr. Sriyan Cooray
Chairman
Nominations and Governance Committee

COMPOSITION OF THE
NOMINATIONS AND GOVERNANCE
COMMITTEEThe Board appointed Nominations andGovernance Committee (formally known
as the Nominations Committee) comprised
four Non-Executive Directors including the
Chairman who is an Independent Director
as set out below.
As at 31 December 2023 the Committee
comprised the following:
Board Members
Mr. Sriyan Cooray(Chairman)
Independent Director

20 Aug2021

2

Mr. Bernard Sinniah
Non-Independent Director

19 Feb2020

3

Mr. Sujeewa Mudalige
Independent Director

21 Jun2022

4

Mr. Kushan D’Alwis, PC
Independent Director

21 Jun2022

1

Date of Appointment to the Committee

Secretary to the Committee
Ms. Shehani Ranasinghe
Vice President - Company Secretary

The Nominations and Governance Committee
was initially formed in compliance with theSection 3 (6) of Direction No. 11 of 2007,“Corporate Governance for Licensed Commercial
Banks in Sri Lanka”, issued by the Monetary Boardof the Central Bank of Sri Lanka under the powers
vested in the Monetary Board, in terms of the
Banking Act No 30 of 1988. The Charter of theCommittee was revised and expanded to be
in compliance with recent amendments to the
Listing Rules of the Colombo Stock Exchange(CSE) introduced via CSE Circular No 04/2023
dated 11 September 2023.
The composition and the scope of work of theCommittee are in conformity with the provisionsof the said Direction and the Listing Rules. The
Charter of the Nominations and GovernanceCommittee was approved by the Board of
Directors and is reviewed annually. As part of theannual review process, the Committee reviewed
the Charter in 2023. The Committee carries out
the following duties and responsibilities.
y Establishes, maintains and implements formal
and transparent procedures to evaluate, selectand appoint/re-appoint Chief Executive Officer(CEO), Key Management Personnel (KMPs)
and new Directors to the Board and the Board
Committeesy Considers and recommends the re-electionof current Directors, taking into account theperformance and contribution made by the
Director/s concerned towards the overall
discharge of the Board’s responsibilities andstrategic demands of the Bank, combined
knowledge, experience, the number of
directorships held by the Director in otherlisted and unlisted companies and otherprincipal commitments
y Sets out and maintains the criteria such as
academic and professional qualifications, skills,
experience and key attributes required for
eligibility to be considered for appointment as
Director to a Bank or promotion to the post of
CEO and KMPs
y Ensures that Directors, CEO and KMPs are fit
and proper persons to hold office as specified
in the criteria given in applicable lawsy Sets the criteria such as qualifications,experience and key attributes required for
eligibility to be considered for appointment toselect/appoint fit and proper persons as theNominee Directors to the Boards of the Bank’s
group companiesy Considers and recommends from time to time,
the requirements of additional/ new expertiseand the succession arrangements for retiring
Directors and KMPs
y Establishes and maintains a suitable process
for the periodic evaluation of the performanceof the Board and the CEO of the Bank to ensurethat their responsibilities are satisfactorily
dischargedy Reviews the structure, size and compositionof the Board and Board Committees withregard to effective discharge of duties andresponsibilitiesy Reviews and recommends the overall
Corporate Governance Framework of the Bank
taking into account the Listing Rules of theColombo Stock Exchange, other applicableregulatory requirements and industry/
international best practices, as applicabley Periodically reviews and updates the corporate
governance policies/framework of the
Bank in line with the regulatory and legal
developments relating to same, as a bestpractice

COMMITTEE MEETINGSThe Committee held twelve (12) meetings
during the year under review. The attendanceof committee members at meetings is stated in
the table on refer page 124. The quorum for ameeting is three members.
The proceedings of the Committee meetings
have been regularly reported to the Board of
Directors.
The Chief Executive Officer (CEO) and other
Directors have been present at meetings only if
invited by the Committee.

METHODOLOGY USED BY THE
COMMITTEEThe Committee meets as and when necessary
in order to assess the suitability of individuals
for appointment as Directors and KMPs in themanner aforementioned as well as to conduct
such other affairs which the Charter of theCommittee mandates the Committee to carryout.

DISCLOSURES BY THE COMMITTEEy A policy and process is in place for thenomination of Directors. This policy andprocess was followed in the appointment
Ms Shweta Pandey and Mr Hasitha Premaratne
to the Board in 2023

National Development Bank PLC

Annual Report 2023

139

y In accordance with the Articles of Associationof the Bank, except for Directors appointed interms of Articles 35 (ii), 37 and 44, 1/3rd of the
Directors for the time being, or if their number
is not a multiple of three, the number nearest
to, but not greater than 1/3rd shall retire fromoffice at each annual general meeting. The
Directors who retire at each annual general
meeting shall be the longest in office as statedin Article 42. As such, eligible Directors submit
themselves for re-election at least once inevery 3 years

y Board diversity is an integral consideration toensure Board performance is at the highest
level. Please refer page 112 for informationon the Directors range of experience, skills,
age and gender. Board diversity was aconsideration when appointing new directors
in 2023.
y Directors to be re-elected or re-appointed at
the annual general meeting to be held in 2024

Mr. Sriyan
CoorayBoard Committees served on(member/chairperson)y Integrated Risk
Management Committee

Mr. Sujeewa
Mudaligey Integrated Risk
Management Committeey Audit Committeey Audit Committeey Strategic Issues
Committee

y Strategic Issues
Committeey Human Resources& Remuneration
Committee

y Nominations &Governance Committeey Nominations &Governance Committeey Human Resources& Remuneration
Committee

y Related Party
Transactions Review
Committee
10 August 201806 January 2020

Date of last re-appointment

09 April 2021

30 March 2022

Directorships or
Chairpersonships and otherprincipal commitments bothpresent and those held overthe preceding three years inother Listed Entities

Orient Finance PLC

CIC Holdings PLC

Any relationships including
close family relationships
between the candidate andthe Directors, the Listed Entity
or its shareholders holding
more than ten per-centum(10%) of the shares of the
Listed Entity

Nil

Nil

National Development Bank PLC

y The Chairman informs the Independent
Directors/Non-Executive Directors as andwhen major issues arisey A procedure is in place to induct andcarry out orientation for newly appointed
Directors primarily led by the Chairman inorder to ensure a sound understanding of
the corporate governance requirements, theapplicable laws and regulations and such othermatters deemed to be of importance at the
point of on-boarding and as needed thereaftery Directors are updated quarterly on new laws
and regulations and changes to existing laws
and regulations including those relating togovernancey The Committee annually assesses the
Independence of Directors against the Banking
Act Direction No. 11 of 2007 on Corporate
Governance for Licensed Commercial Banks in
Sri Lanka and the Listing Rules of the Colombo
Stock Exchange and is satisfied that the
Independent Directors of the Bank meet theapplicable criteriay The Committee believes that it has met thecorporate governance requirements stipulated
in the Listing Rules of the Colombo Stock
Exchange

KEY ACTIVITIES IN 2023

Date of first appointment

140

y Periodic evaluations have been conducted
in 2023 on the performance of the Board of
Directors and the Chief Executive Officer asagreed by the Board

During the year, the Committee carried out thefollowing activities in line with it’s policies andprocedures –y Assessed the fitness and propriety of thecontinuing Directors of the Bank and affidavits
and declarations submitted by Directors were
forwarded to the Regulator/s for approval as
required by applicable laws and regulations.
In this process, the Committee assessed
the diversity in experiences, qualifications,competencies etc. and the contribution andcommitment made towards the Bank vis a
vis the economic landscape and backdrop in
which the Bank functioned.
y Recommended to the Board the re-electionof Directors retiring by rotation and offering
themselves for re-election at the Annual
General Meeting in line with the Articles
of Association of the Bank and applicableregulations, having assessed the fitness andpropriety of the Directors

Annual Report 2023

Nominations and Governance Committee Reporty Considered the suitability of several candidates
and recommended the appointment of
new Directors to the Board of Directors of
the Bank considering succession needs,
gaps in expertise as identified in the Board
etc. which resulted in two appointments
being made to the Bank Board to fill casualvacancies including specific expertise such asa technology expert

y The Committee advised and assisted the Boardin carrying out extensive investigations andinquiries on matters relating to fitness andpropriety of KMPs of the Bank in connection
with certain disciplinary matters that arose
during 2023, arising from whistle blowing andother concerns raised by stakeholdersy The Committee further reviewed andrecommended the appointment andcontinuation of Directors to the Boards ofsubsidiary companies of the BankThe Committee is cognizant of its widening
scope and duties in line with prevailing Rules
and Regulations, noting that with the mostrecent revision to the CSE Listing Rules, going
forward, the Committee will be overseeing theGovernance pillar on behalf of the Board.

In these processes, the Committee assessed
the qualifications, experience, skills andcompetencies of the Directors vis à vis thegaps and needs of the Boards in line withthe current gaps, challenges faced and any
applicable regulatory requirements. The
Committee was conscious of the overallcomposition of the Boards and striking theideal balance in terms of expertise, experience,
age, gender etc. on the boardsy Reviewed policies and procedures on
selection and appointment of Directors andappointment process for the CEO and KMPs of
the Banky Recommended a Code of Conduct & Ethics for
Directors of the Bank’s subsidiary companies
with a view to ensuring the stringent
governance framework within which the Bank
operates permeates to its group

WAY FORWARD

APPRECIATIONThe Committee places on record its appreciationof its members for the contribution andcommitment throughout 2023.

Mr. Sriyan Cooray
Chairman
Nominations & Governance Committee
20 February 2024
Colomboy Reviewed the succession plan for the KMPsof the Bank with a view to proactively ensure
talent identification, retention and grooming
for smooth succession including identificationof areas where external recruitment andexpertise as may be required, in line with thestrategic vision and direction of the Banky Selected and recommended suitable
candidates to hold existing KMP positions
when vacancies were created after a thoroughevaluation of internal talent as well as external
expertise and talent available in the market.
This included identifying and recommendinga suitable candidate to take over the CEO
position of the Bank being the chief apex
management position, considering the current
challenges and the future trajectory of the
Bank in line with the vision and strategy set
forth
y The Board/HRRC having evaluated theneed for certain structural changes in theorganisation after careful consideration of thecurrent needs of the Bank, to equip the Bank
better to handle the challenging environment
and in line with the strategic vision anddirection of the Bank, the Committee
considered and recommended a suitable
candidate to fill an identified new KMP rolecreated in the organisation structure
Nominations and Governance Committee Report

National Development Bank PLC

Annual Report 2023

141

Human Resources and Remuneration Committee Report
CHARTER OF THE HUMAN RESOURCES &REMUNERATION COMMITTEE
The Human Resources & Remuneration
Committee was formed in compliance with
Section 3 (6) of Direction No. 11 of 2007, on thesubject “Corporate Governance for Licensed
Commercial Banks in Sri Lanka”, issued by the
Monetary Board of the Central Bank of Sri Lanka
under the powers vested in the Monetary
Board, in terms of the Banking Act No. 30 of1988. The Charter of the Committee was revisedand expanded to be in compliance with recent
amendments to the Listing Rules of the Colombo
Stock Exchange introduced via CSE Circular No
04/2023 dated 11 September 2023.

Mr. Sriyan Cooray
Chairman
Human Resources &Remuneration Committee

COMPOSITION OF THE HUMANRESOURCES & REMUNERATIONCOMMITTEEThe Board appointed Human Resources &Remuneration Committee comprised five
Non-Executive Directors inclusive of the
Chairman who is an Independent Director
and a majority of Independent Directors as
set out below.

The composition and the scope of work of theCommittee are in conformity with the provisionsof the said Direction and the Listing Rules. The
Charter of the Human Resources & Remuneration
Committee was approved by the Board of
Directors and is reviewed annually. As part of theannual review process, the Committee reviewed
the Charter in 2023. As per the Charter, the scopeof work includes the following;1.

As at 31 December 2023 the Committee
comprised the following:
Board Members

1

Mr. Sriyan Cooray(Chairman)
Independent Director

20 Aug2021

2

Mr. Bernard Sinniah
Non-Independent Director

19 Feb2020

3

Mr. Sujeewa Mudalige
Independent Director

22 Mar2022

4
3

Ms. Kasturi Chellaraja
Independent Director

20 Jun2023

Mr. Hasitha Premaratne
Independent Director

18 Jul2023

5Date of Appointment to the Committee

Secretary to the Committee
Ms. Shehani Ranasinghe
Vice President - Company Secretary142

National Development Bank PLC

2.

3.

4.

5.

Establishing, maintaining and periodicallyreviewing the Remuneration Policy (salaries,
allowances and other financial payments andperquisites) and recommend remuneration
payable to Executive Directors, the CEO andKey Management Personnel (KMP/s) of the
Bank in terms of the Remuneration Policy/
Bank’s Articles etc. for the approval of theBoard
Recommending to the Board theapportionment of the remuneration
perquisites and benefits of the NonExecutive Directors including the Chairman
out of the total sum determined for the
purpose by the shareholders in terms of theBank’s Articles
Reviewing and recommending to theBoard in consultation with the Nominationsand Governance Committee, personnel
considered fit and proper for appointment to
KMP positions of the Bank
Responsibility of setting and reviewing goals
and targets for Directors, CEO and KMPs anddetermining their periodic revision
Evaluating the performance of the CEO
and KMPs against the set goals and targets
periodically and determining the basis forrevising remuneration, benefits and otherpayments of performance based incentives

Annual Report 2023

6.

Consulting with the Nominations andGovernance Committee when considering
the succession plans and proposals
recommended by the Senior Managementof the Bank for all existing KMP positionsof the Bank and making necessary
recommendations for the approval of the
Board

7.

Discussing and analysing with theManagement the overall remuneration
expenditure on all staff and their distribution
among different categories and obtaining
information on the remuneration andbenefits paid/given to consultants engaged
by the Bank

8

Receiving information on the role andactivities of the Human Resources
Department and making recommendations
for the strengthening of the role of the said
department if necessary

9.

Reviewing the recommendations made by
the Senior Management on appropriate
incentives/awards to achieve objectives
such as rewarding performance andretaining KMPs, including the review/recommendation of share option schemesfor employees of the Bank

10. Reviewing and recommending to the Board
any termination payments that are proposed
to be paid to Directors, the CEO and/or KMPs
in the event the same are deemed necessaryand ensuring that such payments are interms of the Remuneration Policy of the
Bank and are approved in accordance withapplicable statutes, rules and regulations
11. Reviewing and approving the scope and anychanges proposed to the Terms of Referenceof the Management Human Resources
Committee as may be recommended by theManagement from time to time

COMMITTEE MEETINGSThe Committee held six (06) meetings during theyear under review. The attendance of committee
members at meetings is stated in the table on
page 124. The quorum for a meeting is threemembers.
The proceedings of the Committee meetings
have been regularly reported to the Board of
Directors.
The CEO has been present at meetings
subsequent to being invited by the Committee,
other than in instances where matters relating to
the CEO have been discussed.

STATEMENT REGARDING
REMUNERATION STRATEGY/POLICYThe Committee acknowledges rewards as oneof the essential components in influencing
employee behaviour, thus impacting businessresults. Therefore, the reward programmes
are designed to attract, retain and to motivate
employees to deliver results by linking
performance to demonstrable performancebased criteria. In this regard, the Committee
evaluates the performance of the CEO andKMPs against the pre-agreed targets and goals
that balance short and long term financial andstrategic objectives of the Bank.
The Bank’s variable (bonus) pay planis determined according to the overall
achievements of the Bank and pre-agreed
individual targets, which are based on
various performance parameters. The levelof variable pay is set to ensure that individual
rewards reflect the overall performance of
the Bank, the particular business unit andindividual performance. The Committee makes
appropriate adjustments to the bonus pool in
the event of over or under achievement against
predetermined targets. In this regard and as andwhen needed, the Committee is aware that it canseek external independent professional advice
on matters falling within its purview.
The Committee has as a practice ensured
that the Bank organises and takes part incompensation surveys as and when required
and at a minimum, every two to three years
and has utilised such feedback to ascertain thatcompensation practices are benchmarked to the“best practices” and are relevant and current as
far as possible.
The comprehensive Remuneration Policy inplace, sets the principles and a formal andtransparent procedure to set and review
remuneration which includes cash and non-cash
benefits payable to Directors, the CEO and the
KMPs of the Bank. This policy also ensures that
non-discriminatory pay practices are followed insetting remuneration payable to Non-Executive
Directors to ensure that their independence is
not impaired.

DISCLOSURES BY THE COMMITTEEThe Committee notes that the Bank has in place aRemuneration Policy as stated above and further
that the aggregate remuneration of the Executive
and Non-Executive Directors is stated in page 127of this Report.

KEY ACTIVITIES IN 2023
During the year, the Committee comprehensively
reviewed the rewards strategy of the Bank in
the context of the current economic landscapeincluding the significant levels of attrition
witnessed in 2023 and the retention challenges
faced.

The Committee evaluated the performanceof the CEO and KMPs of the Bank for the year
2023 against the set goals and targets, using
the Balanced Scorecard methodology andrecommended to the Board of Directors of
the Bank, the increments, performance based
bonuses and promotions for the staff members
in general and individually, for the KMPs in 2023,
in line with current Strategy and Direction of theBank.
Staff benefits, grading and schemes werealso reviewed during the year with a view of
improving staff satisfaction in line with market
standards with focus on the Bank’s strategic
journey and the impact of the prevailingenvironment, whilst ensuring compliance withapplicable rules and regulations. Changes tothe organisational structure too was carried out
during the year to ensure alignment and deliveryof the Strategic Plan of the Bank in order to bebetter equipped to manage the local and global
environment and challenges.

APPRECIATIONThe Committee places on record its appreciationof its members for the contribution andcommitment throughout 2023.

Mr. Sriyan Cooray
Chairman

Human Resources and Remuneration Committee
20 February 2024
Colombo

The Committee also advised and set goals andtargets for the Directors, the CEO and KMPs
for 2023 in line with the Strategic Vision and
Direction of the Bank in 2023. The Committee
reviewed Directors’ fees paid to Non-Executive
Directors in line with the Remuneration Policyof the Bank whilst being cognizant of market
dynamics and related regulations.
The Performance Management Cycle wasrobustly reviewed and revised during the year.
The Committee also advised on commencing
a talent identification, talent mapping, andleadership competency development plan
covering all key roles at the Bank with a view toimproving succession planning at the Bank. The
Remuneration Policy was revised during the year
in line with applicable laws and regulations andto make same more relevant and practical to the
Bank.
The Committee also received information on
the role and activities of the Human Resources
Department and made recommendations tostrengthen governance and management
practices.
The Committee assisted the Nominations andGovernance Committee and advised on certain
disciplinary matters that arose during 2023 from
whistle blowing and other concerns raised bystakeholders.

WAY FORWARD
The Committee will consistently improve
its scope and purview in line with local andglobal trends in Human Resource Management
whilst taking into consideration any changes toapplicable Rules and Regulations.

Human Resources and Remuneration Committee Report

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Annual Report 2023

143

Integrated Risk Management Committee Report
CHARTER OF THE INTEGRATED RISKMANAGEMENT COMMITTEE

Mr. Sriyan Cooray
Chairman
Integrated Risk Management Committee

COMPOSITION OF THE INTEGRATED RISK MANAGEMENT COMMITTEEThe Board appointed Integrated Risk Management Committee (IRMC) comprised six
Non-Executive Directors of which three are independent Directors which includes the
Chairman of the Committee.
As at 31st December 2023 the Committee comprised the following;
Board Members

1

Mr. Sriyan Cooray(Chairman) Independent Director

01 Sep 2018

2

Mr. Sujeewa Mudalige
Independent Director

19 Feb 20203

Ms. Chandima Dilrukshi
Non-Independent Director

22 Jun 2021

4

Ms. Fay Piyachatr Chetnakarnkul
Non-Independent Director

22 Jun 2021

5

Ms. Kasturi Chellaraja
Independent Director

25 Oct 2022

6

Mr. Hasitha Premaratne
Independent Director

20 Jun 2023

7

Mr. Dimantha Seneviratne
Chief Executive Officer - Non-Independent Director(Ceased to be a Director w.e.f. 31 January 2024)

Non-Board Members

8

Chief Risk Officer(Mr. Alex Perera)

9

Vice President - Legal(Ms. Melody Wikramanayake)(Mr. Chandima Kannangara)

Date of Appointment to the Committee

Secretary to the Committee
Mr. Alex Perera
Chief Risk Officer/ Vice President - Risk Management

National Development Bank PLC

The Charter of the IRMC was approved by the
Board of Directors and is reviewed annually. As
part of the annual review process, the Committee
last reviewed the Charter in February 2023. As
per the Charter, the scope of work includes thefollowing:y Work closely with Key Management Personnel(as defined by the Management from time
to time) and make decisions on behalf of theBoard within the framework of the authority
and responsibility assigned to the Committeey Assess all risks of the Bank and Group on
a monthly basis through appropriate risk
indicators and management informationy Submit a risk assessment report within a weekof each meeting to the Board seeking theBoard’s views, concurrence and/or specificdirectionsy Review the adequacy and effectiveness of
all management level committees such as
the Credit Committees, Credit and Market
Risk Policy Committee, Operational Risk
Management Committee and the AssetLiability Committee to address specific risks
and to manage those risks within quantitativeand qualitative risk limits as specified by theCommittee/ Boardy Take prompt corrective action to mitigate theeffects of specific risks in the case such risks areat levels beyond the prudent levels decided
by the Committee/ Board on the basis of theBank’s policies and regulatory and supervisory
requirements

10 Compliance Officer

144

01 Jul 2017

The Integrated Risk Management Committee(IRMC) was formed in June 2008 replacing
the Risk & Credit Committee of the Board, incompliance with the Section 3 (6) of Direction
No. 11 of 2007 (as amended), on the subject“Corporate Governance for Licensed Commercial
Banks in Sri Lanka”, issued by the Monetary Boardof the Central Bank of Sri Lanka under the powers
vested in the Monetary Board, in terms of the
Banking Act No 30 of 1988. The composition
and the scope of work of the Committee arein conformity with the provisions of the said
Direction.

Annual Report 2023

y Inform the Human Resources Department totake appropriate action against the officers
who fail to identify specific risks, and/ or takeprompt corrective actions as recommended
by the Committee, and/ or as directed by
the Director of Bank Supervision. The courseof action to be taken against staff would
be governed by the HR disciplinary action
procedure in force

y Receive copies of regulatory examination
reports pertaining to matters that arewithin the purview of the Committee andManagement’s responses thereto

The key areas of focus in this regard are detailed
under each category below:y Ensure staffs are trained adequately oncompliance related laws, regulations, policies
and procedures as a tool in mitigating bank’s
compliance risk by educating employees andmaintaining their ongoing awareness. The
programmmes include both formal training
courses and ongoing communicationsy Annual Review of Internal Capital Adequacy
Assessment Process (ICAAP) Document for2023 together with the Stress Testing Policy& Framework were reviewed and approved
taking into consideration of the impact on
the operating environment of the Bank due
to prevailing economic condition of thecountry. The Risk Appetite Framework andRisk Tolerance limits were reviewed andadjusted by the Committee considering thechallenges in operating environment. The risk
levels of each material risk of the Bank and themitigants in place were critically reviewed aspart of the ICAAP review

COMMITTEE MEETINGSThe Committee held four (04) meetings, during
the year under review to discuss the normal
scope of work and one special IRMC meeting
held in May 2023, to review the Internal Capital
Adequacy Assessment Process (ICAAP) & Stress
Testing Framework of the Bank. The attendanceof committee members at meetings is stated in
the table on page 124. Key members of the staff
participated at the meetings as appropriate. The
quorum for a meeting is four members of which
two shall be Non-Executive Directors.
The proceedings of the Committee meetings
have been regularly reported to the Board of
Directors.

KEY ACTIVITIES IN 2023
The ongoing Sri Lankan economic crisis has
emerged as a formidable challenge for the
Banking Industry. In 2023, despite the continuing
macroeconomic challenges that affected thebanking industry, the Bank continued to adopt
prudent measures in balance sheet management
in line with the external developments, speciallywith the easing off of uncertainties associatedaround the Government of Sri Lanka’s Domestic
Debt Optimisation (DDO) mechanism which
exerted considerable pressure on the industry.
The finalisation of the DDO and the options
extended to banks removed ambiguity andhelped lessen the risk premia added to interest
rates. The Bank recalibrated its strategy in thecurrent context, in order to remain well on trackin achieving the set targets and deliver continued
value to its stakeholders. The Committee, thus,
in addition to carrying out its duties under thenormal scope of work devoted special attention
to reviewing the risks and mitigants associatedwith the impact on portfolios affected and thefactors that are within the control of the Bank
to mitigate the risks with a view of arresting
deterioration of credit quality.

Integrated Risk Managementy The Integrated Risk Management Frameworkand the Model Validation Policy were reviewed
and approvedy Bank’s Recovery Plan (RCP) was reviewed andapproved in line with the CBSL direction andthe ICCAP document of the Banky The Committee reviewed the Key Risk
Indicators of the Bank and Group Companies
on a monthly basis through the monthly KRI
statements and quarterly Risk Assessment
Reports

Credit Risky The key focus for 2023 was arresting thedeteriorating asset quality in the aftermathof successive crisis stemming from the Easter
Attack in 2019, Covid Pandemic in 2020 & 2021
and the Economic crisis in 2022. The weakened
operating climate was further exacerbated bymultiple geopolitical issues
y The Bank’s Credit related policies (including
the main Credit Policy of the Bank and the
Impairment policy) and Operating Guidelines
were thus reviewed and approved taking into
account the prevailing market environment.
The Bank’s Delegated Lending Authority
structure for credit related approvals was
also reviewed in order to tighten controls
considering the challenging environment andrising non-performing assets
y The portfolio quality of the Bank wasperiodically reviewed in order to assess theimpact of the stresses on sectors, products
and business segments consequent to theexisting country situation and economic
conditionsy The remedial and rehabilitation actions takenby the Remedial Management Unit and theCentralised Recoveries Department werereviewed in assessing the progress madetowards managing the portfolio quality of theBank

Integrated Risk Management Committee Reporty The findings/ observations from the Loan
Review Mechanism unit were reviewed andemphasis was placed on the implementationof the learnings in order to ensure
improvements to the Underwriting Standards
and Credit Administration Processesy The work carried out by the Credit
Committees, Credit and Market Risk Policy
Committee and the decisions taken by eachcommittee were reviewed

Operational Risky The Operational Risk Policy was reviewed andapproved to include process efficiencies
y The Operational Risk reports were reviewed
including but not limited to:y Emerging Operational Risks and significant
incidents and losses
y Key Risk Indicator breaches related to
Human Resources, Information Technology,
Finance, Compliance and Business lines
y Scenario Analysis - Events which would
have a significant impact on the Bank’s
Operations and the Action Plans to mitigatesamey Reviewed the proceedings of the Operational
Risk Management Committee (ORMC)
including the decisions taken by theCommittee

Market and Liquidity Risky Market & Liquidity Risk related Policies alongwith Procedure Guidelines and Terms ofReference were reviewed and approved toensure facilitation, identification & assessmentof related risks together with adequacy ofcontrolsy The Bank’s Liquidity Contingency Funding Plan
was reviewed and approved in line with theBank’s Recovery Plany Treasury Risk Limit Framework & Fundingneeds were reviewed and approved basedon the Strategic Initiatives, Balance Sheet
Structure and the Risk Profile of the Banky Stringent internal risk tolerance limits were
imposed in monitoring Foreign Exchange risk
to be within the Regulatory Limits ensuringthat potential losses arising out of fluctuations
in FX rates are minimisedy Impact of sovereign downgrading on
managing foreign currency liquidity position
with regard to contraction of money market
lines with foreign counterparts, funding lines
and the impact on International Sovereign
Bond (ISB)/ Sri Lanka Development Bond(SLDB) portfolio of the Bank were reviewed

National Development Bank PLC

Annual Report 2023

145

Compliance

IT & Cyber Risky The Committee ensured that the Compliance
Framework, Policies and Processes aredesigned to identify, manage, monitor andreport non-compliances and to minimise
potential for breaches, fines or penalties andto ensure that appropriate remedial action istaken to address instances of non-compliancey The Committee also assessed the implicationsof new regulations and ensured that emerging
risks and regulatory requirements wereadequately managed during these challenging
times
y The Committee noted that all regulatory
engagements were managed effectively
meeting regulator’s expectationsy The Bank’s compliance with laws, regulations
and regulatory obligations were assessed
based on the Quarterly Compliance Reportsubmitted
y All applicable Compliance related Policies andFrameworks were reviewed and approved
which enables the Bank to identify, prioritise
and assign accountability for managing
existing or potential compliance risks that
could lead to fines, penalties or reputational
damagey The Annual Compliance Program work
carried out was reviewed and approved.
Periodic management information reports
were submitted to the Board throughthe Committee informing the status of
implementation related to Complianceprogrammey Committee also noted that adequate training
programmes were conducted on regulatory
requirements and staff were well conversant
with the regulations

Legal Affairs (Litigation)y The Committee reviewed court cases filed
against the Bank, cases filed by the Bankas well as other cases where the Bank ismade a party to. Probable outcomes ofsuch cases were also detailed. Updates on
cases outsourced to external law firms werediscussed as welly Committee was appraised on the progress on
Parate actions, any issues related to the Title
Policy of the Bank, latest laws related to theLegal actions filed and the latest cases in theindustry which may have an adverse impact
on the Bank’s recovery processy Bank was an intervenient party to the casewhere a landmark Judgment was delivered by
the Supreme Court in respect of Mortgages
over lands of 3rd parties can be taken overunder Parate action

146

National Development Bank PLC

y IT Security Policy Revision for 2023 wasreviewed and approved. Periodic updates on
Technology Risk Resilience and Cyber Risk/ IT
Security were also reviewed
y Policies related to Information Security
Management System (ISMS) and BusinessContinuity Management System (BCMS) werereviewed and approved. The Policies werealigned with ISO 27001 Standard and ISO
22301 Standard respectively

Environment & Social Risk
Management (ESRM)
y The ESRM Policy and the ESRM Manual of the
Bank were reviewed and approved during theyear to ensure the relevance of the Policy andManual in a rapidly evolving ESG landscapey The revision introduced new processes
around credit facilities appraisal and approval
which further strengthened the scrutiny onenvironmental and social aspects linked toBank’s lendingy The function continued to cover the
Operations of the Bank as well as the Group
companies. Within the Bank additional
stakeholders were engaged with newly
introduced responsibilities under the Policy
and Manual revision, which derives more
dynamic contribution towards ensuring theeffectiveness of the E&S functiony The IRMC was updated on a quarterly basis on
ESMS related mattersy Committee noted that several capacity
building programmes to the staff members
involved in lending, credit process and ESRM
related process of the Bank were carried out
with the external resource contribution ofeminent professionals in the field and internal
contributors

Othery Revision to the Policy on Payment Related
Mobile Applications and Agent Selection
Policy and Risk Management Framework
relating to Digital Financial Services Unit wasreviewed and approvedy Implement an advance approach, Alternative
Standardised Approach (ASA) for thecomputation of Risk Weighted amountfor Operational risk from the current Basic
Indicator Approach (BIA).
y Improve system capabilities in monitoring
Market Risk, Liquidity Risk and Treasury Middle
Office Function to enhance the efficiency ofrisk control mechanisms
y Work towards strengthening the Financial
Crime Compliance programme incollaboration with Norfund and Ernst & Young(EY). Special emphasis will be made on AntiBribery and Corruption (ABC) training andE learningy Implement a holistic ESG Policy amalgamating
the Bank’s ESRM Policy, Corporate
Sustainability Policy and other related policies/
processes
y Implementation of a Security Operations
Center (SOC) and Security Incident & EventManagement System (SIEM) to strengthen the
security control environment

COMMITTEE EVALUATIONy The Self-Assessment of the IRMC for the year
2023 was carried out by its members and theCommittee agreed on the final satisfactoryrating score and suggestions for improvement
were discussed

Appreciationy The Committee wishes to convey its gratitude
to former Director Mr. Hiran Perera for his
valuable contribution to the Committee

Mr. Sriyan Cooray
Chairman
Integrated Risk Management Committee
20 February 2024
Colombo

WAY FORWARD
y Implement a Loan Origination System for
Wholesale Banking, Project Finance andBusiness Banking which will enable a smoothfunctioning of the Loan Originating Processy Integrate Risk Rating model validation
outcomes and roll out the re-developedmodels in order to strengthen the existing Risk
Rating Models of the Bank

Annual Report 2023

Integrated Risk Management Committee ReportAudit Committee Report
CHARTER OF THE AUDIT COMMITTEEThe Charter of the Committee approved by the
Board, clearly defines the Terms of Reference of theCommittee and is periodically reviewed and revisedwith the concurrence of the Board of Directors.
This process ensures that new developments
relating to the Committee’s functions and concerns
are adequately addressed. The Audit Committee
Charter was last reviewed and approved in
November 2023 by the Board of Directors.
Audit Committee assists the Board in the dischargeof its responsibilities by exercising oversight overthe Bank’s financial reporting, internal controls,internal audit and external audit practices.

Mr. Sujeewa Mudalige
Chairman
Audit Committee

COMMITTEE MEETINGSCOMPOSITION OF THE AUDITCOMMITTEEThe Board appointed Audit Committee
comprised four Non-Executive Directors
inclusive of the Chairman who is an
Independent Director.
As at 31 December 2023 the Committee
comprised the following;
Board Members

1

Mr. Sujeewa Mudalige(Chairman)
Independent Director

18 Feb2020

2

Mr. Sriyan Cooray
Independent Director

01 Sep20183

Ms. Chandima Dilrukshi
Non-Independent Director

22 Jun2021

4

Ms. Shweta Pandey
Independent Director

20 Jun2023

Date of Appointment to the Committee

The Committee held seven (07) meetings
during the year under review. The attendance ofCommittee Members at meetings is stated in thetable on page 124. The quorum for a meeting isthree (03) members.
The proceedings of the Committee Meetings havebeen regularly reported to the Board of Directors.
Vice President Internal Audit, Chief Executive Officer(CEO), Vice President/Chief Financial Officer and theBank’s External Auditors attended all meetings on
invitation. The Committee also invited the Deputy
Chief Executive Officer (DCEO) and members of the
Senior Management of the Bank to participate in
the meetings from time to time on a need basis.
METHODOLOGY USED BY THE COMMITTEEThe Committee functions are structured andregulated in accordance with the guidelines issued
in the Banking Act Direction No.11 of 2007 on“Corporate Governance for Licensed Commercial
Banks in Sri Lanka” and its subsequent amendments(hereinafter referred to as the Direction), “Rules
on Corporate Governance under Listing Rules of
the Colombo Stock Exchange” and “Code of Best
Practice on Corporate Governance” issued jointly
by The Institute of Chartered Accountants of Sri
Lanka (CASL) and the Securities and Exchange
Commission of Sri Lanka (SEC).
The Committee is empowered by the Board to:

Secretary to the Committee
Ms. Ruwani de Silva
Vice President - Internal Audity Review the Interim Financial Statements andthe Bank’s Annual Financial Statements in orderto monitor the integrity of such statements
prepared for disclosure, prior to submission to
the Board of Directors
y Examine any matter relating to the financial andother connected affairs of the Banky Ensure that efficient and sound financial
reporting systems are in place and are wellmanaged in order to provide accurate,
appropriate and timely information to theBoard of Directors, Regulatory Authorities, theManagement and Other Stakeholders
y Ensure the Bank has adopted and adhere topolicies which firmly commits the Bank toachieve the highest standards of good corporate
governance practicey Review the quality and the appropriatenessof Accounting Policies and their adherence
to Statutory and Regulatory Compliancerequirements and applicable AccountingStandardsy Review the outcome of the Annual Risk
Assessment Process and Internal Audit Planassessing independence and performance of theInternal Audit functiony Review internal audit reports and liaising withManagement in taking precautionary measures
to minimise control weaknesses, procedure
violations, frauds and errorsy Review External Audit Management
Letter and Statutory inspection reports inrelation to matters under Audit Committee
purview and follow up on their findings andrecommendations
SUMMARY OF ACTIVITIES IN 2023
Reporting of Financial Position and Performance
The Committee assists the Board to discharge
their responsibility in the preparation of Financial
Statements that evidence a true and fair viewon the financial position and performance inaccordance with the Bank’s accounting records
and as per the stipulated requirements of the
Sri Lanka Accounting Standards and otherregulatory requirements. In fulfilling its oversight
responsibilities, the Committee reviews;
y The adequacy and effectiveness of the Internal
Controls, Systems and Procedures over Financial
Reportingy The effectiveness of the Financial Reporting
Systems in place to ensure reliability of theinformation provided to the Stakeholdersy The Bank’s Financial Statements, Accounting
Policies and practices and reasonableness of
the underlying assumptions for estimates andjudgments made in preparing the Financial
Statementsy The Tax Assessments outstanding and action
initiated for resolution through regular reports
submitted by VP/CFO
y The processes by which compliance with Sri
Lanka Accounting Standards (SLFRS/LKAS) andother regulatory provisions relating to financial
reporting and disclosures are ensuredy The Annual Report and Accounts, and theInterim Financial Statements prepared for
publication together with the press releases prior
to submission to the Boardy The assurance statement received from the
CEO and the CFO that the financial records havebeen properly maintained and the financial
statements give a true and fair view of the
Entity’s Operations and Finances in line with therequirement of listing rules
Compliance with the Revised Sri Lanka
Accounting Standards
During the year the Audit Committee placed
additional focus on the assessment of adequacy ofprovision for Expected Credit Loss (ECL) recognised

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Annual Report 2023

147

in the Financial Statements based on the internal
models, management overlay computed based onstress testing, the exposures to risk elevated sectors,
to strengthen the impairment provision process.
Bank also implemented an automated solution in
the workflow system commencing from Q3 2023
to evaluate objective evidences and compute
impairment provision for individually significant
loans to expedite the Financial Reporting Process.
Further a separate team from our External Audit
Firm conducted an awareness session to theCommittee in the third quarter on overview ofDomestic Debt Restructure (DDR), DDR Scenarios,
SLDBs and FCBUs accounting and risk implications
and key considerations.
Mechanism of Internal Controls
During the year, the Committee reviewed theeffectiveness of the Bank’s Internal Control Systemand the CEO’s quarterly confirmation on theInternal Control Environment, derived throughthe Operational Risk process which supports
strengthening the Second Line of Defence of theBank. Additionally, the Committee assessed theeffectiveness of the Bank’s internal controls overfinancial reporting as of 31 December 2023, as
required by the Banking Act Direction No.11 of 2007(as amended), Corporate Governance for Licensed
Commercial Banks in Sri Lanka, Subsection 3(8) (ii)(b), based on the “Guidance for Directors of Bankson the Directors’ Statement on Internal Control”
issued by The Institute of Chartered Accountantsof Sri Lanka. The result of the assessment is given
on page 157 to 158, in the “Directors’ Statement on
Internal Control” in the Annual Report. The External
Auditors have also issued an Assurance Report on
the Directors’ Statement on Internal Controls. The
report is given on page 160 of the Annual Report.
The Committee also regularly reviews the Internal
Control Procedures in place to ensure thatnecessary control and mitigating measures areavailable in respect of newly identified risks.
Internal Audit Function
The Committee ensures that the Internal Audit
Function is independent of the activities it audits
and that the audits are performed with impartiality,
proficiency and due professional care.
The Vice President Internal Audit reports directly to
the Audit Committee.
The Bank has adopted a risk-based audit
methodology and audit approach. The Audit
universe consists of all auditable areas/processesof the Banking Group, which are audited annuallybased on a risk based audit plan approved by the
BAC.
A risk grading matrix has been adopted forassessing and measuring the risks identified during
audit assignments carried out by the Internal Audit
department.
The Audit Committee reviewed the findings alongwith the Management action plans of the audits
completed and their evaluation of the Bank’s Internal
Control Systems. The Committee also reviewed thecoverage including the action plans given to address
the issues and the implementation status.

148

National Development Bank PLC

Major findings of internal investigations withrecommendations of the Management werediscussed by the Committee in detail.
The Committee also met with the Vice PresidentInternal Audit in the absence of the Management
to ensure independence of the Internal Audits
Operations.
The Audit Committee reviewed the independence,
objectivity & performance of the Internal Audit
function and the adequacy of its resources. The
Audit Committee also evaluated the performanceof Vice President Internal Audit and reviewed theperformance of the senior staff members of theInternal Audit function.
Audit Charter and Audit Manual
The Internal Audit function is governed by
the Audit Charter which defines the mission,authority, responsibility, independence, reporting,commitment and access in order to assist Audit todischarge its function independently. The Audit
Charter and the Audit Manual were revised andapproved in June and November 2023 respectively,by the Board.
External Audit

The Engagement Partner was changed in 2023
to be in line with the Corporate Governancerequirements.
Re-appointment of External Auditor
The Audit Committee performed an evaluationof the External Auditor based on certain defined
criteria and independent evaluation done by
VP/CFO and recommended to the Board of
Directors that Messrs. Ernst and Young, Chartered
Accountants, to be re-appointed for the financial
year ending 31 December 2024 subject to theapproval of the shareholders at the next Annual
General Meeting.
Oversight on Regulatory Compliance
The Internal Audit department performed
verifications covering mandatory banking and otherstatutory requirements during their process audits
ensuring that systems and procedures are in place
to ensure compliance with such requirements.
Good Governance and Whistle Blowing

The Audit Committee undertook the annual
evaluation of the independence and objectivity of
the External Auditor and the effectiveness of theaudit process.
During the audit, the External Auditor presented
to the Committee their audit approach andprocedures, including matters relating to the scopeof the audit and Auditor’s independence.
The Committee reviewed the audited Financial
Statements with the External Auditor responsible
for expressing an opinion on its conformity with
the Sri Lanka Accounting Standards and discussed
in detail the action taken by the Managementwith regard to the Key Audit Matters raised by the
Auditors.
The Committee also reviewed the Management
Letter issued by the External Auditor and the
management responses thereto.
The Audit Committee met the External Auditors
twice (2) during the year, without the presence ofCEO and the Corporate Management, to ensurethat the Auditors had the independence to discuss
any concerns and express their opinions on any
matter and also for the Committee to have theassurance that the Management provided all
information and explanations requested by the
Auditors.
The Audit Committee was of the view that the NonAudit Services provided by the External Auditor
were not within the category of services identified
as prohibited under:
1. The guidelines issued by the Central Bank of
Sri Lanka for External Auditors, relating to theirstatutory duties in terms of Section 39 of Banking
Act No.30 of 1988 and amendments thereto
2. The guidelines for Listed Companies on Audit
and Audit Committees issued by the Securities
and Exchange Commission of Sri Lanka

Annual Report 2023

In carrying out the overseeing responsibilities, theCommittee adopted the overview principles of
the Basel Committee on Banking Supervision onExternal Audits of the Banks, issued in March 2014.

Audit Committee Report

The Bank’s Whistle Blowing Policy was reviewed
and amended in April 2022 in order to further
strengthen the policy. The Policy is intended
to serve as a channel of Corporate Fraud Risk
Management. The policy will educate andencourage any team member who has a legitimate
concern on an existing or potential “wrong doing”,
done by any person within the Bank, to comeforward voluntarily, and bring such concern to thenotice of an independent designated authority.
All appropriate procedures were in place toconduct independent investigations into incidents
reported through whistle blowing. The Whistle
blowing Policy guarantees the maintenance ofstrict confidentiality of the identity of the whistle
blowers.
The Bank also has an established external
informational mechanism, known as the “NDB
Ombudsman” further strengthening the whistle
blowing mechanism where the Bank introduced afeature of reporting through the staff intranet foradded convenience and security. This Policy wasreviewed in July 2023.
EVALUATION OF THE AUDIT COMMITTEE
The Audit Committee carried out a formal selfevaluation/appraisal on the effectiveness of theCommittee for the year 2023 based on certain
defined criteria. The Audit Committee Members
concurred that the Committee had carried out
its responsibilities in an effective and satisfactorymanner.

Mr. Sujeewa Mudalige
Chairman
Audit Committee
20 February 2024
ColomboRelated Party Transaction Review Committee Report
CHARTER OF THE RELATED PARTY
TRANSACTION REVIEW COMMITTEE

Mr. Sriyan Cooray
Chairman
Related Party Transaction Review Committee

COMPOSITION OF THE RELATEDPARTY TRANSACTION REVIEWCOMMITTEEThe Board appointed Related Party
Transaction Review Committee comprised
Four Non-Executive Directors inclusiveof the Chairman who is an Independent
Director as set out below.
As at 31 December 2023 the Committee
comprised the following:
Board Members

1

Mr. Sriyan Cooray(Chairman)
Independent Director

01 Jul2022

2

Mr. Kushan D’Alwis, PC
Independent Director

22 Jul2020

Ms. Chandima Dilrukshi
Non-Independent Director

20 Aug2021

Mr. Hasitha Premaratne
Independent Director

20 Jun2023

3

4

The Board of Directors of the Bank constituted a
Related Party Transactions Committee voluntarily
in December 2014 further to the provisions
contained in the Listing Rules of the Colombo
Stock Exchange (CSE) so as to ensure compliancewith the Rules pertaining to Related Party
Transactions as set out in the Listing Rules of
the CSE at that time, which required mandatorycompliance from 1 January 2016. The Terms ofReference (TOR) of the Related Party Transactions
Review Committee was approved by the Board of
Directors and is reviewed annually. As part of theannual review process, the Committee reviewed
the TOR in 2023 recommending certain changes
including changes to be in line with the recent
amendments to the Listing Rules via CSE Circular
No 04/2023. The composition and the scope ofwork of the Committee are in conformity withthe said Rules.
The primary objective of the Committee is toassess and consider all transactions with relatedparties of the Bank in line with the Listing Rules,
in order to ensure that interests of shareholders
as a whole are taken into account when entering
into transactions with related parties of the Bank
noting that the objective and the economic
and commercial substance of such transactions
should take precedence over the legal form andtechnicality.
The Committee carries out the duties andresponsibilities as mandated in its Charter
including the following:
1.

Reviews, evaluates and determines theadvisability of any Related Party Transactions
except for transactions set out in Rule9.14.10 of the CSE Listing Rules, that requireconsideration by the Committee under theRelated Party Transaction Policy of the Bankand taking into consideration, Rule 9.14.5 of
the Listing Rules of the CSE

2.

Approves or rejects the Related Party
Transaction upon the required internal
approvals being obtained

Date of Appointment to the Committee

Secretary to the Committee
Ms. Shehani Ranasinghe
Vice President - Company Secretary3.

Determines whether the relevant Related
Party Transaction is fair to, and in the bestinterests of, the Bank and its stakeholders; and4.

Recommends to the full Board what action,
if any, should be taken by the Board withrespect to any Related Party Transaction.
In such an instance, approval of the Boardof Directors should be obtained prior toentering in to the relevant Related Party
Transaction

5.

Recommends to the full Board where
necessary that the approval of theshareholders of the Bank be obtained by
way of a Special Resolution prior to theconcerned transaction being entered into as
specified in Section 9.14.6 and 9.14.9 of the
Listing Rules

6.

In respect of transactions with Related Parties
which are recurrent, of revenue or trading
nature and which is necessary for day-today
operations of the Bank or its subsidiaries,
determines if the terms of a transaction
with a Related Party is not favourable to theRelated Party than those generally available
to the public

7.

Approves any proposed material changes
in any previously reviewed Related Party
Transactions prior to the completion of theTransaction

8.

Establishes guidelines for the Senior
Management to follow in its on-going
dealings with the Related Party

9.

Reviews and assesses on-going relationships
with Related Parties, if any

10. Establishes and maintains a clear policy,
procedure and process in place for theidentification, clarification, monitoring andreporting the Related Party Transactions
on an end-to-end basis across the Bank’s
operations
11. Ensures that the Interests of shareholders
as a whole are taken into account by the
Bank when entering into Related Party
Transactions
12. When assessing a Related Party
Transaction, the Committee ensures thatthe objective and the economic andcommercial substance of the transaction
take precedence over the legal form andtechnicality

COMMITTEE MEETINGSThe Committee held four (04) meetings during
the year under review. The attendance ofcommittee members at meetings is stated in thetable on page 124. The quorum for a meeting isthree members.
The proceedings of the Committee meetings
have been regularly reported to the Boardof Directors. The Board of Directors take due
consideration of the comments/observations
made by the Committee and the approvals
granted by the Committee for Related Party
Transactions.

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149

The Chief Executive Officer (CEO) has beenpresent at meetings only if invited by theCommittee.

The Related Party Transaction Policy of the Bank
was reviewed and revised during the year toensure that same is aligned to the revised Listing
Rules of the CSE and any other related laws andregulations.

METHODOLOGY USED BY THE
COMMITTEEThe Committee is guided by the Listing Rules of
the CSE pertaining to Related Party Transactions
and by/as reflected in the Terms of Reference of
the Committee. It also takes into consideration
the Board approved Related Party Transaction
Policy when reviewing the transactions, theRelated Party’s relationship to the Bank andinterest in the transaction, the material factsof the proposed transaction including theaggregate value of the same, the benefits to the
Bank of the proposed transaction, the availabilityof other sources of comparable products orservices and further carries out an assessmentof whether the proposed Related Party
Transaction is on terms generally available to an
unaffiliated third party under the same or similar
circumstances or to employees generally.
In carrying out the duties of the Committee, theCommittee avoids ‘conflicts of interest’ which
may arise from any transaction of the Bank withany person, particularly with related parties
and ensures arm’s length dealings with relatedparties. Whilst noting the approval procedure
to be followed by the Board when granting ofaccommodation to related parties of the Bankin line with the Banking Act, the Committee
advises on ensuring adherence to the Corporate
Governance Directions of the Banking Act
which requires the Bank to avoid engaging intransactions with related parties in a mannerthat would grant such parties ‘more favourable
treatment’ than accorded to other Constituentsof the Bank carrying on the same business andthat the security requirements as stated in the
Banking Act Directions have been adhered to.

The Committee has reviewed new and on-going
Related Party Transactions of the Bank during theperiod of 1 January 2023 to 31 December 2023
and has thus complied with the rules pertaining
to Related Party Transactions as set out in the
Listing Rules of the CSE. The Bank has not enteredinto any transactions as contemplated in Section
9.14.8 (1) & (2) of the Listing Rules of the CSE andaccordingly there are no disclosures to be madein this regard in accordance with Section 9.14.8 of
the Listing Rules of the CSE.

WAY FORWARD
The Committee continuously guides the
Bank in setting up more robust mechanisms
for monitoring and identifying Related Party
Transactions and in fostering awareness among
the business lines/staff of the Bank on the proper
procedures to be followed with regard to Related
Party Transactions.

APPRECIATIONThe Committee places on record its appreciation
to the outgoing committee member during2023, Mr Sujeewa Mudalige, for his contributions
and further appreciates all its members for theircontributions and commitment.

Mr. Sriyan Cooray
Chairman
Related Party Transactions Review Committee
20 February 2024
Colombo

KEY ACTIVITIES IN 2023
During the year the Committee approved
transactions relating to the provision of services
by the Bank to various related parties on an‘arms-length’ basis. This included in depth
deliberations to ensure that where transactions
with related parties were approved, same did
not take place on more favourable terms. Someof the transactions reviewed included obtaining
and providing expert services from/to groupcompanies and other related parties of the Bankon an arm’s length basis.
Recommendations were also made to improve/strengthen processes at ground level/throughautomation etc. when financial as well as nonfinancial transactions with related parties arecontemplated and to monitor transactions andmake required disclosures.

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Related Party Transaction Review Committee ReportStrategic Issues Committee Report
CHARTER OF THE STRATEGIC ISSUESCOMMITTEE REPORTWith the formation of the Strategic Issues Committee
as a Board subcommittee, its Charter has been
approved by the Board and is reviewed annually.
Accordingly, the Committee reviewed the Charterin 2023.
The Committee carries out the following duties andresponsibilities:

Mr. Sriyan Cooray
ChairmanStrategic Issues Committee

COMPOSITION OF THE
STRATEGIC ISSUES COMMITTEEThe Board appointed Strategic Issues
Committee comprised Four Non-Executive
Directors inclusive of the Chairman who
is an Independent Director and the Chief
Executive Officer (CEO).
As at 31 December 2023 the Committee
comprised the following:
Board Members
Mr. Sriyan Cooray(Chairman)
Independent Director

01 May2019

2

Mr. Bernard Sinniah
Non-Independent Director

19 Feb2020

3

Mr. Sujeewa Mudalige
Independent Director

19 Feb2020

4

Ms. (Fay) Piyachatr
Chetnakarnkul
Non-Independent Director

5

Mr. Dimantha Seneviratne
Chief Executive Officer
Non-Independent(Ceased to be a Director
w.e.f. 31 January 2024)

1

22 Jun2021

23 Jul
2019

Date of Appointment to the Committee

Secretary to the Committee
Ms. Shehani Ranasinghe
Vice President - Company Secretary

1. Providing the strategic direction and strategic
thinking of the Board to the Management in thedevelopment and implementation of the Bank’s
strategic plan
2. Developing the Bank’s strategy and its
implementation together with the Management
3. Reviewing and assessing the formulation andimplementation of strategic plans developed by
the Management and approved by the Board
4. Guiding and assisting the Management in
implementing strategic decisions taken by theBoard
5. Making recommendations regarding strategic
capital allocation and reviewing proposals forraising of funds as submitted by the Management
and making recommendations/ suggestions inthat respect to the Board
6. Reviewing and evaluating strategic issues andplans of subsidiary companies of the NDB Groupto ensure that the same are in line with thestrategic initiatives and strategic direction of the
Bank with a view to optimising the NDB Group’s
operational effectiveness
The Committee is responsible for determining thefollowing decisions:y Approving of all strategic investments anddivestments and recommending the same to
the Board (e.g. assess new business proposals
including acquisitions/joint ventures and makeappropriate recommendations)y Approving the periodical Strategic Plan (covering
three to five years or more) and recommending
the same to the Boardy Approving any significant amendments to theexisting Strategic Plan and recommending thesame to the Boardy Reviewing and recommending the annual
business plan/budget and capital structure of the
Bank before onward submission to the Board forapprovaly Reviewing of NDB Bank’s strategic investments
including its investments in subsidiaries in relation
to performance and returns on such investments,
ideally on an annual basis with a view torecommending to the Board any necessary action
related to such investments
COMMITTEE MEETINGSThe Committee held seven (07) meetings during theyear under review. The attendance of committee
members at meetings is stated in the table onrefer page 124. The quorum for a meeting is threemembers.
The proceedings of the Committee meetings havebeen regularly reported to the Board of Directors.
Other Directors and Members of the Management
Team attend meetings upon invitation by theCommittee.

METHODOLOGY USED BY THE COMMITTEEThe Committee meets as and when necessary inorder to, inter alia; deliberate in detail on mattersof strategic importance to the Bank and the NDBGroup so as to advise the Board in a timely manner.
The Committee meets to examine and evaluate any
strategic issues that may arise and further to evaluate
any changes to strategic plans/ decisions alreadyin place, as well as to conduct such other affairs
which the Charter of the Committee mandates theCommittee to carry out.
KEY ACTIVITIES IN 2023
The Committee commenced the year with anin depth deliberation in to the performance andstrategy of NDB Capital Holdings Group vis a vis
the unfolding capital market environment andchallenges. The focus on the performance of thesubsidiaries of the Bank continued through the yearwith a view to streamlining and improving theirperformance, arriving at a few key action points tobe followed up.
The strategic challenges facing the Bank waspresented to the Committee including the capitalraising plans whilst deliberating areas of possible
strategic focus to better manage the unfolding
challenges. The Committee guided the Management
in deliberating on a few areas of strategic focus andwhether further expert advice was needed. The
impact of the local economic environment andchallenges such the Domestic Debt Restructure(DDR) etc were points which were deliberated indetail during the year.
The Committee spent considerable time indeliberating in depth on identified business lines
such as Retail Banking and Treasury providing
oversight and guidance.
The Budget for 2024 was presented to the Committee
where an active deliberation took place prior to same
being presented and approved by the Board.
Upon being apprised by the Management,
the Committee deliberated in depth on theMedium term Strategy for the Bank up to 2025
recommending key focus areas for the years 2024
and 2025 and strategies to improve stability,
profitability and operational efficiencies of the Bank,
taking into consideration the rapidly evolving local
and global economic landscape.
WAY FORWARD
The Committee will continue to improve the Bank’srobust strategy to navigate through the volatile social,economic and political conditions locally and globally.
APPRECIATIONThe Committee places on record its appreciation
to the members for their contributions andcommitment throughout the year.

Mr. Sriyan Cooray
ChairmanStrategic Issues Committee
20 February 2024
Colombo

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Credit Committee Report
CHARTER OF THE CREDIT COMMITTEEThe Charter of the Credit Committee (CC) isreviewed annually and the principal purposeof the Committee is to approve or recommend
facilities in line with Board approved DelegatedLending Authority Limits. As per the Charter, theCommittee is empowered to:y Evaluate, assess and approve credit facilities
which fall within the delegated authority levelof the Committee as prescribed from theBoard from time to time

Mr. Bernard Sinniah
ChairmanCredit Committeey Review and recommend credit facilities whichfall within the purview of the Board

COMPOSITION OF THE
CREDIT COMMITTEEy Review changes proposed by theManagement from time to time to the Credit
Policy and recommend to Integrated Risk
Management Committee

The Board appointed Credit Committee
comprised four Non- Executive Directors
and the Chief Executive Officer (CEO).

y Approve all Counterparty bank limits fallingwithin the policy guidelines approved by the
Board of Directors

As at 31 December 2023 the Committee
comprised the following;
Board Membersy Review a summary of the clients classified
under “Stage 3” , Overdue Annual Reviews,
Covenant compliance status of Clients on aperiodic basis in order to ensure maintenanceof the overall quality of the Bank’s loan book1

Bernard Sinniah(Chairman)
Non-Independent Director

01 May2019

2

Mr. Kushan D’Alwis, PC
Independent Director

22 Jul2020

Ms. Chandima Dilrukshi
Non-Independent Director

01 Oct2022

4

Ms. Kasturi Chellaraja
Independent Director

20 Jun2023

The Committee held twelve (12) meetings
during the year under review. The attendanceof Committee members at meetings is stated in
the table on page 124. The quorum for a meetingis three (03) members inclusive of two NonExecutive Director Members. Presence of CEO or
his designate is mandatory.

5

Mr. Dimantha Seneviratne
Chief Executive Officer
Non-Independent Director(Ceased to be a Director
w.e.f. 31 January 2024)

01 Jun2017

The proceedings of the Committee meetings
have been regularly reported to the Board of
Directors.

3

METHODOLOGY USED BY THE
COMMITTEE

Date of Appointment to the Committee

Secretary to the Committee
Ms. Shareen Jayasuriya
Assistant Vice President - Credit

COMMITTEE MEETINGSThe Committee reviews the Credit Proposals
submitted by the Business Line, its risks andadequacy of pricing or covenants to mitigate theidentified risks. Proposals are recommended to
the Committee by CEO and the Corporate Credit
Committee. Key staff members are required topresent the proposals and answer any queries as
and when required.

KEY ACTIVITIES IN 2023
During the meetings held in 2023 the Committee
carried out the following activitiesy Reviewed and agreed on the revised Termsof Reference of the Committee and proposedsame for approval of the Board of Directors

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Annual Report 2023

y Reviewed and recommended ninety sevencredit proposals for the approval of the Boardof Directors and twenty seven credit proposals
comprising of new facilities, annual review
of revolving facilities, ratification requests,
reschedulements, changes to terms andconditions of facilities already approved andpre clearance proposals, were reviewed andapproved by Committeey Reviewed and approved the renewal of BankCounter Party limitsy Reviewed status of facility annual reviews,
covenant compliance and account strategies
of “Stage 3” accounts
y Reviewed Bank’s exposure to Government of
Sri Lanka, Construction and renewable energy
sectors, loans under moratorium concessions
and discussed on account strategies and way
forward.

APPRECIATIONThe Committee wishes to convey its gratitude to
Mr. Hiran Perera for his valuable contribution to
the Committee.

Mr. Bernard Sinniah
ChairmanCredit Committee
20 February 2024
ColomboDigital Transformation Committee Report
CHARTER OF THE DIGITAL
TRANSFORMATION COMMITTEE
The objective of the DTC is to formulate andprovide oversight on the Bank’s digitalisation
strategy, ensuring its alignment to the Bank’sbusiness strategy, in driving customer centricity,enhancing the customer experience andgenerating operational efficiencies acrossbusiness verticals.

Ms. Shweta Pandey
Chairperson
Digital Transformation Committee

COMMITTEE MEETINGSCOMPOSITION OF THE DIGITAL TRANSFORMATION COMMITTEEThe Board appointed Digital Transformation Committee comprised (DTC) four Non-Executive Directors
inclusive of the Chairman who is a Non-Independent Director and the Chief Executive Officer (CEO).
As at 31 December 2023 the Committee comprised the following:
Board Members

1

Ms. Shweta Pandey(Chairperson) Non-Independent Director

19 Jun 2023

2

Mr. Bernard Sinniah
Non-Independent Director

30 Apr 2021

3

Ms. (Fay) Piyachatr Chetnakarnkul
Non-Independent Director

29 Oct 2021

4

Mr. Dimantha Seneviratne
Chief Executive Officer - Non-Independent Director(Ceased to be a Director w.e.f. 31 January 2024)

30 Apr 2021

Non-Board Members

5

Deputy Chief Executive Officer(Mr. K. V. Vinoj)

6

Chief Operating Officer(Mr. Deepal Akuretiyagama)

The main focus of the Committee meetings wason tracking the user feedback, issues and statusof the core banking migration project to thelatest available version. In addition, new initiatives
and improvements that are to be introduced
were also taken up.
The proceedings of the Committee meetings havebeen regularly reported to the Board of Directors.

KEY ACTIVITIES IN 2023

Senior Vice President - Personal Banking & Customer Experience(Mr. Sanjaya Perera)

8

Vice President - Treasury(Mr. Niran Mahawatte)

9Vice President - Information Technology/ Chief Information Officer(Mr. Indika Gunawardena)y A structured weekly and monthly tracking
mechanism for recording the on-going statusof the core banking migration project to thelatest available version was put in place. This
provided the Management with the ability tohave a more comprehensive understandingof the issues that the operational staff faces intheir day to day operationsy A comprehensive competitor analysis was
carried out on the Digital presence of NDB
against the key four competitors in the
Industry. Focus group discussions wereconducted with both internal staff, as well
as a selected customer base to understandpositioning of NDB in the customer mindset,
and to identify areas for improvement

10 Vice President - SME, Middle Markets and Business Banking(Mr. Indika Ranaweera)

11 Vice President - Strategy & Business Intelligence(Mr. Bimal Perera)

12 Assistant Vice President - Product Lifecycle Management(Mr. Damitha Silva)

13 Chief Manager - Product Lifecycle Management(Mr. Deepa Edirisooriya)

Ms. Dulani Weerasinghe
Deputy Manager - Product Lifecycle Management

A new Chairman to the Committee wasappointed during the year.

Members of the Core Banking Project Team,and representatives of other business lines wereinvited to the meetings on a needs basis.

7

Secretary to the Committee

The Committee held five (05) meetings during
the year 2023. The attendance of committee
members at meetings is stated in the table onrefer page 124. The quorum for a meeting is Four(04) members of which Two (02) shall be NonExecutive Directors.

Date of Appointment to the Committeey The new Chairman to the Committee visited
Sri Lanka, and met with all Key Management
Personnel to understand the current challenges,
obstacles and proposed improvements inthe digital offerings. She also conducted avisit to a few of the branches in the Southernarea, as well as a field visit to the Bank’s agent,appointed under Agency Banking

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153

y Under the guidance of the new Chairman to
the Committee the bank’s Digital Financial
Services Team underwent a structural change,
where the focus of digitisation as a separate
pillar has now been evolved to encompass
a journey of holistic digitisation at productdesign level. The new unit is named as
Product Lifecycle Management, with a view ofincorporating digitisation at all product levels
y Further structural changes were carriedout in the IT and Data Analytics Teams. A
new programme management office wasintroduced within the IT department to focus
more on delivery
y 30-, 60- and 90-day strategic plans are being
formulated for each role within the new
structures, and same are reviewed with the
Chairman to the Committee

WAY FORWARD
During 2024, the Committee will continue its
focus on monitoring the performance of the new
Core Banking System. Further, initiatives havebeen taken to provide a better digital experienceto the Bank’s customers and the Committee will
drive these initiatives, by monitoring, oversightand recommendations. The performance of the
new structures will be closely monitored by theCommittee.

APPRECIATION
We thank the former Chairman to the Committee,
Mr. Bernard Sinniah for the guidance and support
given to the Committee since its inception.
Under his leadership, the Committee formulated
its charter and formalised its structure. We
look forward to his continued support to theCommittee as a valued member.

Ms. Shweta Pandey
Chairperson
Digital Transformation Committee
20 February 2024
Colombo154

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Annual Report 2023

Digital Transformation Committee ReportDiscretionary and Capital Expenditure Committee Report
CHARTER OF THE DISCRETIONARY AND
CAPITAL EXPENDITURE COMMITTEE

Ms. Kasturi Chellaraja
Chairperson
Discretionary and Capital Expenditure
Committee Report

COMPOSITION OF THE
DISCRETIONARY AND CAPITAL
EXPENDITURE COMMITTEEThe Board appointed Discretionary
and Capital Expenditure Committee
comprised an Independent Director, Non- Independent Director and two members
from the Senior Management of the Bank.
As at 31 December 2023 the Committee
comprised the following:
Board Members

1

2

Ms. Kasturi Chellaraja(Chairperson)
Independent Director
Ms. K V Chandima Dilrukshi
Non-Independent Director

27 Mar2023
27 Mar2023

Non-Board Members

3

Chief Operating Officer(Mr. Deepal Akuretiyagama)

4

Head of Compliance(Mr. Chandima Kannangara)

Date of Appointment to the Committee

Secretary to the Committee
Ms. Aloka Ekanayake
Chief Manager - Transformation

The Discretionary and Capital Expenditure
Committee was formed in March 2023 incompliance with the Direction No. 01 of 2023
to all Licensed Banks issued by the Monetary
Board of the Central Bank of Sri Lanka under the
powers vested in the Monetary Board in terms of
the Banking Act No. 30 of 1988. The Committee
will operate during the years 2023 and 2024.
The composition and the scope of work of theCommittee are in conformity with the Provisionsof the said Direction.
The Chairperson and the members of theCommittee were appointed by the Board of
Directors. As per the Charter the Committee
carries out the following duties andresponsibilities.
y Evaluating and approving the discretionary
expenses to be incurred by the Bank above acertain thresholdy Evaluating and approving capital expenditure
to be incurred by the Bank above a certain
threshold
COMMITTEE MEETINGSThe Committee held fourteen (14) meetings
during the year under review. The attendance ofcommittee members at meetings is stated in thetable on page 124. All key members of the staff
participated at all meetings. The quorum for ameeting is three (03) members of which at leastone (01) shall be a Director.
The proceedings of the Committee meetings havebeen regularly reported to the Board of Directors.
METHODOLOGY USED BY THE COMMITTEEThe Committee meets every fortnightly toapprove discretionary and capital expenses tobe incurred by the Bank, in the manner in which
the Charter of the Committee mandates theCommittee to carry out.
The Committee considers the necessity, urgency
and the relevance of the discretionary expenses
and the capital expenditure projects as per thecharter and approve expenditure which are in linewith the Banks strategic objectives. In approving
the mandated expenditure/investment, theCommittee evaluates the strategic alignment,
Return on Investment, and the impact to the
Bank’s business continuity. In the evaluation
process the Committee reviews the outcomes
and the key milestones committed by theManagement in justifying the ROI of projects.
A review of such outcome/targets is also doneby the Committee upon the completion of thediscretionary expense projects.

SUMMARY OF ACTIVITIES IN 2023
During the year, the Committee considered thenecessity and urgency of several discretionary
and capital expenditure projects and approved
expenditure which fell in line with the Banks
strategic objectives. In the process, the Committee
assessed the Return on Investment (ROI), Strategic
fit, and the impact to the Bank’s business
continuity in the manner aforementioned as wellas to conduct affairs which the Charter of theCommittee mandates the Committee to carry out.
The Committee held fourteen (14) meetings
to advice and approve several discretionary
and capital expense projects. In the evaluation
process the Committee considered the outcome/targets and the key milestones committed by
the Management in justifying the ROI of projects
for the year. A review of the same was carriedout by the Committee upon the completion of
the approved discretionary expense projects
and evaluated outcomes. Where progressive
milestones were committed, the evaluation will
be continued to ensure monitoring of outcomes.
The Committee also made recommendations tofurther negotiate and get the best possible deal
wherever applicable and also gave suggestions
to the management to strengthen the postmonitoring process on the agreed deliverables
thereby inculcating a frame work for being
accountable on agreed deliverables.
EVALUATION OF THE DISCRETIONARY AND
CAPITAL EXPENDITURE COMMITTEEThe Discretionary and Capital Expenditure
Committee carried out a formal self-evaluation/
appraisal on the effectiveness of the Committee
for the year 2023 and reported the results of thesame to the Board. The Board concurred that theCommittee had carried out its responsibilities inan effective and satisfactory manner.
WAY FORWARD
The Committee will continue to add value by
focusing on the strategic alignment, ROI andcost efficiencies with respect to all discretionary
and capital Expenditure. This will be done by
inculcating a frame work for being accountable onachieving agreed deliverables.
APPRECIATIONThe Chairperson and the Committee wishes toconvey its gratitude to former member Mr. Deepal
Akuretiyagama who resigned from the Committee
on the 31 January 2024, for his valuable
contribution to the Committee.

Kasturi Chellaraja
Chairperson
Discretionary and Capital Expenditure Committee
20 February 2024
Colombo

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155

Statement of Directors’ Responsibilities for Financial Reporting
This statement sets out the responsibility of the
Directors in relation to the Financial Statementsof National Development Bank PLC (the Bank) andthe Consolidated Financial Statements of the Bankand its subsidiaries (the Group). The Directors are
required by relevant statutory provisions to prepare
and table at a General Meeting of the Bank, such
Financial Statements as may be necessary, whichgive a true and fair view of the state of affairs of the
Bank and the Group.
It is also the responsibility of the Directors to ensurethat the Bank maintains proper accounting records
and to take reasonable steps as far as practical toensure the accuracy and reliability of accounting
records and to prepare Financial Statements
using appropriate Accounting Policies appliedconsistently and supported by reasonable andprudent judgment and estimates in compliancewith the Sri Lanka Accounting Standards (SLFRS/
LKAS), the Banking Act No. 30 of 1988 (as amended),
the Companies Act No. 07 of 2007 and the Listing
Rules of the Colombo Stock Exchange. Changes in
the Accounting Policies where applicable and therationale for the changes have been disclosed inthe ‘Notes to the Financial Statements’.
Accordingly, the Directors confirm that the Financial
Statements of the Bank and the Group give a trueand fair view of:(a) the financial position of the Bank and theGroup as at the reporting date; and(b) the financial performance of the Bank and
the Group for the financial year ended on thereporting date.
The Financial Statements of the Bank and the Group
have been certified by the Vice President - Strategy& Business Intelligence and Vice President - Financeof the Bank, the officer responsible for their
preparation, as required by the Companies Act. In
addition, the Financial Statements of the Bank and
the Group have been signed by two Directors andthe Company Secretary of the Bank on 20 February
2024 as required by the Companies Act and otherregulatory requirements. The Directors are also
responsible for ensuring that proper accounting
records which correctly record and explain the
Bank’s transactions are maintained and that theBank’s financial position, with reasonable accuracy,
at any point of time is determined by the Bank,
enabling preparation of the Financial Statements,
in accordance with the Companies Act to facilitate
proper audit of the Financial Statements.
The Financial Statements for the year 2023,
prepared and presented in this Annual Report
have been prepared in compliance with therequirements of the Sri Lanka Accounting Standards(SLFRS/LKAS), Companies Act No. 07 of 2007 (asamended), Sri Lanka Accounting and AuditingStandards Act No. 15 of 1995, Banking Act No. 30 of1988 and amendments thereto, the Listing Rules of
the Colombo Stock Exchange and the Code of Best
Practice on Corporate Governance issued jointly by
the Institute of Chartered Accountants of Sri Lanka(CA Sri Lanka) and the Securities and Exchange

156

National Development Bank PLC

Commission of Sri Lanka (SEC)(2023). The Bankand Group has also complied with the Directions/
Guidelines issued by the Central Bank of Sri Lanka
in the preparation of the Financial Statements
including the Direction No. 13 of 2021 and Direction
No. 14 of 2021 on Classification, Recognition andMeasurement of Credit Facilities and Financial
Assets Other Than Credit Facilities which wereeffective from 1 January 2022.
The significant accounting policies and estimatesthat involved a high degree of judgment andcomplexity were discussed with the Audit
Committee and External Auditors.
In addition, these Financial Statements comply withthe prescribed formats issued by the Central Bankof Sri Lanka, Direction No. 02 of 2019 for publicationof annual and quarterly Financial Statements andother disclosures by the licensed banks.
The Directors have been responsible for taking
reasonable measures and care to safeguard
the assets of the Bank and the Group and toprevent and detect frauds and other irregularities.
The Directors have instituted an effective andcomprehensive system of internal controls and an
effective system of monitoring its effectiveness,internal audit being one of them.
The Directors’ Statement on Internal Control overFinancial Reporting is given on pages 157 and158 of this Annual Report. The Board has been
provided additional assurance on the reliabilityof the Financial Statements through a process of
independent and objective review performedby the Audit Committee. Please refer the Audit
Committee Report on pages 147 to 148 of thisReport.
Messrs Ernst & Young, Chartered Accountants, whowere appointed in terms of the Companies Act
No. 07 of 2007 and in accordance with a resolution
passed at the last Annual General Meeting, havebeen made available with all records of the Bank
including the Financial Statements by the Boardof Directors and provided every opportunity
to undertake the inspections they consideredappropriate, all of which they have examined andhave expressed their opinion which appears asreported by them on page 147 of this Report.
The Board of Directors accepts responsibility for the
integrity and objectivity of the Financial Statements
presented in this Annual Report. The Directors
confirm that in preparing the Financial Statements
exhibited on pages 169 to 290 including,appropriate Accounting policies have been applied
on a consistent basis, and where necessary changes
to accounting policies have been made withadequate disclosures while reasonable and prudent
judgments have been made so that the form andsubstance of transactions are properly reflected.
The Board of Directors wishes to confirm that, as
required by the Section 56 (2) of the Companies Act
No. 07 of 2007 (as amended), they have authorised
distribution of the dividends paid upon being
satisfied that the Bank would satisfy the solvency

Annual Report 2023

test after such distributions are made in accordancewith the Section 57 of the Companies Act No. 07
of 2007 and have obtained in respect of dividends
paid, necessary certificates of solvency from theExternal Auditors.
The Board of Directors also wishes to confirm
that, as required by Sections 166 (1) and 167 (1)of the Companies Act, they have prepared thisAnnual Report in time and ensured that a copy
thereof is sent to every Shareholder and Debenture
holder of the Bank, who have expressed desire toreceive a printed copy or to other Shareholders
and Debenture holders a soft copy each sharedby way of a link containing the Annual Report
within the stipulated period of time as required by
the Rule No. 7.5 (a) and (b) of Continuing Listing
Requirements of the Listing Rules of the Colombo
Stock Exchange. The Directors also wish to confirm
that all Shareholders have been treated equitably inaccordance with the original terms of issue.
Further, the Board of Directors wishes to confirm
that the Bank has met all the requirements under
the Section 07 on Continuing Listing Requirementsof the Listing Rules of the Colombo Stock Exchange
and other regulations, laws and internal controls
and there were no material non-compliances.

COMPLIANCE REPORTThe Directors confirm that to the best of theirknowledge, all taxes, duties and levies payable by
the Bank and the Group, all contributions, levies
and taxes payable on behalf of and in respect of
the employees of the Bank and the Group, andall other known statutory dues as were due andpayable by the Bank and the Group as at thereporting date have been paid or, where relevant,provided for, except as specified in Note 48.3 to
the Financial Statements on ‘Litigation Against theBank’ on page 246. The Directors further confirm
that after considering the financial position,
operating conditions, regulatory and other factors
and such matters required to be addressed in the‘Code on Corporate Governance’ issued jointly by
the Institute of Chartered Accountants of Sri Lanka(CA Sri Lanka) and the Securities and Exchange
Commission of Sri Lanka (SEC), the Directors havea reasonable expectation that the Bank and theGroup possess adequate resources to continue inoperation for the foreseeable future. For this reason,
we continue to adopt the going concern basis inpreparing the Financial Statements. The Directors
are of the view that they have discharged their
responsibilities as set out in this Statement.
By Order of the Board

Ms. Shehani Ranasinghe
Company Secretary
20 February 2024
ColomboDirectors’ Statement on Internal Control over Financial ReportingRESPONSIBILITY

In line with the Banking Act Direction No. 11
of 2007(as amended), Section 3 (8) (ii) (b) andprinciple D.1.5 of the Code of Best Practiceon Corporate Governance 2023 issued by theInstitute of Chartered Accountants of Sri Lanka(CA Sri Lanka) , the Board of Directors present
this report on Internal Control over Financial
Reporting.
The Board of Directors (‘Board’) is responsible
for the adequacy and effectiveness of theinternal control mechanism in place at
National Development Bank PLC (‘the Bank’). In
considering such adequacy and effectiveness,
the Board recognises that the business ofbanking requires reward to be balanced withrisk on a managed basis and as such the internal
control systems are primarily designed with aview to highlighting any deviations from thelimits and indicators which comprise the risk
appetite of the Bank. In this light, the system ofinternal controls can only provide reasonable,
but not absolute assurance, against material
misstatement of financial information andrecords or against financial losses or fraud.

KEY FEATURES OF THE PROCESS ADOPTEDIN APPLYING AND REVIEWING THE DESIGNAND EFFECTIVENESS OF THE INTERNALCONTROL SYSTEM OVER FINANCIALREPORTING

The Board is of the view that the system ofinternal controls over financial reportingin place is sound and adequate to provide
reasonable assurance regarding the reliability offinancial reporting, and that the preparation of
Financial Statements for external purposes is inaccordance with relevant accounting principles
and regulatory requirements.
The management assists the Board in theimplementation of the Board’s policies andy

The Committee also reviews the internal
audit functions with particular emphasis
on risk assessment, scope of audits andquality of internal audit. The minutes of the
Audit Committee meetings are tabled at
the meetings of the Board of Directors of
the Bank on a periodic basis. Further detailsof the activities undertaken by the Audit
Committee of the Bank are set out in the‘Audit Committee Report’ on pages 147 to148.

y

The Audit Committee of the Bank also
reviews internal control issues identified by
the External Auditor, regulatory authorities
and the management, and evaluates
the adequacy and effectiveness of therisk management and internal control
systems. Also on a quarterly basis theinternal control confirmation is presented
to the Committee by Vice President Risk
Management.

y

In assessing the internal control systemover financial reporting, identified officersof the Bank collate all procedures andcontrols that are connected with significant
accounts and disclosures of the Financial
Statements of the Bank. These in turn are
observed and checked by the Internal
Audit department for suitability of designand effectiveness on an ongoing basis. The
comments/recommendations made by
the External Auditors in connection with
the internal control system over financial
reporting during the year was taken into
consideration to further strengthen theinternal control system over the financial
reporting process.

y

The Integrated Risk Management
Committee (IRMC) is established toassist the Board to oversee the overallmanagement of principal areas of risk of theBank. The committee reviews the adequacyand effectiveness of all management levelcommittees such as the Credit Committees,
Credit and Market Risk Policy Committee
etc. Further IRMC works closely with Key

The key processes that have been establishedin reviewing the adequacy and integrity ofthe system of internal controls with respect tofinancial reporting include the following:yy
The Board has established an ongoing process
for identifying, evaluating and managing thesignificant risks faced by the Bank and theGroup and this process includes enhancing
the system of internal controls over financial
reporting as and when there are changes tobusiness environment or regulatory guidelines.
The process is regularly reviewed by the Boardin line with the ‘Guidance for Directors of
Banks on the Directors’ Statement on Internal
Control’ issued by the Institute of Chartered
Accountants of Sri Lanka. The Board has
assessed the internal control over financial
reporting taking in to account principles for theassessment of the internal control system asgiven in that guidance.

are rated below Satisfactory, reviewing
the action plans to address these areas
and the implementation status. All audit
reports are shared with the Operational Risk
Management for their necessary actions
and the regulatory issues are shared with
the Compliance department.

procedures on risk and control by identifying
and assessing the risks faced and in the design,operation and monitoring of suitable internal
controls to mitigate and control these risks.

yVarious Committees are established by
the Board Including those mandatorycommittees as required by the Banking Act
Direction No. 11 of 2007 and the Listing
Rules of the Colombo Exchange, to assist
the Board in ensuring the effectiveness of
the Bank’s daily operations and that theBank’s operations are in accordance withthe corporate objectives, strategies andthe annual budget as well as the policies
and business directions that have been
approved.
Policies/Procedures are developed
covering all areas, which are approved by
the relevant Board subcommittees andthe Board. These Policies/Procedures arereviewed periodically and the Compliancedepartment follows up on the review of
Policies to ensure that they are reviewed
timely.
Internal Audit department checks
compliance with policies and procedures
and the effectiveness of internal control
systems on an ongoing basis during
their process audits. The Internal Audit
department uses a top down risk based
auditing approach enhancing the Risk
Based Auditing Process. The entire audit
universe is audited annually, at determined
intensities based on the risk assessment
covering the entire group. The Audit
Committee reviews the findings of theinternal audits completed and theirevaluation of the Bank’s internal control
systems at their periodic meetings. The
Committee also reviews updates on audit
activities and the scope and adequacyof coverage of the approved audit plan
and any improvements thereto, and has
detailed discussions on any audits that

National Development Bank PLC

Annual Report 2023

157

Management Personnel (as defined by
the Management from time to time) andmake decisions on behalf of the Board
within the framework of the authority andresponsibility assigned to the Committee.
yy

The Bank took necessary steps tofurther improve the models used for
Impairment computations under the Sri
Lanka Accounting Standard – SLFRS 9 on
‘Financial Instruments’ in consultation
with the External Auditors. The required
processes and controls have been designed
to be in line with SLFRS - 9 and regulatory
requirements. Also adequate training andawareness sessions have been conducted
for all stakeholders. The Credit Review
Department independently reviews theIndividually Significant loan impairment
process at each reporting date. The Board
will continuously strengthen the processes
and controls around management
information systems and reports requiredfor validation and compliance in line withSLFRS 9; and financial statement disclosuresrelated to risk management.
With the core banking system upgradein 2023, the preliminary staging of thecustomers was automated based on
certain criteria such as days past due
count, restructure count, reschedulement
status, industry classification etc. Bank also
implemented an automated solution in theworkflow system commencing Q3 2023 toevaluate objective evidences and compute
impairment provision for individuallysignificant loans to expedite the financial
reporting process.

REVIEW OF THE STATEMENT BY EXTERNAL
AUDITORS

The External Auditors, Messrs.’ Ernst & Young
have reviewed the above Directors’ Statement
on internal control over financial reporting
included in the Annual Report of the Bankfor the year ended 31 December 2023 andreported to the Board that nothing has cometo their attention that causes them to believethat the statement is inconsistent with theirunderstanding of the process adopted by
the Board in the review of the design andeffectiveness of the internal control overfinancial reporting of the Bank.
Their independent assurance report on the
Directors’ Statement on Internal Control is givenon the page 160 of this Annual Report.
By order of the Board,

Mr. Sriyan Cooray
Chair, Board of Directors

Mr. Sujeewa Mudalige
Chairman Audit Committee

Mr. Kelum Edirisinghe
Director/ Chief Executive Officer

CONFIRMATIONThe Board of Directors and the Management
re-evaluated Financial and other operationalrisks and assessed the impact of any notedchanges on internal controls.

20 February 2024
ColomboBased on the above processes, the Board
confirms that the financial reporting systemof the Bank has been designed to provide
reasonable assurance regarding the reliabilityof financial reporting and the preparation of
Financial Statements for external purposes
and has been done in accordance with Sri
Lanka Accounting Standards and regulatory
requirements of the Central Bank of Sri Lanka.

158

National Development Bank PLC

Annual Report 2023

Directors’ Statement on Internal Control over Financial ReportingResponsibility Statement of the Chief Executive Officer andVice President - Finance
The Financial Statements of the National
Development Bank PLC (the Bank) and theConsolidated Financial Statements of the Bankand its Group Companies (the Group) as at 31
December 2023 are prepared and presented
in compliance with the following regulatory
requirements:i

Sri Lanka Accounting Standards (SLFRS/
LKAS) issued by The Institute of Chartered
Accountants of Sri Lanka

ii.

Sri Lanka Accounting and AuditingStandards Act No. 15 of 1995

iii. Statements of Alternative Treatments (SoAT)
on Accounting issued by The Institute ofChartered Accountants of SL
iv. Companies Act No. 7 of 2007v.

Banking Act No. 30 of 1988 andamendments thereto

vi. Directions, circulars and guidelines issued tolicensed commercial banks by the Central
Bank of Sri Lanka including but not limited
to Banking Act Direction No. 11 of 2007 (asamended) issued by the Monetary Board of
the Central Bank of Sri Lanka on corporate
governanceviii. Listing Rules of the Colombo Stock
Exchange (as amended)ix. The Code of Best Practice on Corporate
Governance issued jointly by The Instituteof Chartered Accountants of Sri Lanka andthe Securities and Exchange Commission of
Sri Lanka (2023)
These Financial Statements comply with theprescribed formats issued by the Central Bank of
Sri Lanka.
The Accounting Policies of the Bank and
the Group are in compliance with Sri Lanka
Accounting Standards (SLFRS/LKAS) issued by
The Institute of Chartered Accountants of Sri
Lanka. Circular No. 2 of 2019, Direction No. 13 of
2021 and Direction No. 14 of 2021 for publicationof annual and quarterly Financial Statements andother disclosures by the licensed banks.
Significant Accounting Policies and estimatesthat involve a high degree of judgment
and complexity were discussed with the
Audit Committee and the External Auditors.
Comparative information has been reclassified
wherever necessary to comply with the current
Our Approach to Reporting

year’s presentation. All significant items havebeen disclosed and explained by way of Notes to
the Financial Statements. We confirm to the bestof our knowledge, that the Financial Statements
presented herewith give a true and fair view ofthe financial position, Statement of Profit or Lossand the cash flows of the Bank and the Groupfor the year. We also believe that the Bank and
the Group have adequate resources to continue
its operations in the foreseeable future andaccordingly adopt the going concern basis forthe preparation of the Financial Statements.

financial reporting to provide reasonableassurance that all transactions are accurately andcompletely recorded in the books of accountand the processes by which compliance with Sri
Lanka Accounting Standards (SLFRS/ LKAS) andother regulatory provisions relating to financial
reporting and disclosures are ensured. The Audit
Committee Report is available on pages 147
to 148. To ensure complete independence, theExternal Auditors and the Internal Auditors havefull and free access to the members of the Audit
Committee to discuss any matter of substance.

The Board of Directors and the Management of
the Bank and the Group accept responsibility forthe integrity and the objectivity of the Financial
Statements. The estimates and judgments
relating to the Financial Statements were madeon a reasonable and prudent basis; in order that
the Financial Statements reflect a true and fairview; the form and the substance of transactions
and that the state of affairs of the Bank and theGroup is reasonably presented. To ensure this,the Bank and the Group have taken proper andsufficient care in implementing internal control
systems, with the use of a comprehensive
core banking system, for safeguarding assets
and for preventing and detecting fraud aswell as other irregularities, which is reviewed,
evaluated and updated on an ongoing basis. The
Internal Auditor of the Bank and the Group has
conducted periodic audits to provide reasonableassurance that the established policies andprocedures of the Bank and the Group are
consistently followed. However, there are
inherent limitations that should be recognised inweighing the assurance provided by any system
of internal control and accounting.

We confirm to the best of our knowledge that

The Financial Statements of the Bank and theConsolidated Financial Statements of the Bankand its Group Companies were audited by
Messrs Ernst & Young, Chartered Accountants.
The Report issued by them is available on
page 166 of Annual Report. The audit andnon-audit services provided by Messrs Ernst &Young are approved by the Audit Committee
in line with the relevant audit policy, to ensurethat the provision of such services does notcontravene with the guidelines issued by theCentral Bank of Sri Lanka or impair Messrs Ernst& Young’s independence. The Audit Committee
reviews the adequacy and the effectivenessof the Internal Control Systems including theeffectiveness of the internal controls over•

The Bank and the Group have complied withall applicable laws, rules, regulations andguidelines;•

There is no material non-compliance;•

There is no material litigation against the
Bank and the Group other than those
disclosed in Note 48.3 on page 246 of the
Financial Statements section of Annual
Report;•

All taxes, duties, levies and all statutory
payments by the Bank and the Groupand all contributions, levies and taxes
payable on behalf of and in respect of theemployees of the Bank and the Group as
at the reporting date have been paid, or
where relevant provided for.

Mr. Kelum Edirisinghe
Director/ Chief Executive Officer

Mr. Bimal Perera
Vice President - Strategy & Business Intelligence

Mr. Hasitha Athapattu
Vice President - Finance
20 February 2024
Colombo

National Development Bank PLC

Annual Report 2023

159

Independent Assurance Report

TO THE BOARD OF DIRECTORS OF
NATIONAL DEVELOPMENT BANK PLC
Report on the Director’s Statement on
Internal Control
We were engaged by the Board of Directorsof National Development Bank PLC (“Bank”) to
provide assurance on the Directors’ Statement
on Internal Control over Financial Reporting(“Statement”) included in the annual report for
the year ended 31 December 2023.
Management’s responsibility

Management is responsible for the preparationand presentation of the Statement inaccordance with the “Guidance for Directors of
Banks on the Directors’ Statement on Internal
Control” issued in compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of
2007, by the Institute of Chartered Accountantsof Sri Lanka.
Our Independence and Quality Control

We have complied with the independence andother ethical requirement of the Code of Ethics
for Professional Accountants issued by theInstitute of Chartered Accountants of Sri Lanka,
which is founded on fundamental principles ofintegrity, objectivity, professional competence
and due care, confidentiality and professional
behavior.
The firm applies Sri Lanka Standard on
Quality Control 1 and accordingly maintains
a comprehensive system of quality control
including documented policies andprocedures regarding compliance with ethicalrequirements, professional standards andapplicable legal and regulatory requirements.

160

National Development Bank PLC

Our responsibilities and compliance withSLSAE 3050 (Revised)

Our responsibility is to assess whether
the Statement is both supported by the
documentation prepared by or for directors andappropriately reflects the process the directors
have adopted in reviewing the design andeffectiveness of the internal control of the Bank.
We conducted our engagement in accordancewith Sri Lanka Standard on Assurance
Engagements (SLSAE) 3050 (Revised), Assurance
Report for Banks on Directors’ Statement on
Internal Control, issued by the institute ofCharted Accountants of Sri Lanka.
This Standard required that we plan andperform procedures to obtain limited assurance
about whether Management has prepared, inall material respects, the Statement on Internal
Control.
For purpose of this engagement, we are notresponsible for updating or reissuing any
reports, nor have we, in the course of thisengagement, performed an audit or review ofthe financial information.
Summary of work performed

We conducted our engagement to assess
whether the Statement is supported by the
documentation prepared by or for directors;
and appropriately reflected the process the
directors have adopted in reviewing the system
of internal control over financial reporting of
the Bank.
The procedures performed were limited
primarily to inquiries of bank personnel and theexistence of documentation on a sample basisthat supported the process adopted by the
Board of Directors.

Annual Report 2023

SLSAE 3050 (Revised) does not require us toconsider whether the Statement covers all
risks and controls or to form an opinion on
the effectiveness of the Bank’s risk and control
procedures. SLSAE 3050 (Revised) also does not
require us to consider whether the processes
described to deal with material internal control
aspects of any significant problems disclosed
in the annual report will, in fact, remedy the
problems.
The procedures selected depend on ourjudgement, having regard to our understandingof the nature of the Bank, the event ortransaction in respect of which the Statement
has been prepared.
We believe that the evidence we have obtained
is sufficient and appropriate to provide a basis
for our conclusion.
Our conclusion

Based on the procedures performed, nothing
has come to our attention that causes us
to believe that the Statement included in
the annual report is inconsistent with ourunderstanding of the process the Board of
Directors has adopted in the review of thedesign and effectiveness of internal control overfinancial reporting of the Bank.

20 February 2024
ColomboFinancial Statements

A Future of Growth
We continue to seek out and explore new opportunities for growth, while
expanding our scope to reach new heights of innovation and excellence.
The term “way of flowers,” or “kado,” is now more commonly used in Japan to refer to ikebana conveying the essence of theart as a lifetime learning process. This sense of impermanence communicates the importance of continuous exploration in
the quest for excellence..

Financial Calendar 2023/2024
Annual General Meetings

Date

19th Annual General Meeting

28 March 2024

18th Annual General Meeting

30 March 2023

Dividends

Amount – LKR

Date dividends announced

Date dividends paid

2.50 (Scrip)

19 April 2023

18 May 2023

Dividends for 2022

FINANCIAL STATEMENTS
Interim Financial Statements

Submission to CSE

Publication in the Newspapers
EnglishSinhalaTamil

Q4/ For the twelve months ended 31.12.2023

20 February 2024

15 March 2024

15 March 2024

15 March 2024

Q3/For the nine months ended 30.09.2023

14 November 2023

24 November 2023

29 November 2023

29 November 2023

Q2/ For the six months ended 30.06.2023

14 August 2023

23 August 2023

31 August 2023

31 August 2023

Q1/ For the three months ended 31.03.2023

12 May 2023

25 May 2023

31 May 2023

31 May 2023

Q4/ For the twelve months ended 31.12.2022

21 February 2023

17 March 2023

17 March 2023

17 March 2023

Annual Financial Statements

Submission to CSE

Publication in the Newspapers
EnglishSinhalaTamil

Annual Financial Statements for 2023

04 March 2024

15 March 2024

15 March 2024

15 March 2024

Annual Financial Statements for 2022

07 March 2023

17 March 2023

17 March 2023

17 March 2023

Investor engagements on quarterly financial results

Online Webinar

Q4 2023

12 March 2024

Q3 202329 November 2023

Q2 2023

18 August 2023

Q1 2023

23 May 2023

Q4 202216 March 2023

PROPOSED FINANCIAL CALENDAR 2024/2025 (TENTATIVE)
Interim Financial Statements
Interim financial statements will be released to the Colombo Stock Exchange (CSE) and published in newspapers in all three languages of Sinhala, Tamil and English
within the regulator stipulated deadlines. Investor Webinars will be held per each quarter, within a maximum of ten working days from releasing the financial
statements to the CSE.

Annual Financial Statements
Annual financial statements for 2024 will be released to CSE in March 2025.

Annual General Meeting
20th Annual General Meeting will take place in March 2025.
As per Rule 7.4 of the Listing Rules of the Colombo Stock Exchange (CSE), quarterly Financial Statements (un-audited) for the first three quarters should be released
to the CSE as soon as the said statements are approved by the Board of Directors and in any event not later than 45 days from the end of each quarter and in respectof the final quarter, within two months from the end of the final quarter. According to Rule 7.5 of the Listing Rules of the CSE, the audited Financial Statements
should be published in accordance with the Sri Lanka Accounting Standards and audited in accordance with Sri Lanka Auditing Standards and shall comply with anyother applicable regulatory requirements and the Annual Report should be sent to the shareholders and the CSE within five months from the close of the financialyear.
As per the Banking Act Direction No 11 of 2007 - Corporate Governance for Licensed Commercial Banks (as amended), the annual audited Financial Statements andquarterly Financial Statements should be prepared and published in accordance with the requirements of supervisory and regulatory authorities and applicableaccounting standards and such statements must be published in the newspapers in an abridged form in Sinhala, Tamil and English.
All of the dates above are/ will be updated in the Events Calendar in the Events section of the Investor Relations page of the Bank’s corporate web site on
https://www.ndbbank.com/investor-relations/events.
National Development Bank PLC

Annual Report 2023

163

Table of Contents
Page No.
Financial Performance

165

Independent Auditors’ Report

166

FINANCIAL STATEMENTS
Statement of Profit or Loss

169

Statement of Comprehensive Income

170Statement of Financial Position

171

Statement of Changes in Equity

172

Statement of Cash Flows174

NOTES TO THE FINANCIAL STATEMENTS
1

Corporate Information

176

2

Basis of Preparation of Financial Statements

177

3

Accounting Policies

179

STATEMENT OF PROFIT OR LOSS
4

Gross Income

184

5

Net Interest Income

1846

Net Fee and Commission Income

186

7

Net Gains/(Losses) from Trading

187

8

Net Gains/(Losses) from Financial Assets at Fair Value
through Profit or Loss

188

Net Gains/(Losses) from Derecognition of Financial
Assets188

910 Other Operating Income

188

11 Impairment Charges

189

12 Personnel Expenses

193

13 Depreciation and Amortisation Expenses

194

14 Other Expenses

195

15 Tax on Financial Services

195

16 Share of Associate Companies’ Profits/(Losses)

196

17 Income Tax Expenses

196

18 Basic/Diluted Earning Per Share

198

19 Dividend Per Share199

STATEMENT OF FINANCIAL POSITION : ASSETS
20 Analysis of Financial Instruments by Measurement
Basis

199

21 Cash and Cash Equivalents

202

22 Balances with the Central Bank of Sri Lanka

203

23 Placements with Banks

203

24 Derivative Financial Instruments

204

25 Financial Assets Recognised through Profit or Loss Measured at Fair Value

206

164

National Development Bank PLC

Annual Report 2023

Page No.
26 Financial Assets at Amortised Cost - Loans andReceivables to Other Customers

207

27 Financial Assets at Amortised Cost - Debt and Other
Instruments

213

28 Financial Assets Measured at Fair Value through Other
Comprehensive Income

216

29 Investments in Subsidiary Companies

219

30 Investments in Associate Companies

220

31 Investment Property

221

32 Property, Plant & Equipment

222

33 Right of Use Assets

225

34 Intangible Assets

226

35 Other Assets

228

STATEMENT OF FINANCIAL POSITION : LIABILITIES
36 Due to Banks

228

37 Financial Liabilities at Amortised Cost

229

38 Debt Securities Issued

231

39 Current Tax (Receivables)/Liabilities

232

40 Deferred Tax (Assets)/Liabilities

232

41 Retirement Benefit Obligations

234

42 Other Liabilities

239

STATEMENT OF FINANCIAL POSITION : EQUITY
43 Stated Capital

241

44 Statutory Reserve Fund241

45 Retained Earnings

242

46 Other Reserves

242

47 Non-Controlling Interests

244

OTHER FINANCIAL DISCLOSURES
48 Contingent Liabilities and Commitments

244

49 Net Asset Value Per Ordinary Share

247

50 Maturity Analysis

247

51 Segmental Analysis - Group250

52 Related Party Disclosures

252

53 Events Occurring after the Date of the Statement of
Financial Position

256

54 Comparative Information

256

55 Fair Value of Financial Instruments and Non-Financial
Instruments

257

56 Risk Management

267

COMPLIANCE WITH DISCLOSURE REQUIREMENTS
OF THE CENTRAL BANK OF SRI LANKA

Financial Performance
For the purpose of reporting financial performance, the Bank represents National Development Bank PLC, separate financial statements and the Group represents
the Bank and the subsidiary companies.
GROSS INCOME

NET INTEREST INCOME

NET OPERATING INCOME

LKR Mn

LKR Mn

LKR Mn150,000

35,00025,00020%

120,000

LKR Mn132,326

90,0002023

60,000LKR Mn109,9022022

30,0000

4%25,00020,00077%

31,947

15,00023,749LKR Mn10,000

2022

5,000

LKR Mn20,0002022

30,74410,0000

2023

PROFIT FOR THE YEAR
6,000

85%

5,000

2022

5,370
2023

3,000

LKR Mn

2,909

2,000

2022

1,000

2022

LKR Mn600,000-6%

800,000

LKR Mn779,899

600,000

2023

400,000

832,772

LKR Mn2022

100,000

2022

0

2023

10%

60,000LKR Mn70,14850,00040,0002023

300,000

LKR Mn30,000LKR Mn2022

20,00002023

CAPITAL ADEQUACY RATIOS
%

2022

16.0

Tier I capital ratio

15.90%

14.0

2023

12.0
10.0

25%

8.0
6.0

Total capital ratio

11.67%

4.0
2.0

Tier I
capital
ratio

Total
capitalratio

51%
Impairment cover

2022

ROA

1.25%

7.0

2023

6.0

69%

5.0
4.0

10%

25.0
20.0

Impairment(stage 3) tostage 3 loans ratio

15.0
10.0

41.11%

5.0

2023

Impairment Impairment
cover(stage 3) tostage 3 loans ratio

2023

2.0

2023

2023

1.0

2023

LKR

85%

12.5

LKR

10.0

13.44
2023

7.5

2022

0.0

LKR

7.28

5.0

2022

2.5

ROA

RETURN ON EQUITY

ROE

2022

15.0

ROE

8.03%

3.0

2023

EARNINGS PER SHARE

382%

8.0

2023

30.0

2023

%
9.0

8.75%

35.0

0

RETURN ON ASSETS AND EQUITY

19%

18.0

0

63,536

10,000

2022

2023

40.0

70,000

2023

0

2022

Asset Quality

400,000

100,000

579,561

200,000

2022

200,000%

672,3142023

LKR Mn45.0

200,000

496,068

300,000

80,000615,644

LKR Mn400,000

800,000

500,000-14%

500,000

EQUITYLKR Mn2023

LKR Mn

LKR Mn600,000

2022

1,000,000

DUE TO DEPOSITORS

-8%

2022

GROSS LOANS AND RECEIVABLES TO
OTHER CUSTOMERSLKR Mn700,000

LKR Mn13,420TOTAL ASSETS

0

2023

2023

0

2023

LKR Mn4,000

LKR Mn2023

15,0005,000

LKR Mn0

30,000

2022

0.0

2022

National Development Bank PLC

2023

Annual Report 2023

165

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF NATIONAL DEVELOPMENT BANK PLC
Report on the audit of the consolidated financial statements
OpinionWe have audited the financial statements of National Development Bank
PLC (the “Bank”) and the consolidated financial statements of the Bank andits subsidiaries (the “Group”), which comprise the statement of financial
position as at 31 December 2023, statement of profit or loss, statement ofcomprehensive income, statement of changes in equity and statement of cash
flows for the year then ended, and notes to the financial statements, including
material accounting policy information.
In our opinion, the accompanying financial statements of the Bank and theGroup gives a true and fair view of the financial position of the Bank and
the Group as at 31 December 2023, and of their financial performance andcash flows for the year then ended in accordance with Sri Lanka AccountingStandards.

Basis for opinion
We conducted our audit in accordance with Sri Lanka Auditing Standards(“SLAuSs”). Our responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial statements sectionof our report. We are independent of the Group in accordance with the Codeof Ethics for Professional Accountants (including Sri Lanka IndependenceStandards) and we have fulfilled our other ethical responsibilities in accordancewith the Code of Ethics. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.

Key audit matters
Key audit matters are those matters that, in our professional judgement, wereof most significance in our audit of the financial statements of the current
period. These matters were addressed in the context of our audit of thefinancial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is provided in that
context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities
for the audit of the financial statements section of our report, including in
relation to these matters. Accordingly, our audit included the performanceof procedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying financial statements.

Key Audit Matter

How our audit addressed the key audit matter

Impairment allowance for financial assets carried at amortised cost.

In addressing the adequacy of the impairment allowance for financial assets
carried at amortised cost, our audit procedures included the following key
procedures.

Impairment allowance for financial assets measured at amortised cost
comprising of both loans and advances and debt and other instruments asstated in Note 26 & 27, respectively, is determined by management based on theaccounting policies described in Note 11.
This was a key audit matter due toythe involvement of significant management judgements, assumptions
and level of estimation uncertainty associated in estimating management
expectation of future cash flows to recover such financial assets; andythe materiality of the reported amount of allowance of expected credit
losses and use of complex calculations in its determination.

Key areas of significant judgements, assumptions and estimates used bymanagement in the assessment of the impairment allowance for financial assets
measured at amortised cost included: assumed future occurrence of events andconditions relating to the ongoing foreign currency debt restructuring exercise,forward-looking macroeconomic scenarios and their associated weightages,
which are subject to inherently heightened levels of estimation uncertainty.

166

National Development Bank PLC

Annual Report 2023

y Assessed the alignment of the Bank’s impairment allowance
computations and underlying methodology including responses tocurrent economic conditions with its accounting policies, based on thebest available information up to the date of our report.
y Evaluated the design, implementation, and operating effectivenessof controls over estimation of expected credit losses, which included
assessing the level of oversight, review and approval of allowancesfor expected credit losses, policies and procedures by the Board andmanagement.
y Checked the completeness, accuracy and reasonableness of theunderlying data used in the expected credit loss computations byagreeing details to relevant source documents and accounting recordsof the Bank.
y Evaluated the reasonableness of credit quality assessments and related
stage classifications.

Key audit matter

How our audit addressed the key audit matter
In addition to the above, the following procedures were performed:y For loans and advances assessed on an individual basis for impairment:•

Checked the arithmetical accuracy of the underlying individual impairment calculations.

•

Evaluated the reasonableness of key inputs used in the allowances for expected credit
losses made with particular focus on current economic conditions. Such evaluations
were carried out considering the value and timing of cash flow forecasts particularly
relating to elevated risk industries and status of recovery action of the collaterals.

y For financial assets assessed on a collective basis for impairment:•

Tested the key inputs and the calculations used in the allowances for expected credit
losses.

•Assessed the reasonableness of judgements, assumptions and estimates used by theManagement in the underlying methodology and the management overlays. Our
testing included evaluating the reasonableness of forward-looking information used,
economic scenarios considered, and probability weighting assigned to each of thosescenarios.

Assessed the adequacy of the related financial statement disclosures set out in notes 11, 26, 27& 56.3.

Information Technology (IT) systems related internal
controls over financial reporting.
Bank’s financial reporting process is significantly reliant on
multiple IT systems with automated processes and internal
controls. Further, key financial statement disclosures areprepared using data and reports generated by IT systems, thatare compiled and formulated with the use of spreadsheets.

Our audit procedures included the following key procedures:y Obtained an understanding of the internal control environment of the processes and test
checked relevant controls relating to financial reporting and related disclosures.
y Involved our internal specialised resources and;Accordingly, IT systems related internal controls over financial
reporting were considered a key audit matter.

•

Identified, evaluated and tested the design and operating effectiveness of IT
systems related internal controls, including those related to user access and change
management, and•Obtained a high-level understanding of the cybersecurity risks affecting the bank andthe actions taken to address these risks primarily through inquiry.

y Tested source data of the reports used to generate disclosures for accuracy andcompleteness, including review of the general ledger reconciliations.

Other information included in the Group’s 2023 Annual Report
Other information consists of the information included in the Annual
Report, other than the financial statements and our auditor’s report thereon.
Management is responsible for the other information.
Our opinion on the financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is
to read the other information and, in doing so, consider whether the otherinformation is materially inconsistent with the financial statements, or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to reportthat fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governancefor the financial statements
Management is responsible for the preparation of financial statements thatgive a true and fair view in accordance with Sri Lanka Accounting Standards,
and for such internal control as management determines is necessary toenable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Group or tocease operations, or has no realistic alternative but to do so.

Independent Auditors’ Report

Those charged with governance are responsible for overseeing the Bank’s andGroup’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with SLAuSs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with SLAuSs, we exercise professional
judgement and maintain professional skepticism throughout the audit. We
also:
1.

Identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

2.

Obtain an understanding of internal control relevant to the audit in orderto design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of theinternal controls of the Bank and the Group

National Development Bank PLC

Annual Report 2023

167

3.

4.

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made bymanagement.
Conclude on the appropriateness of management’s use of the going
concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.

5.

Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a mannerthat achieves fair presentation.

6.

Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.		

Report on Other Legal and Regulatory Requirements
As required by section 163 (2) of the Companies Act No. 07 of 2007, we haveobtained all the information and explanations that were required for the audit
and as far as appears from our examination, proper accounting records havebeen kept by the Bank.
CA Sri Lanka membership number of the engagement partner responsible forsigning this independent auditor’s report is 2965.

20 February 2024
Colombo

We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence,and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we
determine those matters that were of most significance in the audit of thefinancial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremelyrare circumstances, we determine that a matter should not be communicatedin our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.

168

National Development Bank PLC

Annual Report 2023

Independent Auditors’ ReportStatement of Profit or Loss
BANK
For the year ended 31 December

Note

GROUP

Page

2023

2022

No.

LKR ’000

LKR ’000

%

2023

2022

LKR ’000

LKR ’000%

Gross income

4184

132,326,003

109,902,478

20

134,472,594

111,551,511

21Interest income

5.1

184

119,372,564

97,917,822

22

119,722,233

98,217,310

22

Less: Interest expenses

5.2

185

87,425,434

67,174,16430

87,341,751

67,086,940

30

Net interest income

5184

31,947,130

30,743,658

4

32,380,482

31,130,370

4

Fee and commission income

6.1

187

7,164,891

6,274,698

14

8,566,191

7,438,752

15

Less: Fee and commission expenses

6.2

187

7,084

16,929

(58)

7,084

16,929(58)

Net fee and commission income

6186

7,157,807

6,257,769

14

8,559,107

7,421,823

15

Net gains/(losses) from trading

7

187

2,905,753(340,346)

954

2,905,753(340,346)

954

Net gains/(losses) from financial assets at fair value
through profit or loss

8

188

1,745,982(389,767)

548

1,947,286(340,388)

672

Net gains/(losses) from derecognition of financial assets

9188

4,057,348

15,127

26,722

4,108,332

15,127

27,059Other operating income

10

188

Total operating income
Less: Impairment charges

11

189

Net operating income(2,920,535)

6,424,944(145)(2,777,201)

6,561,056(142)

44,893,485

42,711,385

5

47,123,759

44,447,642

6

21,144,038

29,291,660(28)

21,137,016

29,276,538(28)

23,749,447

13,419,725

77

25,986,743

15,171,104

71

6,633,355

5,650,176

17

7,379,192

6,277,028

18

Less: Operating expenses
Personnel expenses

12

193

Depreciation and amortisation expenses

13

194

984,510

846,634

16

1,054,459

926,034

14

Other expenses

14

195

6,035,825

4,886,836

24

6,649,013

5,296,103

26

Total operating expenses

13,653,690

11,383,646

20

15,082,664

12,499,165

21

Operating profit before tax on financial services

10,095,757

2,036,079

396

10,904,079

2,671,939

308

2,749,840

1,203,092

129

2,749,840

1,203,092

129

7,345,917

832,987782

8,154,239

1,468,847

455

-

-

-

-

-

-

7,345,917

832,987782

8,154,239

1,468,847

455

Less: Tax on financial services

15

195

Operating profit after tax on financial services
Share of associate companies’ profits/(losses)

16

196

Profit before taxation
Less: Income tax expenses/(reversals)

1,975,590(2,076,058)

195

2,296,029(1,606,957)

243

Profit for the year

17

196

5,370,327

2,909,045

85

5,858,210

3,075,804

90

Profit attributable to equity holders of the parent

5,370,327

2,909,045

85

5,759,436

3,008,737

91

Non-controlling interests
Profit for the year

-

-

-

98,77467,06747

5,370,327

2,909,045

85

5,858,210

3,075,804

90

85

14.42

7.53

91

Basic/Diluted Earnings per share (LKR)

18

198

13.44

7.28

Dividend per share (LKR)

19

199

-

2.50

The Notes to the Financial Statements disclosed on pages 176 to 290 form an integral part of these Financial Statements.

National Development Bank PLC

Annual Report 2023

169

Statement of Comprehensive Income
BANK
For the year ended 31 December

Note

GROUP

Page

2023

2022

No.

LKR ’000

LKR ’000

5,370,327

2,909,045-

Profit for the year

%

2023

2022

LKR ’000

LKR ’000%85

5,858,210

3,075,804

90

-

-

(67,465)

191,168(135)

Other comprehensive income items that will bereclassified to the Statement of Profit or Loss
Exchange differences on translation of foreign
operations
Gains/(losses) on investments in debt instruments - fairvalue through other comprehensive income
Net change in fair value during the year
Changes in impairment allowances

46.2

243

5,259,686

2,420,880

117

5,268,192

2,421,371

118

28.1 (c)218-(181,155)

100-(181,155)

100

Deferred tax effect on gains/ (losses) in above financial
instruments(1,577,905)(675,432)(134)(1,577,918)(675,432)(134)

Net gains/(losses) on investments

3,681,781

1,564,293

135

3,690,274

1,564,784

136

Gains/(losses) on cash flow hedge reserve(3,191,786)

4,385,238(173)(3,191,786)

4,385,238(173)

Deferred tax effect on gains/ (losses) of cash flow
hedge reserve
Net gains/(losses) on cash flow hedge reserve24.1(b)205

Net other comprehensive income that will bereclassified to the Statement of Profit or Loss (a)957,535(1,315,571)

173

957,535(1,315,571)

173(2,234,251)

3,069,667(173)(2,234,251)

3,069,667(173)

1,447,530

4,633,960(69)

1,388,558

4,825,619(71)

Items that will not be reclassified to the Statement ofProfit or Loss
Net gains/(losses) on investments in equity
instruments - fair value through othercomprehensive income

28.2

218

315,123(304,245)

204

315,123(304,245)

204

Revaluation of freehold land and buildings

46.1

243

50,483249,651(80)

92,531

316,789(71)

Deferred tax effect on revaluation gains/(losses)(15,145)(185,581)

92(27,760)(217,679)

87

Net gains/(losses) on revaluation of freehold land andbuildings

35,33864,070(45)

64,771

99,110(35)(581,395)

68,094(954)(605,550)

58,168(1,141)87,60642,044108

94,85345,022111

Net actuarial gains/(losses) on defined benefit plans(493,789)

110,138(548)(510,697)

103,190(595)

Net other comprehensive income that will not bereclassified to the Statement of Profit or Loss (b)(143,328)(130,037)(10)(130,803)(101,945)(28)

Total other comprehensive income for the year, netof taxes (a+b)

1,304,202

4,503,923(71)

1,257,755

4,723,674(73)

Total comprehensive income for the year

6,674,529

7,412,968(10)

7,115,965

7,799,478(9)6,674,529

7,412,968(10)

7,029,011

7,685,035

(9)

-

-

-

86,954

114,443(24)

6,674,529

7,412,968(10)

7,115,965

7,799,478(9)Actuarial gains/(losses) on defined benefit plans

41.2 (g)239

Deferred tax effect on actuarial gains/(losses)

Attributable to:Equity holders of the parent
Non-controlling interests
Total comprehensive income for the year

The Notes to the Financial Statements disclosed on pages 176 to 290 form an integral part of these Financial Statements

170

National Development Bank PLC

Annual Report 2023

Statement of Financial Position
BANK
For the year ended 31 December

AssetsCash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss measured at fair value
Financial assets at amortised cost - loans and receivables
to other customers
Financial assets at amortised cost - debt and other
instruments
Financial assets measured at fair value through othercomprehensive income
Investments in subsidiary companies
Investments in associate companies
Investment property
Property, plant & equipment
Right of use assets
Intangible assets
Current tax receivables
Deferred tax assets
Other assets
Total assets
Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers
Debt securities issued
Current tax liabilities
Deferred tax liabilities
Retirement benefit obligations
Other liabilities
Total liabilities
EquityStated capital
Statutory reserve fundRetained earnings
Other reserves
Total equity to equity holders of the Bank
Non-controlling interests
Total equity
Total liabilities and equity
Contingent liabilities and commitments
Net asset value per share (LKR)

Note

GROUP

Page

2023

2022

No.

LKR ’000

LKR ’000

21
22
23
24

202
203
203
204

28,100,515
7,040,421
33,743,602
3,083,815

34,849,521
18,187,547
4,108,989
7,909,25225

206

24,021,340

26

207

27

%

2023

2022

LKR ’000

LKR ’000

%

(19)
(61)
721
(61)

28,580,676
7,040,421
33,743,602
3,083,815

35,727,665
18,187,547
4,108,989
7,909,252

(20)
(61)
721
(61)

19,318,483

24

26,040,046

20,788,523

25

452,660,461

545,873,027(17)

452,739,928

545,919,824

(17)

213

125,672,370

135,047,886(7)125,672,370

135,047,886

(7)

28
29
30
31
32
33
34
39
40
35

216
219
220
221
222
225
226
232
232
228

83,805,398
1,108,772
3,141,117
1,145,601
1,883,447
9,648,118
4,844,183
779,899,160

44,685,230
1,115,794
3,261,362
1,170,763
1,804,321
9,004,747
6,435,328
832,772,250

88
(1)
(4)
(2)
4
7
(25)
(6)

84,645,423
3,112,440
3,817,097
1,260,055
1,898,270
43,102
9,717,805
5,563,827
786,958,877

45,454,490
2,879,091
3,907,994
1,323,368
1,813,213
43,4889,048,896
7,037,671
839,197,897

86
8
(2)
(5)
5
(1)
7
(21)
(6)

36
24

228
204

7,679,195
93,361

20,251,657
96,246(62)(3)

7,679,195
93,361

20,298,844
96,246

(62)
(3)

37.1
37.2
37.3
38
39
40
41.1
42

229
230
231
231
232
232
235
239

615,643,999
15,632,569
24,636,539
29,388,875
7,265,070
1,299,909
8,111,766
709,751,283

672,314,023
130,541
32,372,265
27,979,631
6,470,353
916,0078,705,664
769,236,387(8)
11,875
(24)
5
12
42
(7)
(8)

615,232,470
15,632,569
24,636,539
29,388,875
7,430,773
921,189
1,439,374
8,608,209
711,062,554

671,713,337
130,541
32,372,265
27,979,631
6,635,188873,280
1,019,294
9,183,115
770,301,741(8)
11,875
(24)
5
12
5
41
(6)
(8)

43
44
45
46

241
241
242
242

47

244

48
49

244
247

20,738,231
3,046,479
41,027,500
5,335,667
70,147,877
70,147,877
779,899,160
277,965,419
175.6019,870,665
2,746,479
37,381,043
3,537,676
63,535,863
63,535,863
832,772,250
293,609,756
167.16

4
11
10
51
10
10
(6)
(5)
5

20,738,231
3,046,479
45,079,167
5,607,516
74,471,393
1,424,930
75,896,323
786,958,877
278,127,046
186.43

19,870,665
2,746,479
41,116,154
3,771,599
67,504,897
1,391,259
68,896,156
839,197,897
294,376,707
177.60

4
11
10
49
10
2
10
(6)
(6)
5

The Notes to the Financial Statements disclosed on pages 176 to 290 form an integral part of these Financial Statements.
We certify that these Financial Statements are in compliance with the requirements of the Companies Act No. 7 of 2007.

Mr. Bimal Perera								Mr. Hasitha Athapattu
Vice President - Strategy and Business Intelligence					Vice President - Finance
The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
Approved and signed for and on behalf of the Board.

Mr. Sriyan Cooray			
Mr. Kelum Edirisinghe			Mrs. Shehani Ranasinghe
Director/Chairman			Director/Chief Executive Officer			Company Secretary
20 February 2024
Colombo

National Development Bank PLC

Annual Report 2023

171

172

National Development Bank PLC

Annual Report 2023
19,870,665

Balance as at 01 January 2023

Balance as at 31 December 2023

Reversal of dividends paid in prior years

44
19

Transfer to the statutory reserve fundFinal dividend for 2022: Scrip

Transactions with equity holders, recognised directly in equity

20,738,231-

867,566---

Tax on other comprehensive income

Total comprehensive income for the year

3,046,479--

300,000---

Profit for the year-

2,746,479

2,746,479---

175,000

Other comprehensive income before tax

Total comprehensive income for the year

19,870,665

Balance as at 31 December 2022--

Reversal of dividends paid in prior years

Final dividend for 2021: Cash

19

1,607,056

44
19Transfer to the statutory reserve fundFinal dividend for 2021: Scrip

Transactions with equity holders, recognised directly in equity--

Tax on other comprehensive income

Total comprehensive income for the year
-

-

-

-

2,571,479-

2,571,479

LKR ’000-

18,263,609-

18,263,609

LKR ’000

Statutory
Reserve FundProfit for the year

Note

StatedCapitalOther comprehensive income before tax

Total comprehensive income for the year

Adjusted balance as at 01 January 2022

Surcharge Tax

Balance as at 01 January 2022

BANK

For the year ended 31 December

44,479

-

-

-

-

-

-

-

44,47944,479

-

-

-

-

-

-

-

-

44,479-44,479

LKR ’000

Share Based
Payment
Reserve

BANK

2,954,169---

3,996,904(1,577,905)

5,574,809-(1,042,735)(1,042,735)

-

-

-

-

1,441,203(675,432)

2,116,635-(2,483,938)-(2,483,938)

LKR ’000Fair Value
through Other
Comprehensive
Income Reserve

1,501,603---

35,338(15,145)

50,483-

1,466,265

1,466,265

-

-

-

-

64,070(185,581)

249,651-

1,402,195-

1,402,195

LKR ’000

Revaluation
Reserve

835,416---(2,234,251)

957,535(3,191,786)-

3,069,667

3,069,667

-

-

-

-

3,069,667(1,315,571)

4,385,238

-

-

-

-

LKR ’000

Cash Flow
Hedge
Reserve

41,027,500

20,156(950,237)(300,000)

4,876,538

87,606(581,395)

5,370,327

37,381,043

37,381,043

4,215(357,124)(1,607,056)(175,000)

2,838,029

42,044(113,060)

2,909,045

36,677,979(2,456,403)

39,134,382

LKR ’000

Retained
Earnings

70,147,877

20,156(82,671)-

6,674,529(547,909)

1,852,111

5,370,327

63,535,863

63,535,863

4,215(357,124)--

7,412,968(2,134,540)

6,638,464

2,909,045

56,475,803(2,456,403)

58,932,206

LKR ’000

Total

Statement of Changes in Equity

Statement of Changes in Equity

National Development Bank PLC

Annual Report 2023

173

Balance as at 31 December 2023

Reversal of dividends paid in prior years

Final dividend for 2022: Scrip

Dividend attributable to non controllinginterests

Transfer to the statutory reserve fundTransactions with equity holders, recognised
directly in equity

19
20,738,231-

867,566

-

-

-

-

Tax on other comprehensive income

Total comprehensive income for the year

3,046,479---

300,000

-

-

-

-

2,746,479

2,746,479

-

-

-

-

175,000

Profit for the year

19,870,665

19,870,665--

1,607,056--

Other comprehensive income before tax

Total comprehensive income for the year

Balance as at 01 January 2023

Balance as at 31 December 2022

44

19

Final dividend for 2021: CashReversal of dividends paid in prior years

19

Final dividend for 2021: Scrip

Dividend attributable to non controllinginterests

Transfer to the statutory reserve fundTransactions with equity holders, recognised
directly in equity--

Tax on other comprehensive income

Total comprehensive income for the year
-

-

-

-

2,571,479-

2,571,479

LKR ’000-

18,263,609-

18,263,609

LKR ’000

Statutory
Reserve FundProfit for the year

44

Notes

StatedCapitalOther comprehensive income before tax

Total comprehensive income for the year

Adjusted Balance as at 01 January 2022

Surcharge Tax

Balance as at 01 January 2022

GROUP

For the year ended 31 December

44,479

-

-

-

-

-

-

-

-

44,47944,479

-

-

-

-

-

-

-

-

-

44,479-44,479

LKR ’000

Share Based
Payment
Reserve

2,979,910

-

-

-

-

4,005,397(1,577,918)

5,583,315-(1,025,487)(1,025,487)

-

-

-

-

-

1,441,694(675,432)

2,117,126-(2,467,181)-(2,467,181)

LKR ’000Fair Value
through Other
Comprehensive
Income Reserve

GROUP

1,747,711

-

-

-

-

64,771(27,760)

92,531-

1,682,940

1,682,940

-

-

-

-

-

99,109(217,680)

316,789-

1,583,831-

1,583,831

LKR ’000

Revaluation
Reserve

835,416

-

-

-

-

(2,234,251)

957,535(3,191,786)-

3,069,667

3,069,667

-

-

-

-

-

3,069,667(1,315,571)

4,385,238

-

-

-

-

LKR ’000

Cash Flow
Hedge
Reserve

45,079,167

20,156(950,237)-(300,000)

5,193,094

94,853(661,195)

5,759,436

41,116,154

41,116,154

4,215(357,124)(1,607,056)-(175,000)

3,074,563

45,02220,804

3,008,737

40,176,556(2,554,396)

42,730,952

LKR ’000

Retained
Earnings

74,471,393

20,156(82,671)--7,029,011(553,290)

1,822,865

5,759,436

67,504,897

67,504,897

4,215(357,124)---

7,685,033(2,163,661)

6,839,957

3,008,73760,172,773(2,554,396)

62,727,169

LKR ’000

Total

1,424,930(53,283)

86,954(11,820)

98,774

1,391,259

1,391,259-(40,778)-

114,444-

47,37767,067

1,317,593(21,780)

1,339,373

LKR ’000

Non Controlling
Interests

75,896,323

20,156(82,671)(53,283)-

7,115,965(553,290)

1,811,045

5,858,210

68,896,156

68,896,156

4,215(357,124)-(40,778)-

7,799,478(2,163,661)

6,887,334

3,075,804

61,490,366(2,576,176)

64,066,542

LKR ’000

Total Equity

Statement of Cash Flows
ACCOUNTING POLICYThe Statement of Cash Flows has been prepared by using ‘The Direct Method’ in accordance with Sri Lanka accounting standard LKAS 7 on “Statement of Cash
Flows”, whereby gross cash receipts and gross cash payments of operating, investing and financing activities have been recognised. For the purpose of the
preparation of the Statement of Cash Flows, cash and cash equivalents include cash in hand, balances with banks and placements with banks, as presented in
the Statement of Financial Position.

BANK
For the year ended 31 December

Note

GROUP

Page

2023

2022

2023

2022

No.

LKR ’000

LKR ’000

LKR ’000

LKR ’000

115,721,380

92,732,700

116,098,876

92,930,324

6,724,305

6,350,791

8,097,965

7,715,104

Dividend income received

77,194

345,679

15,40256,010

Other operating income received

296,105

5,575,291

457,150

5,771,691

Interest paid

(88,033,051)(51,885,500)(88,031,617)(51,895,768)

Personnel costs paid

(6,530,159)(5,591,768)(7,272,194)(6,124,495)

Other expenses paid

(7,082,535)(4,625,884)(7,551,205)(5,003,505)

Operating profit before changes in operating assets and liabilities (a)21,173,239

42,901,309

21,814,377

43,449,361

Cash flows from operating activities
Interest received
Fee and commission income received

Increase/decrease in operating assets
Deposits held for regulatory or monitory control purposes

11,147,126(1,784,185)

11,147,126(1,784,185)

Financial assets at amortised cost - loans and receivables to othercustomers

77,234,867(49,031,658)

77,234,867(49,266,112)

Net (increase)/decrease in operating assets

4,984,338(3,667,367)

5,063,435(2,656,530)

Financial liabilities at amortised cost - due to depositors(57,694,801)

106,277,952(57,505,645)

106,460,463

Financial liabilities at amortised cost - due to debt securities holders

15,502,028(1,210,519)

15,502,028(1,210,519)

Financial liabilities at amortised cost - due to banks/other borrowers(15,280,423)

4,699,078(15,280,423)

4,699,078(435,836)(420,768)(511,440)(485,967)

115,767(2,697,938)(2,593)(3,611,245)

Net cash (outflow)/inflow from operating activities before taxation

56,746,305

95,065,904

57,461,732

95,594,344

Tax on financial services paid

(2,689,010)(1,357,619)(2,689,010)(1,357,619)(2,372,153)(1,582,804)(2,674,348)(1,824,899)-(2,456,403)-(2,576,177)

51,685,142

89,669,078

52,098,374

89,835,649

Net changes in financial investments(24,482,448)(67,569,963)(25,191,301)(67,146,633)

Purchase of intangible assets(1,925,214)(830,787)(1,933,715)(832,700)

Purchase of property, plant and equipment(357,644)(323,417)(398,262)(346,237)

Increase/decrease in operating liabilities

Repayment of principal portion of lease liabilities

42.1.2

240

Net increase/(decrease) in other liabilities

Income taxes paid

39.2

232

Surcharge tax paid
Net cash (used in)/from operating activities
Cash flows from investing activities

Proceeds from disposal of property, plant and equipment
Net cash from/(used in) investing activities

5,069

1,714

5,109

1,788

(26,760,237)(68,722,453)(27,518,169)(68,323,782)-

Cash flows from financing activities
Repayment of debts securities issued

38

231

(3,637,980)-(3,637,980)

Proceeds from debt securities issued

38

231

5,000,000-

5,000,000-(3,348,150)(3,348,149)(3,348,150)(3,348,149)

Interest paid on debt securities issued
Dividends paid to non-controlling interests--(53,283)(40,549)

Dividends paid-

(345,731)-(345,731)(1,986,130)(3,693,880)(2,039,413)(3,734,429)

Net cash from/(used in) financing activities

174

National Development Bank PLC

Annual Report 2023

BANK
For the year ended 31 December

Note

GROUP

Page

2023

2022

2023

2022

No.

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Net (decrease)/increase in cash and cash equivalents

22,938,775

17,252,745

22,540,792

17,777,438

Cash and cash equivalents at the beginning of the year

38,958,510

21,713,982

39,836,654

22,067,433

Cash and cash equivalents at the end of the year

61,897,285

38,966,727

62,377,446

39,844,871

Reconciliation of cash and cash equivalents
Cash and cash equivalents

21

202

28,104,415

34,857,500

28,584,576

35,735,644

Placements with banks

23

203

33,792,870

4,109,227

33,792,870

4,109,227

61,897,285

38,966,727

62,377,446

39,844,871

53,1688,217

53,1688,217

61,844,117

38,958,510

62,324,278

39,836,654

Cash and cash equivalents at the end of the year (Gross)Less : Impairment allowance
Cash and cash equivalents at the end of the year (Net)(a) Reconciliation of Operating Profit before Changes in Operating Assets and Liabilities
BANK
For the year ended 31 December

Note

GROUP

Page

2023

2022

2023

2022

No.

LKR ’000

LKR ’000

LKR ’000

LKR ’000

10,095,757

2,036,079

10,904,079

2,671,939

Operating profit before tax on financial services
Gains on disposal of property, plant & equipment(3,489)(1,436)(5,712)(3,830)Accruals for interest/other income(3,651,184)(5,185,122)(3,654,744)(5,241,668)

Accruals for interest expenses(607,617)

15,288,665(607,617)

15,310,779

Accruals for general expenses(849,732)

352,291(610,077)

459,739

Unrealised revaluation gains/(losses) from investments(5,803,330)

374,640(6,055,618)

320,201

Contribution made to the pension fund

(93,782)(32,931)(93,782)(32,931)

Depreciation of property, plant & equipment

13

194

393,336

397,748

420,837

433,647

Amortisation of intangible assets

13

194

271,056

135,787

275,353

141,118

Depreciation of Right of use assets

13

194

320,118

313,099358,269

351,269

Impairment charges for financial assets and investments in subsidiaries

11

189

21,144,038

29,291,660

21,137,016

29,276,538(41,932)(69,171)(42,075)(69,171)--(211,552)(168,269)

21,173,239

42,901,309

21,814,377

43,449,361

Scrip dividend received from investments
Fair value adjustments on investment property
Operating profit before changes in operating assets and liabilities

Statement of Cash Flows

National Development Bank PLC

Annual Report 2023

175

Notes to the Financial Statements
1.

CORPORATE INFORMATION

1.1

Reporting Entity
The National Development Bank of Sri Lanka was incorporated under the National Development Bank of Sri Lanka Act No. 2 of 1979. In 2005, pursuant to theprovisions of the National Development Bank of Sri Lanka (consequential provisions) Act No.1 of 2005, a company by the name of ‘National Development
Bank Limited’ was incorporated for the purposes of taking over the business of National Development Bank of Sri Lanka. Accordingly, on 15 June 2005, theNational Development Bank Limited was incorporated and with effect from that date, the National Development Bank of Sri Lanka Act No. 2 of 1979 was
repealed except for certain provisions contained therein.
In terms of the new Companies Act No. 7 of 2007, the name of the Bank was changed as ‘National Development Bank PLC’ (‘The Bank’). The Bank was
re-registered in terms of the new Companies Act, on 04 July 2007 and was assigned with PQ 27 as the new Registration Number. The Bank is listed on the
Colombo Stock Exchange. The Registered Office of the Bank and its principle place of business are situated at No.40, Nawam Mawatha, Colombo 02. The
number of branches of the Bank as at 31 December 2023 was 113 (2022 - 113) and the number of staff employed as at 31 December 2023 was 2,756 (2022 2,929).

1.2

Principle Activities of the Bank and the GroupThe principal activities of the Bank and its Group companies are summarised below:
National Development Bank PLC
PARENT COMPANY
40, Nawam Mawatha, Colombo 02, Sri Lanka
Retail banking, small and medium enterprise (SME) banking, corporate banking, project and infrastructure financing, trade finance, investment banking,leasing, housing finance, credit cards, cash management, correspondent banking, remittance services, margin trading, pawning, treasury, underwriting,custodian, investment services and bancassurance.
ENTITYHOLDING %PRINCIPAL ACTIVITY

PRINCIPAL PLACE OF BUSINESS

DirectHolding

Full service investmentbanking

Level 1,135, Bauddhaloka Mawatha,
Colombo 04

Sri Lanka

Indirect
Holding

Investment banking

Level 1,135, Bauddhaloka
Mawatha, Colombo 04

Sri Lanka

Indirect
Holding

Wealth management

Level G, 135, Bauddhaloka
Mawatha, Colombo 04

Sri Lanka

Indirect
Holding

Investment advisory andsecurities

Level 2, 135,Bauddhaloka
Mawatha, Colombo 04

Sri Lanka

DirectHolding

Property management

42, NDB EDB Tower (2nd Floor), Nawam
Mawatha, Colombo 02

Sri LankaNDB Zephyr Partners Lanka (Pvt) Limited(Fully owned subsidiary of NDB ZephyrPartners Limited)

Indirect
Holding

Managementof private
equity funds

48/5/1 (West Wing), Parkway
Building, Park Street, Colombo 02

Sri Lanka

60%

Indirect
Holding

Managementof private
equity funds

IFS Court, Bank Street, TwentyEight Cybercity, Ebene 72201,
Republic of Mauritius

Mauritius

Direct/Indirect
Holding

Investment banking

Bilquis Tower (5th Floor), Plot
6, Gulshan 2, Dhaka 1212, Bangladesh

Bangladesh

99.9%
NDB Capital Holdings Limited

99.9%

Local Subsidiaries

99.9%
NDB Wealth Management Limited

99.9%
NDB Securities (Pvt) Limited

58.7%
Development Holdings (Pvt) Limited

60%

Foreign Subsidiaries

SUBSIDIARIESNDB Investment Bank Limited

NDB Zephyr Partners Limited

41.8%

84.2%

DirectDirect and Indirect

NDB Capital Limited

COUNTRY OF
INCORPORATIONThe Bank also holds 50% shareholding in Ayojana Fund (Pvt) Limited (an Investment in Associate) which is under liquidation.

176

National Development Bank PLC

Annual Report 2023

1.3

Consolidated Financial Statements
The Consolidated Financial Statements
for the year ended 31 December 2023
comprise of the Bank (parent company) andthe subsidiaries and associate companies,
together referred as the Group.
The Bank is the ultimate parent of the
NDB Group the Financial Statements of allcompanies in the group have a common
financial year which ends in 31 December.

2.

BASIS OF PREPARATION OF
FINANCIAL STATEMENTS

2.1

Statement of Compliance
The Consolidated Financial Statementsof the Group and the separate Financial
Statements of the Bank as at 31 December
2023 comprises of y

y

y

y

2.5

The Statement of Profit or Lossand Statement of Comprehensive
Income providing information on theperformance for the year under review(Refer pages 169 and 170).
Statement of Financial Position
providing the information on thefinancial position of the Bank and theGroup as at the year end (Refer page171).
Statement of Changes in Equity
providing the movement in theshareholders’ funds during the year
under review for the Bank and theGroup (Refer pages 172 and 173).
Statement of Cash Flow providing theinformation to the users, on the abilityof the Bank and the Group to generatecash and cash equivalents and theneeds for entities to utilise those cash
flows (Refer pages 174 and 175);yNotes to the Financial Statements, which
comprise of the Accounting Policies andother explanatory notes and information(Refer pages 176 to 290).

The Consolidated Financial Statements of theGroup and the separate Financial Statementsof the Bank, have been prepared andpresented in accordance with the Sri Lanka
Accounting Standards (SLFRS and LKAS),
laid down by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka) andin compliance with the requirements of
the Companies Act No. 7 of 2007 and the
Banking Act No. 30 of 1988 and amendments
thereto. These Financial Statements also
provide appropriate disclosures as requiredby the listing rules of the Colombo Stock
Exchange. The Group has also complied withdirections/guidelines issued by the Central
Bank of Sri Lanka including the Direction No
13 of 2021 and the Direction No. 14 of 2021
which were effective from 1 January 2022.
These Financial Statements, except for
information on cash flows, have been
prepared following the accrual basis ofaccounting. The Group did not adopt any
inappropriate accounting treatment, which
are not in compliance with the requirementsof the SLFRSs and LKASs and regulations
governing the preparation and presentationof the Financial Statements.
The formats used in the preparation andpresentation of the Financial Statements andthe disclosures made therein also comply
with the specified formats prescribed by
the Central Bank of Sri Lanka (CBSL) in the
Circular No.02 of 2019 dated 18 January 2019,
on “Publication of Annual and Quarterly
Financial Statements and Other Disclosures
by Licensed Banks”.

2.2

Functional and Presentation
Currency
The Financial Statements of the Bankand the Group are presented in Sri Lanka
Rupees (LKR) which is the currency of the
primary economic environment in which
the Bank and the Group operates. Financial
information presented in Sri Lanka Rupees(LKR) has been rounded to the nearest
thousand unless indicated otherwise.

2.3

Responsibility for the Financial
Statements
The Board of Directors is responsible
for these Financial Statements of theGroup, in compliance with the Sri Lanka
Accounting Standards (SLFRS and LKAS)
and provisions of the Companies Act No.
7 of 2007 and listing rules of the Colombo
Stock Exchange. The Board of Directors
acknowledge their responsibility as set
out in the ‘Annual Report of the Boardof Directors’ on the affairs of the Bank,‘Statement of Directors Responsibilities on
Financial Reporting’ and the certification
given on the ‘Statement of Financial
Position’ on pages 14, 156 and 171
respectively.

2.4

Approval of the Financial Statements
by Directors
The Financial Statements of the Bank and
the Group for the year ended 31 December
2023 (including the comparative figures)
have been approved and authorisedfor issue by the Board of Directors inaccordance with the resolution of the
Directors on 20 February 2024.

Basis of Measurement
The Financial Statements of the Group have been prepared on a historical cost basis, except for the following material items in the Statement of Financial
Position:
Item

Basis of Measurement

Note

Pages

Derivative financial instruments

Fair value

24

204

Financial assets recognised through profit orloss - measured at fair value

Fair value

25

206

Financial assets measured at fair value
through other comprehensive income

Fair value

28

216

Investment property

Fair value

31

221

Freehold land and buildings

Measured at cost at the time of acquisition and subsequently measured atrevalued amounts, which represented the fair value at the date of revaluation.

32

222

Retirement benefit obligations

Recognised at the present value of the defined benefit obligations less the fairvalue of the assets of the plan.

41

234

Employee Share Option Scheme

Fair value

46.3

243

Annual Report 2023

177

Notes to the Financial Statements

National Development Bank PLC

2.6

Presentation of Financial Statements“Subsidiaries are fully-consolidated from thedate on which, control is transferred to theBank. Non- controlling interests represent
the portion of profit or loss and net assetsof subsidiaries not owned, directly or
indirectly, by the Bank.”

The Group presents its Statement of
Financial Position broadly in order ofliquidity. An analysis regarding therecoveries and settlements within 12
months after the reporting date (current)
and more than 12 months after thereporting date (non-current) is presented in
Note 50 to the Financial Statements.

Non-controlling interests are presented
separately in the Consolidated Statementof Profit or Loss and within equity in theConsolidated Statement of Financial
Position, but separate from the Parent
shareholders’ equity.

2.6.1 Rounding
The amounts in the Financial Statements
have been rounded off to the nearest
Rupees thousand, except where otherwise
indicated as permitted by the Sri Lanka
Accounting Standard - LKAS 1 on
“Presentation of Financial Statements”.

2.10

Foreign Currency Translation(a)

All foreign currency transactions aretranslated into the functional currency,
which is Sri Lankan Rupees (LKR), using
the exchange rates prevailing at the dates,
the transactions were affected. Monetary
assets and liabilities denominated in foreign
currencies are retranslated at the middle
exchange rate of the functional currency
ruling, at the date of the Statement of
Financial Position. The resulting gains andlosses are accounted for in the Statement ofProfit or Loss.

2.6.2 Offsetting of financial assets andliabilities
Financial assets and financial liabilities areoffset and the net amount is reported in
the Statement of Financial Position if, andonly if, there is a enforceable legal right tooffset the recognised amounts and there
is an intention to settle on a net basis, or to
realise the assets and settle the liabilities
simultaneously.
Income and expenses are presented on a
net basis only when it is permitted underSLFRSs, or for gains and losses arising from agroup or similar transactions such as in theGroup’s trading activity.

2.7

(e)

Basis of Consolidation
The Consolidated Financial Statements
comprise the Financial Statements of
the Bank and its subsidiaries for the year
ended 31 December 2023. The Financial
Statements of the Bank’s subsidiaries areprepared for the same reporting year as theBank, using consistent Accounting Policies.
All intra-group balances, income andexpenses and unrealised gains and losses
resulting from intra-group transactions
are eliminated in full in preparing theConsolidated Financial Statements.

178

(d)

Comparative Information
The comparative information is reclassified
wherever necessary to conform to thecurrent year’s presentation and the detailsof which are given in Note 54 to the
Financial Statements.

2.9

(c)

Materiality and Aggregation
In compliance with Sri Lanka AccountingStandards - LKAS 01 on ‘Presentation of
Financial Statements’, each material classof similar items is presented separately
in the Financial Statements. Items of
dissimilar nature or functions are presented
separately, unless they are immaterial.

2.8

(b)

National Development Bank PLC(f)Accordingly, transactions of the Foreign
Currency Banking Unit have been recordedin accordance with Note (a) above. Net
gains and losses are dealt within theStatement of Profit or Loss.
Non-monetary assets and liabilities thatare measured on a historical cost basis inforeign currency are translated using theexchange rates prevailing at that date. Nonmonetary assets and liabilities measured atfair value in a foreign currency are translatedusing the exchange rates at the date when
the fair value was determined.
Forward exchange contracts are valued at
the forward market rates prevailing at thedate of the Statement of Financial Position.
Profits or losses on such transactions aredealt within the Statement of Profit or Loss.
As at the reporting date, the assets andliabilities of overseas subsidiaries/ associates
are translated into the Bank’s presentation
currency at the rate of exchange rulingat the date of the Statement of Financial
Position and its profits and losses aretranslated at the weighted averageexchange rates for the year. Exchange
differences arising on translation are taken
directly to a separate component of equity.
On disposal of a foreign subsidiary/associate, the deferred cumulative amountrecognised in equity relating to thatparticular foreign subsidiary/associate isrecognised in the Statement of Profit or
Loss in ‘other operating expenses’ or ‘otheroperating income’, respectively.

Annual Report 2023

Notes to the Financial Statements

2.11

Significant Accounting Judgments,
Estimates and Assumptions
In the process of applying the accounting
policies of the Group, the Management isrequired to make judgments, which may
have significant effects on the amounts
recognised in the Financial Statements.
Further, the Management is also required
to consider key assumptions concerning
the future and other key sources of
estimation of uncertainty at the date of theStatement of the Financial Position thathave a significant risk of causing a material
adjustment to the carrying amountsof assets and liabilities within the next
financial year. Actual results may differ fromthese estimates.
The key significant accounting judgments,
estimates and assumptions for each typeof assets, liabilities, income and expenses
along with the respective carrying amountsof such items are presented along with thenotes to the Financial Statements.
The following table includes the items thatinvolve significant accounting judgements,
estimates and assumptions in the
preparations of the Financial Statements of
the Group.
Notes to the Financial
Statements

Note

Pages

Impairment charges

11

189

Income tax expense

17

196

Derivative financial
instruments

24

204

Financial assets
recognised throughprofit or loss measured at fair value

25

206

Financial assets at
amortised cost - debt
and other instruments

27

213

Financial assets
measured at fairvalue through othercomprehensive
income28

216

Investment property

31

221

Property, plant &equipment

32

222

Right of use assets

33

225

Intangible assets

34

226

Retirement benefit
obligations

41.1

235

Pension fund

41.2

236

Share based payment
reserve

46.3

243

Fair value of financial
instruments and non
financial instruments

55

257

2.11.1 Going Concern-basis ofaccounting
The Board of Directors of the Bank andits group companies have made anassessment of its ability to continue as agoing concern and is satisfied that it has theresources to continue in business for theforeseeable future. Furthermore, the Boardof Directors is not aware of any material
uncertainties that may cast significant
doubt upon the ability of the Group tocontinue as a going concern.

3.

Accounting policy

Note

Pages

3.1

180

Gross income

4184

Net interest income

5184

Material accounting policy information
Financial instruments
Material accounting policy information - Recognition of income andexpenses

Net fee and commission income

6

186

Therefore, the Financial Statements of theGroup continue to be prepared on a going
concern basis.

Net gains/(losses) from trading

7

187

Net gains/(losses) from financial assets at fair value through profit or loss

8

188

Net gains/(losses) from derecognition of financial assets

9188

ACCOUNTING POLICIESOther operating income

10

188

The Group has consistently applied
the accounting policies for all periods
presented in the financial statements. The
Group has not early adopted any otherstandard, interpretation or amendment thathas been issued but not yet effective.

Impairment charges

11

189

Personnel expenses

12

193

Depreciation and amortisation expenses

13

194

Other expenses

14

195

Tax on financial services

15

195

Apart from the general accounting policies
set out below, the specific accounting
policies pertaining to each item in thefinancial statements have been presented
within the respective notes to the Financial
Statements. These material accounting
policy information have been appliedconsistently to all periods presented within
the respective notes to the Financial
Statements of the Group. The accounting
policies have been consistently appliedby the Group entities where applicableand deviations if any have been disclosed
accordingly.

Income tax expenses

17

196

Basic/Diluted EPS

18

198

Dividend Per Share

19

199

Cash and cash equivalents

21

202

Placements with banks

23

203

Derivative financial instruments

24

204

Financial assets recognised through profit or loss - measured at fair value

25

206

Financial assets at amortised cost - loans and receivables to other customers

26

207

Financial assets at amortised cost - debt and other instruments

27

213

Financial assets measured at fair value through other comprehensive income

28

216

Investments in subsidiary companies

29

219

Investments in associate companies

30

220

Investment property

31

221

Property, plant & equipment

32

222

Right of use assets

33

225

Intangible assets

34

226

Current tax receivables/liabilities

39

232

Deferred tax assets/liabilities

40

232

Other assets

35

228

Due to banks

36

228

Financial liabilities at amortised cost - Due to depositors

37.1

229

Financial liabilities at amortised cost - Due to debt securities holders

37.2

230

Financial liabilities at amortised cost - Due to other borrowers

37.3

231

Debt securities issued

38

231

Retirement benefit obligations

41

234

Annual Report 2023

179

Notes to the Financial Statements

Material accounting policy information - Recognition of assets andliabilities

National Development Bank PLC

3.1

Financial Instruments - SLFRS 9
The Group applies the requirements
under SLFRS 9 - Financial Instruments inclassifying, measuring, re-classifying andde-recognition of financial instruments.

3.1.1 Date of recognition
Financial assets and financial liabilities, withthe exception of loans and receivables
to other customers and balances due todepositors, are initially recognised on the
trade date.
The trade date means the date that the
Bank becomes a party to the contractual
provisions of the instruments. This includes
regular way trades: purchases or sales offinancial assets that require delivery ofassets within the time frame generally
established by regulation or convention
in the market place. Loans and receivables
to other customers are recognised whenfunds are transferred to the customers’
accounts. The Bank recognises balances
due to depositors when funds aretransferred to the Bank.

3.1.2 Initial measurement of financial
instruments
The classification of financial instruments
at initial recognition depends on theircontractual terms and the businessmodel for managing the instruments, as
described in Notes 3.1.4.(a) and (b). Financial
instruments are initially measured at theirfair value (as defined in Note 55), except
in the case of financial assets and financial
liabilities recorded at Fair Value throughProfit or Loss, transaction costs are added
to, or subtracted from, this amount. Trade
receivables of subsidiaries are measured at
the transaction price. When the fair value offinancial instruments at initial recognitiondiffers from the transaction price, the Groupaccounts for the Day 1 profit or loss, as
described below in Note 3.1.3.

3.1.3 Day 1 profit or loss
When the transaction price of the
instrument differs from the fair value atorigination and the fair value is based ona valuation technique using only inputs
observable in market transactions, theGroup recognises the difference between
the transaction price and fair value in theStatement of Profit or Loss over the tenorof the financial instrument using Effective
Interest Rate method. In cases where fairvalue is based on models for which someof the inputs are not observable, thedifference between the transaction priceand the fair value is deferred and is only
recognised in the Statement of Profit or
Loss when the inputs become observable,or when the instrument is derecognised.

180

National Development Bank PLC

3.1.4 Classification and subsequent
measurement of financial assets andliabilities
The Group classifies all of its financial assets
based on the business model for managing
the assets and the asset’s contractual terms,
measures at either:yFair Value through profit or loss (FVPL)
as explained in Note 25.

yAmortised cost, as explained in Note
3.1.4.1. and in Note 27.

yFair Value through Other
Comprehensive Income (FVOCI), as
explained in Note 28.

The Bank measures its derivative portfolio
at FVPL as explained in Note 24.
Financial liabilities, other than loan
commitments and financial guarantees,
are measured at amortised cost or at
FVPL when they are held for trading andfinancial liabilities designated upon initialrecognition as at FVPL.
The subsequent measurement of financial
assets/liabilities depends on theirclassification.

3.1.4 (a) Business model assessment
The Group determines its business model at
the level that best reflects how it manages
groups of financial assets to achieve its
business objective.
The business model of the Group is notassessed on an instrument-by-instrument
basis, but at a higher level of aggregatedportfolios and is based on observablefactors such as:
y

y

y

y

How the performance of the businessmodel and the financial assets held
within that business model areevaluated and reported to the entity’s
key management personnel.
The risks that affect the performance ofthe business model (and the financial
assets held within that business model)
and, in particular, the way those risks
are managed.
How managers of the business arecompensated (for example, whether
the compensation is based on the fairvalue of the assets managed or on thecontractual cash flows collected).
The expected frequency, value andtiming of sales are also important
aspects of the assessment.

The business model assessment is basedon reasonably expected scenarios without
taking ‘worst case’ or ‘stress case’ scenarios
into account.

Annual Report 2023

Notes to the Financial Statements

If cash flows after initial recognition are
realised in a way that is different from theoriginal expectations, the Group does notchange the classification of the remaining
financial assets held in that businessmodel, but incorporates such information
when assessing newly originated or newly
purchased financial assets going forward.

3.1.4 (b) Assessment of whether contractual
cash flows are Solely Payments ofPrinciple and Interests (SPPI test)
As a second step of its classification process,the Group assesses the contractual termsof financial assets to identify whether theymeet the SPPI test.
An entity has a business model to hold thefinancial asset to collect the contractual
cash flows. The characteristics of thecontractual cash flows are that of solely
payments of the principal amount andinterest (referred to as “SPPI”).
For the purpose of this assessment,
principle is defined as the fair value of thefinancial asset at initial recognition and maychange over the life of the financial asset(for example, if there are repayments ofprincipal or amortisation of the premium/discount).
The most significant elements of interest
within a lending arrangement are typicallythe consideration for the time value ofmoney and credit risk. To make the SPPI
assessment, the Group applies judgement
and considers relevant factors such as thecurrency in which the financial asset isdenominated, and the period of which theinterest rate is set.

3.1.4.1 Measurement of financial assets at
amortised cost
Cash and cash equivalents, balances with
the Central Bank of Sri Lanka, placementswith banks, loans and receivables to othercustomers, financial assets at amortised
cost - debts and other instruments aremeasured at amortised cost by the Group.
The Group only measures financial assets
at amortised cost if both of the following
conditions are met and is not designated as
at FVPL:y

The financial asset is held within abusiness model with the objective tohold financial assets in order to collectcontractual cash flows.

y

The contractual terms of the financial
asset give rise on specified dates tocash flows that are solely based on
SPPI.

3.1.5 Reclassification of financial assets andliabilities
As per SLFRS 9, financial assets are notreclassified subsequent to their initialrecognition, except and only in those rare
circumstances when the Group changes
its objective of the business model for
managing such financial assets which
may include the acquisition, disposal or
termination of a business line.

3.3.2 Tax on financial services
Details of “Value Added Tax (VAT) on financial services” and “Social Security Contribution Levy (SSCL)
on financial services” are given in Note 15.

3.3.3 Crop Insurance Levy (CIL)
As per the provisions of the Section 14 of the Finance Act No. 12 of 2013, the CIL was introducedwith effect from 01 April 2013 and is payable to the National Insurance Trust Fund. Currently, the CIL
is payable at 1% of the profit after tax.

3.3.4 Surcharge tax
As per the Provisions of the Surcharge Tax Act No. 14 of 2022, if the aggregate of the taxable incomeof the holding company and all subsidiaries in a group of companies, for the Year of Assessment
2020/2021, exceed LKR 2,000 Mn, each company in the group of companies was liable to pay
Surcharge Tax calculated at 25% on the taxable income (after deducting profit from dividends
received from subsidiaries included in the taxable income). Total surcharge tax liability has beenrecognised by the Group as an opening adjustment to the retained earnings in the Statement of
Changes in Equity as at 01 January 2022 as per the Statement of Alternative Treatment (SoAT) issued
by the Institute of Chartered Accountants of Sri Lanka.

Financial liabilities are not reclassified assuch reclassifications are not permitted by
SLFRS 9.

3.1.6 Derecognition of financial assets
and financial liabilities other than for
substantial modification
3.1.6 (a) Financial assets
A financial asset (or, where applicable, apart of a financial asset or part of a groupof similar financial assets) is derecognised
when the rights to receive cash flows fromthe financial asset have expired.

3.1.6 (b) Financial liabilities
A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires.

3.1.7 Government securities denominatedin local currency – Treasury bills andbonds
Treasury bills and bonds denominated inlocal currency, issued by the Governmentof Sri Lanka, are classified under Stage 1
in line with Banking Act Direction No. 14
of 2021 - Classification, Recognition andMeasurement of Financial Assets Other thanCredit Facilities in Licensed Banks.

3.2

As per the Inland Revenue (Amendment) Act No. 45 of 2022, dividends are subject to WHT effectivefrom 01 January 2023. Accordingly, dividend income is liable to WHT at the rate of 15% which isconsidered as a final tax for the Group.

3.4

Bank’s Risk Management Framework
The Board of Directors of the Bank has the overall responsibility for the establishment and oversightof the Bank’s Risk Management Framework. The Risk Management Policy of the Bank translates
overall risk appetite on business activities in a holistic approach to provide the guidance required forconvergence of strategic and risk perspectives of the Bank. The Board Integrated Risk Management
Committee (IRMC) meets quarterly to review and assess the Bank’s overall risks and to focus onpolicy recommendations and strategies in an integrated manner and the Board of Directors are duly
updated of its activities.
A detailed disclosure on how the risk management is carried out within the Bank’s Risk
Management Framework with due consideration given to Credit risk, Market risk and Liquidity risk
are given in the Notes to the Financial Statements Section on “Risk Management disclosures” onpages 267 to 290.

BANK

Borrowing Costs
As per the Sri Lanka Accounting Standard-LKAS 23 on “Borrowing Costs”, the Group
capitalises borrowing costs that are directly
attributable to the acquisition, construction
or production of a qualifying asset as partof the cost of the asset. A qualifying asset is
an asset which takes a substantial period oftime to get ready for its intended use or sale.
Other borrowing costs are recognised in
the profit or loss in the period in which theyoccur.

3.3

3.3.5 Withholding Tax (WHT) on dividends

RetailBanking

Business
Banking• Privilege
Banking• Islamic
Banking• MicroFinancing• RefinanceOperations

Wholesale Banking

Project andInfrastructure
Financing (PIF)

Credit Risk
Operational
Risk
Market Risk

Taxation

3.3.1 Current tax and deferred tax
Details of “Income tax expense” and“Deferred tax assets and liabilities” are given
in Note 17.

Notes to the Financial Statements

Treasury

Credit Risk

Credit Risk

Credit Risk

Credit Risk

Operational Risk

Operational Risk

Operational Risk

Operational Risk

Market Risk

Market Risk

Market Risk

Market Risk

National Development Bank PLC

Liquidity Risk

Annual Report 2023

181

3.5

Changes in Accounting Policies

y3.5.1 New and amended accounting
standards and interpretations
The Group applied for the first-time certain
standards and amendments, which are
effective for annual periods beginning on
or after 1 January 2023 (unless otherwise
stated). The Bank has not early adopted
any other standard, interpretation oramendment that has been issued but is not
yet effective.
Certain prior year figures and phrases havebeen rearranged in order to compatible
with the presentation requirements of theCentral Bank of Sri Lanka.

yThe other accounting policies adopted by
the Group are consistent with those of theprevious financial year.

3.5.2 Amendments to Interest Rate
Benchmark Reform Phase 1 and 2
IBOR reform Phase 1
On 15 January 2021, the Institute ofChartered Accountants of Sri Lanka (CASri Lanka) issued amendments to SLFRS 9,
LKAS 39 and SLFRS 7 due to Interest Rate
Benchmark Reform (Phase 1). A summary of
Phase 1 amendments are as follows:
y

y

182

Highly Probable Requirement:
According to SLFRS 9 and LKAS
39, when a forecast transaction isdesignated as a hedged item, thattransaction must be highly probableto occur. By the Phase 1 amendments,
when determining whether a forecast
transaction is highly probable, an
entity shall assume that the interest
rate benchmark on which the hedged
cashflows are based is not altered as aresult of the reform.
Prospective assessments: A hedging
relationship qualifies for hedge
accounting only if there is an economic
relationship between the hedged item
and the hedging instrument (describedin SLFRS 9) or the hedge is expected
to be highly effective in achieving
off-setting (described in LKAS 39).
An entity must demonstrate suchprospective assessments on a regularbasis. By the Phase 1 amendments,
when performing prospective
assessments, an entity shall assume
that the interest rate benchmark on
which the hedged item, hedged risk
and/or hedging instrument are based
is not altered as a result of the interest
rate benchmark reform.

National Development Bank PLC

LKAS 39 retrospective assessment: To
apply hedge accounting under LKAS
39, an entity must demonstrate that theactual results of the hedge are within arange of 80% - 125%. This requirement
is commonly known as the ‘LKAS
39 retrospective assessment’. By thePhase 1 amendments, an entity is not
required to undertake the LKAS 39
retrospective assessment for hedging
relationships directly affected by thereform. However, the entity mustcomply with all other LKAS 39 hedge
accounting requirements, including
the prospective assessment.
Separately identifiable risk
components: While there are somedifferences between SLFRS 9 and
LKAS 39 regarding designation of risk
components, both Standards requirea risk component (or a portion) to be
separately identifiable to be eligiblefor hedge accounting. An entity may
designate an item in its entirety or acomponent of an item as a hedged
item in a hedging relationship. SLFRS
9 and LKAS 39 require the component
to be separately identifiable to qualify
as a hedged item. By the Phase 1
amendments, for hedges of noncontractually specified benchmark
component of interest rate risk, an
entity shall apply the separately
identifiable requirement only at
the inception of such hedging
relationships.

y

The effective date of both IBOR reform
Phase 1 and Phase 2 amendments is forannual reporting periods beginning on
or after 1 January 2023 in the Sri Lankan
context.
The requirements under phase 1
amendments have to be applied
retrospectively. However, the reliefs only
apply to hedging relationships that existed
at the beginning of the reporting period
in which an entity first applies thoserequirements or were designated thereafter,
and to the amount accumulated in the
cash flow hedge reserve that existed at the
beginning of the reporting period in which
an entity first applies those requirements.
It follows that it is not possible to apply
the reliefs retrospectively to hedge
relationships that were not previously
designated as such.
The requirements under phase 2
amendments have to be applied
retrospectively. Hedge relationships are
not designated retrospectively. However,discontinued hedging relationships must
be reinstated if, and only if,yThe hedging relationship was
discontinued solely due to changes
required by the Reform, and,
therefore, the entity would not havebeen required to discontinue that
hedging relationship if the Phase 2
Amendments had been applied at thattime andy

At the date of initial applicationof the Phase 2 Amendments, that
discontinued hedge relationshipcontinues to meet all the qualifying
criteria for hedge accounting, after
taking account of the Phase 2
Amendment.

IBOR reform Phase 2
In addition to Phase 1 amendments, CA Sri
Lanka also issued amendments to SLFRS 9,
LKAS 39, SLFRS 7, SLFRS 4 and SLFRS 16 due
to Interest Rate Benchmark Reform. The
Phase 2 amendments provide temporary
reliefs which address the financial reporting
effects when an interbank offered rate
(IBOR) is replaced with an alternative
nearly risk-free interest rate (RFR). The
amendments include the following
practical expedients.
yy

A practical expedient require,
contractual changes, or changes tocash flows that are directly required by
the reform, to be treated as changes toa floating interest rate, equivalent to amovement in a market rate of interest.
Permit changes required by
IBOR reform to be made tohedge designations and hedge
documentation without the hedging
relationship being discontinued.

Annual Report 2023

Notes to the Financial Statements

Provide temporary relief to entities
from having to meet the separately
identifiable requirement when an RFR
instrument is designated as a hedge ofa risk component.

As of 31 December 2023, the Group does
not have any material impact from the IBOR
Reform.

3.6

Standards issued but not yet effective
The new and amended standards andinterpretations that are issued up to the dateof issuance of the Group’s financial statements
but are not effective for the current annual
reporting period, are disclosed below. The
Group intends to adopt these new andamended standards and interpretations, if
applicable, when they become effective.

SLFRS 17 - Insurance Contracts
SLFRS 17 is a comprehensive new accounting
standard for insurance contracts covering
recognition and measurement, presentationand disclosure. SLFRS 17 is effective for annual
reporting periods beginning on or after 1
January 2025. The Bank/Group expects thatthe implementation of this standard may
not have a material impact on the financial
statements of the group.
SLFRS 17 is a comprehensive new accounting
standard for insurance contracts covering
recognition and measurement, presentationand disclosure. Once effective, SLFRS 17 will
replace SLFRS 4 Insurance Contracts (SLFRS 4)that was issued in 2005. SLFRS 17 applies to alltypes of insurance contracts (i.e., life, non-life,
direct insurance and re-insurance), regardlessof the type of entities that issue them, as
well as to certain guarantees and financial
instruments with discretionary participation
features. A few scope exceptions will apply.
The overall objective of SLFRS 17 is to provide
an accounting model for insurance contracts
that is more useful and consistent for insurers.
In contrast to the requirements in SLFRS 4,
which are largely based on grandfathering
previous local accounting policies, SLFRS
17 provides a comprehensive model for
insurance contracts, covering all relevant
accounting aspects. The core of SLFRS 17 is
the general model, supplemented by:y

A specific adaptation for contracts withdirect participation features (the variable
fee approach)y

A simplified approach (the premium
allocation approach) mainly for shortduration contracts

SLFRS 17 is effective for annual reporting
periods beginning on or after 1 January 2026,
with comparative figures required. Early
application is permitted, provided the entity
also applies SLFRS 9 and SLFRS 15 on or before
the date it first applies SLFRS 17.
As of 31 December 2023, the Group does nothave any material impact from the SLFRS 17 Insurance Contracts.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

183

4.

GROSS INCOME
ACCOUNTING POLICYThe Gross Income represents the Interest Income and the Non-Interest Income earned by the Group during the year.		
Gross Income is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. The specific recognition criteria, for each type of Gross Income are given under the respective notes.

BANK
For the year ended 31 December

Note

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000Interest income

5.1

119,372,564

97,917,822

119,722,233

98,217,310

Fee and commission income

6.1

7,164,891

6,274,698

8,566,191

7,438,752

Net gains/(losses) from trading

72,905,753(340,346)

2,905,753(340,346)

Net gains/(losses) from financial assets at fair value through profit or loss

8

1,745,982(389,767)

1,947,286(340,388)

Net gains/(losses) from derecognition of financial assets

94,057,348

15,127

4,108,332

15,127

Other operating income

10(2,920,535)

6,424,944(2,777,201)

6,561,056

132,326,003

109,902,478

134,472,594

111,551,511

Total

5.

GROUP

NET INTEREST INCOME
ACCOUNTING POLICY

Recognition of Interest Income and Interest Expenses
The Group uses the Effective Interest Rate (EIR) method for recognising the interest income and interest expenses of Financial Assets and Financial
Liabilities that are measured at amortised cost, fair value through profit or loss or fair value through other comprehensive income under SLFRS 9- Financial Instruments. EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial
instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or the financial liability.
The carrying amount of financial assets or financial liabilities is adjusted if the Group revises their estimates of payments or receipts. The adjusted
carrying amount is calculated based on the original EIR. The EIR (and therefore, the amortised cost) is calculated by taking into account any discountor premium on an acquisition, fees and costs that are an integral part of the EIR. The change in the carrying amount is recorded as ‘interest income’ forfinancial assets and ‘Interest expenses’ for financial liabilities.
Group ceases the recognition of interest income on assets which are impaired (over 90 days past due) when it is probable that the economic benefits
associated will not continue to flow to the Bank.			

5.1

Interest Income
BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

2,851,076

2,284,922

2,898,626

2,363,675

Financial assets recognised through profit or loss measured at fair value

5,027,171

2,863,301

5,027,171

2,913,525

Financial assets measured at fair value through other comprehensive income

16,389,156

5,443,943

16,584,965

5,527,118

Financial assets at amortised cost - loans and receivables to other customers

72,019,997

70,408,770

72,031,029

70,375,045

Placements with banks

Interest income on impaired loans and receivables to other customers

1,250,873

2,804,639

1,250,873

2,804,639

Financial assets at amortised cost - debt and other instruments

21,537,882

14,107,642

21,537,882

14,107,642

Other interest income
Total interest income (a)

184

GROUP

2023

National Development Bank PLC

Annual Report 2023

296,409

4,605

391,687

125,666

119,372,564

97,917,822

119,722,233

98,217,310

Notes to the Financial Statements

5.2Interest Expenses
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

3,860,848

4,070,485

3,860,848

4,016,986

Due to depositors

77,298,817

58,949,307

77,215,134

58,915,582

Due to debt securities holders

1,231,932

294,995

1,231,932

294,995

Due to other borrowers

1,642,788

492,611

1,642,788

492,611

Due to banks
Financial liabilities at amortised cost

5.3

Debt securities issued

3,391,049

3,366,766

3,391,049

3,366,766

Total interest expenses (b)87,425,434

67,174,164

87,341,751

67,086,940

Net interest income (a)-(b)31,947,130

30,743,658

32,380,482

31,130,370

Net Interest Income from Sri Lanka Government Securities					Interest income and interest expenses on Government Securities have been extracted from interest income and interest expenses given in Notes 5.1 and 5.2
respectively and disclosed separately, as required by the Guidelines issued by the Central Bank of Sri Lanka.
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial assets recognised through profit or loss measured at fair value

5,027,171

2,863,301

5,027,171

2,863,301

Financial assets measured at fair value through other comprehensive income

16,389,156

5,443,943

16,565,542

5,504,900

Financial assets measured at amortised cost - debt and other instruments

20,521,024

13,387,207

20,521,024

13,387,207

41,937,351

21,694,451

42,113,737

21,755,408

Interest income

Less : Interest expenses
Financial liabilities at amortised cost - Due to debt securities holders

1,231,932

294,995

1,231,932

294,995

Net interest income from Sri Lanka Government Securities

40,705,419

21,399,456

40,881,805

21,460,413

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

185

6.

NET FEE AND COMMISSION INCOME
ACCOUNTING POLICY

Income from Fee-based Activities
Fee and Commission Income
The Group recognises the fee and commission earned from depositors and the loans and receivables to other customers as per the requirementsof SLFRS 9 - Financial Instruments and all other fee and commission income are recognised based on the SLFRS 15 - Revenue from contracts withcustomers.						The fee and commission income are recognised by the Group within the scope of SLFRS 15 (Revenue from contracts with customers) only when all of
the following criteria are met:(i) The parties to the contract have approved the contract (in writing, orally or in accordance with other customary business practices) obligations; andare committed to perform their respective obligations;						(ii) The entity can identify each party’s rights regarding the services to be transferred;						(iii) The entity can identify the payment terms for the services to be transferred;						(iv) The contract has commercial substance (ie the risk, timing or amount of the entity’s future cash flows is expected to change as a result of thecontract); and						(v) It is probable that the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferredto the customer. In evaluating whether collectability of an amount of consideration is probable, an entity shall consider only the customer’s ability
and intention to pay that amount of consideration when it is due. The amount of consideration to which the entity will be entitled may be lessthan the price stated in the contract if the consideration is variable because the entity may offer the customer a price concession.
Fees and commission income that are integral to the EIR of a financial asset are capitalised and included in the measurement of the EIR and recognisedin the Statement of Profit or Loss over the expected life of the instrument. Other fees and commission income on account servicing, investment
management, underwriting, advisory work, loan syndication and all other fees and commissions earned during the normal course of the business of
the Group are recognised as the related services are performed and are recorded on accrual basis. If a loan commitment is not expected to result in
the draw-down of a loan, then the related loan commitment fees are recognised on a straight-line basis over the commitment period.

Income from Financial Guarantees
The Bank issues financial guarantees, consisting of letters of credit, guarantees and acceptances, in the normal course of its business activities. Financial
guarantees are initially recognised in the Statement of Financial Position as a contingent liability at the guarantee value. The premium received isrecognised in the Statement of Profit or Loss on a straight-line basis over the life time of the guarantee and the balance amount to be amortised to theStatement of Profit or Loss after the reporting date, is recognised in the Statement of Financial Position, as Other Liabilities.

Rental Income
The Group recognises the rental income arising from operating leases including the investment property on an accrual basis by equalising the rental
income over the tenure of the rent agreement in line with the requirement of SLFRS 16-Leases.

Fee and Commission Expenses
Fee and commission expenses mainly relates to transactions of loans and receivables to other customers and service fees, which are paid when theservices are received. Fee and commission expenses are recognised on an accrual basis.

BANK

Fee and commission income (Note 6.1)
Less: Fee and commission expenses (Note 6.2)
Net Fee and commission income

186

National Development Bank PLC

Annual Report 2023

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

7,164,891

6,274,698

8,566,191

7,438,752

7,084

16,9297,084

16,9297,157,807

6,257,769

8,559,107

7,421,823

Notes to the Financial Statements

BANK

6.1

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Cards

1,928,905

1,708,769

1,928,905

1,708,769

Due to depositors

422,159

333,750

422,159

333,750

Guarantees

745,043

850,612745,043

850,612Loans and receivables to other customers

647,225

658,179

647,225

658,179

Remittances

1,232,093

1,002,662

1,232,093

1,002,662

Trade finance

1,688,617

1,271,469

1,688,617

1,271,469

Other financial services

354,247

326,197

427,425

399,857

Bancassuarance

144,663

121,318

144,663

121,318--

994,530

627,332
273,573

Fee and Commission Income on

Investment banking and wealth management
Brokerage
Rental income
Total (a)--153,625

1,939

1,742

181,906

191,231

7,164,891

6,274,698

8,566,191

7,438,752

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

BANK

6.2

Fee and Commission Expenses on
Loans and receivables to other customers

4,159

4,300

4,159

4,300

Other financial services

2,925

12,6292,925

12,629Total (b)7,084

16,9297,084

16,9297,157,807

6,257,769

8,559,107

7,421,823

Net Fee and commission income (a)-(b)

7.

GROUP

NET GAINS/(LOSSES) FROM TRADINGACCOUNTING POLICYNet gains/(losses) from trading includes the unrealised gains/(losses) derived from revaluation of the foreign exchange contracts and other derivative
financial instruments. All derivative financial instruments are fair valued at each reporting date as per the SLFRS 09 - Financial Instruments.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,924,931(834,958)

1,924,931(834,958)

Income from foreign exchange contracts
With banks
With other customers

980,822494,612980,822494,612

Total

2,905,753(340,346)

2,905,753(340,346)

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

187

8.

NET GAINS/(LOSSES) FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSSACCOUNTING POLICYNet gains/ (losses) from financial assets at fair value through Profit or Loss comprises all realised and unrealised fair value changes, related capital gains
and losses derived from the financial assets classified as financial assets recognised through profit or loss measured at fair value.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000-(365,514)

140,495(365,514)

1,745,982(24,253)

1,745,982(6,555)

Financial assets recognised through profit or loss measured at fair value
Realised/ unrealised revaluation gains/(losses);
Investment in unit trusts
Sri Lanka Government Securities - treasury bills/bonds
Equity securities
Total

9.

-

-

60,80931,681

1,745,982(389,767)

1,947,286(340,388)

NET GAINS/(LOSSES) FROM DERECOGNITION OF FINANCIAL ASSETSACCOUNTING POLICY
All realised gains and losses from derecognition of financial assets classified as financial assets measured at amortised cost and financial assets
measured at fair value through other comprehensive income are given below.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Debt securities

4,057,348

15,127

4,108,332

15,127

Total

4,057,348

15,127

4,108,332

15,127

Financial assets - Measured at Fair Value through Other Comprehensive Income

10.

OTHER OPERATING INCOME
ACCOUNTING POLICY
Other operating income includes capital gains/(losses), dividend income, foreign exchange gains, disposal gains/(losses) from property, plant &equipment and gains/(losses) from investment properties.

Dividend Income
Dividend income from group investments in subsidiary companies and associate companies and other investments in quoted and non quoted sharesare recognised when the Group’s right to receive the payment is established.						Foreign Exchange GainsThe change in exchange rate differences arising from the valuation of the retained profits held in foreign currency is included under ‘foreign exchange
gains’.

Gains/(Losses) on disposal of Property, Plant & Equipment
Gains/(losses) on disposal of property, plant & equipment represent the difference between the sales proceeds and the net book value of
property,plant & equipment that are disposed during the year.						Gains/(Losses) on Investment Properties
Gains/(losses) from investment properties arise from the changes in the fair values of investment properties and are included in the Statement of Profit
or Loss, in the year in which they arise. The valuation methodology and the basis of valuation adopted by the Group is explained in detail in Note 31
on page 221.

Initial recognition of fair value on LKR bonds replaced for Sri Lanka Development Bonds
The Day 1 losses relating to LKR bonds which replaced Sri Lanka Development Bonds as a part of the Domestic Debt Optimisation exercise undertaken
in July 2023 by the Government of Sri Lanka was estimated considering a comparable instrument as at 31 December 2023.

188

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

BANK

Dividend income from securities- Quoted investments- Non-quoted investments
Dividend income from group investments - Non-quoted investments
Foreign exchange gains/(losses)
Gains/(losses) on disposal of property, plant & equipment
Gains/(losses) on investment properties (Note 31)
Initial recognition of fair value on LKR bonds replaced for Sri Lanka
Development Bonds
Others
Total

11.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

41,932

69,17152,302

86,88328,712
48,482(2,606,158)
3,489(450,000)

38,841
306,838
5,917,072
1,436-

28,712(2,632,844)
5,712
211,552(450,000)

38,841
6,121,572
3,830
168,269-

13,008(2,920,535)

91,586
6,424,944

7,365(2,777,201)

141,661
6,561,056

IMPAIRMENT CHARGESACCOUNTING POLICYThe Group recognises the impairment(Expected Credit Loss) on financial instruments
assessed as per SLFRS 9 -Financial Instruments.
Further, the Group also recognises an
impairment loss when the carrying amount of
a non-financial asset exceeds the estimatedrecoverable amount from that asset.

Overview of the Expected Credit Loss (ECL)The Group records the allowance for expectedcredit loss for all loans and receivables andother financial assets not held at Fair Value
through Profit or Loss (FVPL), together withloan commitments, financial guarantee
contracts and letters of credit which arereferred to as ‘financial instruments’. Equity
instruments are not subject to impairment
under SLFRS 9.
The Expected Credit Loss (ECL) allowanceis based on the credit losses expected toarise over the life of the asset [The Life Time
Expected Credit Loss (LTECL)], when there
is a significant increase in credit risk sinceorigination. In all other instances ECL is basedon the 12 months ECL (12mECL). The Group’s
policies for determining if there has been asignificant increase in credit risk are set out in
Note 56.3.4.5.
The 12 months ECL is the portion of life time
ECLs that represents the ECLs that result fromdefault events on a financial instruments thatare possible within the 12 months after thereporting date.
Both Life time ECLs and 12 months ECLs arecalculated either on an individual basis or acollective basis, based on a predeterminedthreshold of customer exposures. If a particularloan is credit impaired under individual
impairment the amount of loss is measured as
the difference between the carrying amountof the asset and the present value of estimatedfuture cash flows. If the individually assessed
asset is determined that it is not credit impaired
Notes to the Financial Statements

under individual impairment, such financial
assets are then collectively assessed for any
impairment along with other portfolios having
similar risk characteristics under collective
impairment. The Group’s policy for grouping
financial assets measured on a collective basis
is explained in Note 56.3.4.5.
The Group has established a policy to perform
an assessment, at the end of each reporting
period, of whether a financial instrument’s
credit risk has increased significantly since initialrecognition, by considering the change in therisk of default occurring over the remaining
life of the financial instrument. This is further
explained in Note 56.3.4.6.
As per SLFRS 9, the Group adopts a three stage
model for impairment based on changes incredit quality since initial recognition.

STAGE 1
A financial asset that is not originally credit
impaired on initial recognition is classified inStage 1. Financial instruments in Stage 1 havetheir ECL measured at an amount equal to the
proportion of LTECL that result from default
events possible within the next 12 months(12mECL). Stage 1 also include financial assetsof which the credit risk has improved andhence reclassified from stage 2 and stage 3.

STAGE 2Financial asset is moved to Stage 2 if asignificant increase in credit risk (SICR) sinceorigination is identified and the Group records
an allowance for LTECL. Stage 2 also includes
financial assets of which credit risk has
improved and hence reclassified from stage 3.

The calculation of Expected Credit Loss(ECL)The Group calculates ECLs under the threestaging approach to measure the expectedcash shortfalls, discounted at an approximation
to the Effective Interest Rate (EIR). A cash
shortfall is the difference between the cash
flows that are due to an entity in accordancewith the contract and the cash flows that theentity expects to receive.
The calculation of ECLs, including theestimation of the expected period of exposureand discount rate is made on an individual
basis or on a collective basis as per the Group’s
impairment policy. The collective assessments
are made separately for portfolio of facilities
with similar credit risk characteristics.
The mechanics of the ECL calculations
are outlined below and the key elements,
Probability of Default (PD), Exposure at Default(EAD) and Loss Given Default (LGD) undercollective impairment assessment are as
follows:

PD
The Probability of Default (PD) is an estimateof the likelihood of default over a given time
horizon. A default may only happen at a certain
time over the assessed period, if the facility has
not been previously derecognised and is stillin the portfolio. The concept of PDs is further
explained in Note 56.3.4.2.

STAGE 3
If a financial asset is credit impaired (as outlined
in Note 56.3.4.1), it is moved to Stage 3 and theGroup recognises an allowance for LTECL, withprobability of default at 100%.

National Development Bank PLC

Annual Report 2023

189

11.

IMPAIRMENT CHARGES (CONTD.)ACCOUNTING POLICY

Forward looking information

EAD
The Exposure at Default (EAD) is an estimateof the exposure at a future default date, taking
into account expected changes in the exposure
after the reporting date, including repayments
of principal and interest whether scheduled bycontract or otherwise, expected drawdowns
on committed facilities. To calculate EAD for astage 1 loan, the Group assesses the possible
default events within 12 months. For all otherloans, the EAD is considered for default events
over the life time of the financial instruments.
The EAD is further explained in Note 56.3.4.3.

LGD
The Loss Given Default (LGD) is an estimateof the loss arising in the case where a default
occurs at a given time. It is based on the
difference between the contractual cash flows
due and those that the lender would expect
to receive, including from the realisation of any
collateral. They are calculated on a discounted
cashflow basis using EIR as the discounting
factor. It is usually expressed as a percentage of
the EAD. The LGD is further explained in Note
56.3.4.4.
The above parameters are generally derived
from internally developed statistical models
and historical data and then adjusted to reflectforward looking information.

The Group incorporates forward looking
information into both its assessment as towhether the credit risk of an instrument
has increased significantly since its initialrecognition and its measurement of ECL. Whenestimating the ECLs, the Group considers three
economic scenarios (base case, best case andworse case). Quantitative economic factors
are based on economic data and forecasts
published by CBSL and other reliable sources.
In its ECL models, the Group relies on a broad
range of forward looking information as
economic inputs, such as:yyQuantitative factors - GDP growth,
Unemployment rate, Rate of Inflation,
Interest rate and Exchange rate
Qualitative factors - Government
policies, average loan to value ratio andmanagement outlook on delinquencies
etc.

The inputs and models used for calculating
ECLs may not always capture all characteristicsof the market at the date of the Financial
Statements.
Detailed information about these inputs andsensitivity analysis are provided in Note 56.3.4.7.

Credit cards and other revolving facilities
When estimating the ECLs, the Group considers
three scenarios (a base case, best case andworse case) of Economic Factor Adjustment(EFA). When relevant, the assessment ofmultiple scenarios are also incorporated toassess how defaulted loans are expected to be
recovered, including the probability that theloans will cure and the value of collateral or theamount that might be received for selling theasset.
With the exception of Credit cards and otherrevolving facilities, for which the treatment isseparately set out below under “Credit cards
and other revolving facilities”, the maximum
period for which the credit losses are
determined is the contractual life of a financial
instrument unless the Group has the legal rightto call it earlier.
Provisions for ECLs for undrawn loan
commitments are assessed as set out below
under “Loan commitments and letters ofcredit”. The calculation of ECLs (including
the ECLs related to the undrawn element)of revolving facilities such as credit cards is
explained below under “Credit cards and otherrevolving facilities”.

190

National Development Bank PLC

The Bank’s product offering includes a varietyof corporate and retail overdraft and credit
cards facilities, in which the Bank has the rightto cancel and/or reduce the facilities within ashort period of time. The Bank does not limit
its exposure to credit losses to the contractual
notice period, but, instead calculates ECL overa period that reflects the Bank’s expectationsof the customer behaviour, its likelihood of
default and the Bank’s future risk mitigation
procedures, which could include reducing
or cancelling the facilities. Based on pastexperience and the Bank’s expectations, theperiod over which the Bank calculates ECLs forthese products, is one year.
The ongoing assessment of whether asignificant increase in credit risk has occurred
for revolving facilities is similar to otherlending products. This is based on shifts inthe customer’s number of days past due,as explained in Note 56.3.4.5, but greater
emphasis is also given to qualitative factors
also.
The interest rate used to discount the ECLs for
credit cards is based on the average effective
interest rate that is expected to be charged
over the expected period of exposure to theAnnual Report 2023

Notes to the Financial Statements

facilities. This estimation takes into account thatmany facilities are repaid in full each monthand are consequently charged no interest.

Loan commitments and letters of credit:
When estimating LTECLs for undrawn loan
commitments, the Group estimates the
expected portion of the loan commitmentthat will be drawn down over its expected
life. The ECL is then based on the present
value of the expected shortfalls in cash flows
if the loan is drawn down. The expected cash
shortfalls are discounted at an approximation
to the expected EIR of the loan. For loan
commitments and letters of credit, the ECL isrecognised within other liabilities.

Financial guarantee contracts
The Bank’s liability under each guarantee ismeasured at the higher of the amount initiallyrecognised less cumulative amortisation
recognised in the Statement of Profit or Lossand the ECL allowance. For this purpose, theBank estimates ECLs based on the present
value of the expected payments to reimburse
the holders for a credit loss that it incurs. The
shortfalls are discounted by the risk adjusted
interest rate relevant to the exposure. The ECLs
related to financial guarantee contracts arerecognised within other liabilities.

Impairment of Debt Instruments
The Group calculates the impairment on
debt instruments at amortised cost anddebt instruments at FVOCI. Thus the Groupconsiders PDs based on the rating scales ofexternal rating agencies as at the reportingdate.
LGD for all debt instruments are based on
the guideline issued by the Central Bank of
Sri Lanka. Further, the Group applied theEconomic Factor Adjustment based on themacro economic factor model. Exposure of
Default (EAD) of a debt instrument is its grosscarrying amount.

Recognition of impairment on Financial
Assets measured at Fair Value through
Other Comprehensive Income (FVOCI)The ECLs for debt instruments measured at
FVOCI do not reduce the carrying amountof these financial assets in the Statement of
Financial Position, which remains at fair value.
Instead, an amount equal to the allowancethat would arise if the assets were measured
at amortised cost is recognised in OCI as anaccumulated impairment amount, with acorresponding charge to the Statement ofProfit or Loss. The accumulated loss recognisedin OCI is recycled to the Statement of Profit or
Loss upon derecognition of the assets.

ACCOUNTING POLICY

Collateral valuation
To mitigate its credit risks on financial assets,
the Bank seeks to use collateral, where possible.
The collateral comes in various forms, such as
cash, securities, letters of credit/guarantees,real estate, receivables, inventories, other nonfinancial assets and credits enhancements suchas netting agreements etc.
However, the fair value of collateral affects thecalculation of ECLs. It is generally assessed, at
inception and re-assessed on a regular basis.
Details of the impact of the Bank’s various
credit enhancements are disclosed in Note
56.3.4.11.
To the extent possible, the Bank uses active
market data for valuing financial assets held ascollateral. Other financial assets which do nothave readily determinable market values arevalued using models. Non-financial collateral,such as real estate, is valued based on data
provided by third parties such as independentvaluation specialists.

Collateral repossessed
In its normal course of business, the Bank
does not physically repossess properties orother assets in its retail portfolio, but engages
external agents to recover funds, generally
at auctions, to settle outstanding debt. Any
surplus funds are returned to the customers/
obligors. As a result of this practice, assets
under legal repossession processes are notrecorded on the Statement of Financial
Position.
The Bank’s policy is to sell the repossessed
assets at the earliest possible opportunity.
Such collaterals repossessed are held on amemorandum basis without derecognising theunderlying receivable.

Write-offs
Financial assets are written off either partiallyor in their entirety only when the Bank
has stopped pursuing the recovery. If theamount to be written off is greater than theaccumulated loss allowance, the difference isfirst treated as an addition to the impairment
allowance that is then applied against thegross carrying amount. Any subsequent
recoveries are credited to the Statement ofProfit or Loss.

Forborne and modified loans(restructured/rescheduled loans)
The Group sometimes makes concessions ormodifications to the original terms of loans
as a response to the borrower’s financial
difficulties, rather than taking possession or tootherwise enforce collection of collateral. The

Notes to the Financial Statements

Group considers a loan forborne when suchconcessions or modifications are provided asa result of the borrower’s present or expectedfinancial difficulties and the Group would
not have agreed to them if the borrower had
been financially healthy. Indicators of financial
difficulties include defaults on covenants.
Forbearance may involve extending thepayment arrangements and the agreementof new loan conditions. Once the terms
have been renegotiated, any impairment ismeasured using the original EIR as calculated
before the modification of terms. It is theGroup’s policy to monitor forborne loans to
help ensure that future payments continue tobe likely to occur. Derecognition decisions andclassification between Stage 2 and Stage 3 aredetermined on a case-by-case basis.
When the loan has been renegotiated or
modified but not derecognised, the Groupalso reassesses whether there has been asignificant increase in credit risk. Accordingly,
all rescheduled loans are classified as Stage
3 unless upgraded due to satisfactory
performing period as specified in the
Direction on “Classification, Recognition andMeasurement of Credit Facilities in Licensed
Banks” issued by the Central Bank of Sri Lanka.
Further loans which have been restructured areclassified as stage 2 or 3 based on the numberof times restructured unless upgraded due tosatisfactory performing period as specified in
the said Direction.

Significant Accounting Judgements,
Estimates and Assumptions on Impairment
Allowance on financial assets
The measurement of impairment allowance
under SLFRS 9 across all categories of financial
assets requires judgement in particular, theestimation of the amount and timing of
future cash flows and collateral values when
determining impairment losses and theassessment of a significant increase in credit
risk. These estimates are driven by a number offactors, changes in which can result in different
levels of impairment allowances. Accounting
judgements, estimates and assumptions arereviewed regularly and revisions to the same
are recognised prospectively.

yThe segmentation of financial assets
when their ECL is assessed on a collective
basis.

yDevelopment of ECL models, including thevarious formulas and the choice of inputs.

y

Determination of associations between
macroeconomic scenarios and economic
inputs such as unemployment levels andcollateral values, and the effect on PDs,
EADs and LGDs.

y

Selection of forward-looking
macroeconomic scenarios and theirprobability weightings to derive theeconomic inputs into the ECL models.

A sensitivity analysis of impairment allowance
to feasible changes in various factors used has
been disclosed in note 56.3.4.14

Management overlays on impairment
allowances
The Group considered the following
management overlays to the model incomputing expected credit loss provisions
at the end of the period to mitigate any
unforeseen increased credit risk in addition
to the expected credit loss resulted from themodelled computation.
y

The economic assumptions applied in
respect of forward-looking information
were adjusted significantly by increasing
the weightage given to worst casescenario and adjusting the other factors as
required.

yStaging of the facilities included in theidentified risk elevated industries weremoved to a higher stage where necessary
to capture the significant increase in credit
risk.

The Group’s ECL calculations are outputs ofcomplex models with a number of underlying
assumptions regarding the choice of variable
inputs and their interdependencies. Elementsof the ECL models that are considered
accounting judgements and estimates include;y

The Group’s criteria for assessing if there
has been a significant increase in credit risk
and hence allowances for financial assets
should be measured on a LTECL basis andthe qualitative assessment.

National Development Bank PLC

Annual Report 2023

191

11.

IMPAIRMENT CHARGES (CONTD.)BANK
For the year ended 31 December

Note

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Charges/(reversals) to the Statement of Profit or Loss;
Loans and receivables to other customers- Impairment on individually significant loans

11.1

10,167,636

10,772,845

10,167,636

10,772,845- Impairment on collective loan portfolio

11.1

5,500,035

1,733,532

5,500,035

1,733,532

11.1

291,802(660,626)

291,802(660,626)

15,959,473

11,845,751

15,959,473

11,845,751

5,177,543

17,430,787

5,177,543

17,430,787

Impairment on contingent liabilities and commitments
Total impairment charges for loans and receivables to other customers andcontingent liabilities and commitments
Total impairment charges on financial assets

11.1

Impairment charges on investments in subsidiaries

11.1

Total

11.1

7,022

15,122--

21,144,038

29,291,660

21,137,016

29,276,538

Analysis of Impairment Charges - Stage wise Impairment
A further analysis of the impairment charges on financial instruments for the year are given below.
BANK
Current Year 2023

GROUP

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Impairment on loans and receivables
Financial assets at amortised cost- loans and receivables to othercustomers(340,178)

721,519

15,286,330

15,667,671(340,178)

721,519

15,286,330

15,667,671

Individual impairment [Note 26.6 (a)]-561,863

9,605,773

10,167,636-

561,863

9,605,773

10,167,636

Collective impairment [Note 26.6 (a)](340,178)

159,656

5,680,557

5,500,035(340,178)

159,656

5,680,557

5,500,035

Contingent liabilities and commitments[Note 48.1 (b)]278,635

44,253(31,086)

291,802

278,635

44,253(31,086)

291,802

Total impairment charges on loans
and receivables to other customers
and contingent liabilities andcommitments(61,543)765,772

15,255,244

15,959,473(61,543)765,772

15,255,244

15,959,473

Impairment on financial assets

192

Cash and cash equivalents (Note 21.1)(4,079)--(4,079)(4,079)--(4,079)Placements with banks (Note 23.1)

49,030--49,03049,030--49,030Financial assets at amortised cost debt and other instruments [Note27.1 (d)]279

5,132,313-

5,132,592

279

5,132,313-

5,132,592

Total impairment charges on financial
assets45,2305,132,313-

5,177,543

45,2305,132,313-

5,177,543

Impairment charges on investments in
subsidiaries (Note 29.1)

7,022

-

-

7,022

-

-

-

-

Total impairment charges(9,291)

5,898,085

15,255,244

21,144,038(16,313)

5,898,085

15,255,244

21,137,016

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

BANK
Previous Year 2022

GROUP

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Impairment on loans and receivables
Financial assets at amortised cost- loans and receivables to othercustomers

334,730

1,316,121

10,855,526

12,506,377

334,730

1,316,121

10,855,526

12,506,377

Individual impairment [Note 26.6 (a)]-821,341

9,951,504

10,772,845-

821,341

9,951,504

10,772,845

Collective impairment [Note 26.6 (a)]334,730

494,780

904,022

1,733,532

334,730

494,780

904,022

1,733,532

Contingent liabilities andcommitments [Note 48.1 (b)](353,957)(101,473)(205,196)(660,626)(353,957)(101,473)(205,196)(660,626)

Total impairment charges on loans
and receivables to other customers
and contingent liabilities andcommitments(19,227)

1,214,648

10,650,330

11,845,751(19,227)

1,214,648

10,650,330

11,845,751

Impairment on financial assets

12.

Cash and cash equivalents (Note 21.1)

7,310

-

-

7,310

7,310

-

-

7,310

Placements with banks (Note 23.1)(1,853)--(1,853)(1,853)--(1,853)Financial assets at amortised cost debt and other instruments [Note27.1 (d)](180)

17,425,510-

17,425,330(180)

17,425,510-

17,425,330

Total impairment charges on financial
assets5,277

17,425,510-

17,430,787

5,277

17,425,510-

17,430,787

Impairment charges on investments in
subsidiaries (Note 29.1)

15,122--

15,122----

Total impairment charges

1,172

18,640,158

10,650,330

29,291,660(13,950)

18,640,158

10,650,330

29,276,538

PERSONNEL EXPENSES
ACCOUNTING POLICY
Personnel expenses include salaries andbonus, terminal benefit charges, share-based
payments and other related expenses. The
provisions for bonus is recognised when
it is probable that an outflow of resources,
embodying economic benefits will be required
to settle the obligation and a reliable estimate
can be made on the amount of the obligation.

Defined Contribution Plans
A defined contribution plan is a post
employment benefit plan under which
an entity pays fixed contributions into aseparate entity (a fund) and will have no legal
or constructive obligation to pay further
contributions if the fund does not holdsufficient assets to pay all employee benefits
relating to employee services in the current
and prior periods, as defined in the Sri Lanka
Accounting Standard - LKAS 19 (Employee
Benefits).

Notes to the Financial Statements

Employees’ Provident Fund and
Employees’ Trust Fund
Employees are eligible for Employees’
Provident Fund contributions and Employees’
Trust Fund contributions, in accordance withthe respective statutes and regulations. The
Bank contributes 15% and 3% of gross salaries
of employees to the Bank’s Employees’
Provident Fund and the Employees’ Trust Fund
respectively. Group companies contribute
12% and 3% of gross salaries of employees
to the Employees’ Provident Fund of Central
Bank of Sri Lanka and Employees’ Trust Fund
respectively.
The above expenses are identified ascontributions to ‘Defined Contribution Plans’ as
defined in the Sri Lanka Accounting Standard- LKAS 19

Defined Benefit Plans
A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. Accordingly, the pension fund and staff
gratuity were considered as defined benefit
plans as per Sri Lanka Accounting Standard LKAS 19, Employee Benefits. The contributions
to the defined benefit plans are recognised in
the Statement of Profit or Loss, based on an
actuarial valuation carried out for the gratuity
liability and the pension fund of the Group inaccordance with LKAS 19.
The basis of measurement, assumptions usedin actuarial valuations are given in detail in
Note 41 to these Financial Statements.

National Development Bank PLC

Annual Report 2023

193

12.

PERSONNEL EXPENSES (CONTD.)
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000Salary and bonus

5,219,419

4,543,796

5,823,543

5,062,479

Contribution to Employees’ Provident Fund

487,878

441,180

532,368

478,666

Contribution to Employees’ Trust Fund

97,576

88,107108,282

97,131- Pension Fund [Note 41.2 (a)](93,782)(32,931)(93,782)(32,931)- Gratuity [Note 41.1 (a)]197,725

Contribution to defined benefit plan

13.

258,344

177,685

283,632

Others663,920432,339

725,149

473,958

Total

6,633,355

5,650,176

7,379,192

6,277,028

DEPRECIATION AND AMORTISATION EXPENSES
ACCOUNTING POLICY

Useful Life Time of Property, Plant & Equipment and Depreciation
Depreciation is calculated on a straight-line basis over the useful life of the assets, commencing from the date when the assets are available for use,since this method closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets. No depreciation ischarged in the month of disposal of the asset and the Group does not charge depreciation on freehold land. The depreciation rates are determined
separately for each significant part of the assets.						.
The Group reviews the residual values, useful lives and methods of depreciation of property, plant & equipment at each reporting date. Judgment of
the management is exercised in the estimation of these values, rates, methods and hence they are subject to uncertainty.
The estimated useful lives of the assets for the year ended 31 December 2023 and 2022, are as follows:
Period (Years)% per Annum

Freehold buildings

50

2.00

Leasehold buildings

5

20.00
25.00

Motor vehicles

4

Office equipment and furniture

5

20.00

Computer equipment - ATMs

8

12.50

Computer equipment - Servers

6

16.67

Computer equipment - iPads

4

25.00

Computer equipment - Others

5

20.00

Mobile Phones

3

33.33

Sundry fittings

4

25.00

Above rates are compatible with the rates used by the group companies.

Amortisation of Intangible Assets
Intangible assets are amortised using the straight-line method to write down the cost over its estimated useful economic lives and the useful life for theyears ended 31 December 2023 and 2022 are given as follows:
Class of Assets% per Annum
16.67

Computer software - Application software

6

Computer software - Data Base Software

8

12.50

Computer software - Operating System software

8

12.50

Computer software - Utility Software

6

16.67

Computer software - Core Banking

10

10.00

5-10

20.00-10.00

Computer software - Others
Above rates are compatible with the rates used by the group companies.

194

Period (Years)

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Depreciation of Right of Use Assets
Depreciation is calculated using the straight-line method over the tenor of the lease agreements and it is recognised in the Statement of Profit or Loss. An
analysis of depreciation and amortisation expenses are given below.
BANK
For the year ended 31 December

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Depreciation of property, plant & equipment (Note 32.1 & 32.4)

393,336

397,748

420,837

433,647

Amortisation of intangible assets (Note 34.1)

271,056

135,787

275,353

141,118

Depreciation of right of use assets (Note 33)

320,118

313,099358,269

351,269

Total

984,510

846,634

1,054,459

926,034

Own assets

Assets under operating leases

14.

OTHER EXPENSES
ACCOUNTING POLICY
Other expenses include operating expenses of the Group which are recognised in the Statement of Profit or Loss on the basis of a direct association
between the cost incurred and the earning of specific items of income and are recognised on an accrual basis.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

94,509117,622106,904

131,006

Audit fees and expenses

14,006

11,944

22,375

19,073

Audit related fees and expenses

9,692

5,354

12,596

5,354

Non-audit fees and expenses*

4,206

3,559

4,206

3,933

Professional and legal expenses

30,69331,71069,13055,997

Donations

8,550

7,963

14,102

12,063

Office administration and establishment expenses

2,862,367

2,209,399

3,157,389

2,372,194

Deposit insurance expenses

755,337

621,852

755,337

621,852

Others2,256,465

1,877,433

2,506,974

2,074,631

Total

6,035,825

4,886,836

6,649,013

5,296,103

Directors’ emoluments
Auditors’ remuneration

Directors’ emoluments consists of the salary/fees paid to both Executive and Non-Executive Directors of the Group.
*In addition to the above, an amount of LKR 1.1 Mn (2022-1.1 Mn) in relation to the implementation of core banking project which is included undercomputer software in Note 34.1, had been paid to the auditors during the year.

15.

TAX ON FINANCIAL SERVICESACCOUNTING POLICYTax on Financial Services include Value Added Tax and Social Security Contribution Levy on financial services.

Value Added Tax (VAT) on Financial Services
Value Added Tax (VAT) on financial services is calculated in accordance with Value Added Tax Act, No. 14 of 2002 and subsequent amendments
thereto. The base for the computation of Value Added Tax on financial services is the accounting profit before income tax and emoluments payable toemployees, which is adjusted for the depreciation of property, plant & equipment computed at the prescribed rates. The emoluments payable include
aggregate of both benefits in money and benefits not in money payable to the employees and any contribution or provision in relating to terminal
benefits. The regulatory tax rate applicable for the current year was 18%. (2022 - 18%).

Social Security Contribution Levy (SSCL) on Financial Services
SSCL on financial services is calculated with effect from 01 October 2022 in accordance with Social Security Contribution Levy Act, No. 25 of 2022 andsubsequent amendments thereto. The base applicable for Value Added Tax on financial services as explain above is applied for the computation of the
SSCL on financial services and the regulatory tax rate applicable for the current year was 2.5% (2022-2.5%).

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

195

15.

TAX ON FINANCIAL SERVICES (CONTD.)BANK & GROUP

16.

2023

2022

LKR ’000

LKR ’000

Value Added Tax on financial services

2,414,923

1,149,682

Social Security Contribution Levy on financial services

334,91753,410Total

2,749,840

1,203,092

SHARE OF ASSOCIATE COMPANIES’ PROFITS/(LOSSES)The Group’s share of profits/(losses) of an investment in an associate company which is recognised as per the equity method, is shown on the face of theStatement of Profit or Loss outside operating profits. The Bank has not recognised profits/(losses) from its associate company, Ayojana Fund (Pvt) Limited, as
the company is under liquidation. Please refer Note 30 to these Financial Statements.

17.

INCOME TAX EXPENSES
ACCOUNTING POLICY
As per Sri Lanka Accounting Standard - LKAS
12, Income Taxes, income tax expense is theaggregate amount included in determinationof profit or loss for the period in respect of
current and deferred taxation. Income tax
expense is recognised in the Statement ofProfit or Loss, except to the extent it relates toitems recognised directly in equity or othercomprehensive income in which case it isrecognised in equity or in other comprehensive
income.

yWhere the deferred tax liability arises fromthe initial recognition of goodwill or of anasset or liability in a transaction that is nota business combination, at the time of thetransaction, affects neither the accounting
profit nor taxable profit or loss and at thetime of the transaction, does not give riseto equal taxable and deductible temporary
differences.

y

In respect of taxable temporary differences
associated with investments in subsidiaries
and associates, where the timing of thereversal of the temporary differences canbe controlled and it is probable that thetemporary differences will not reverse in
the foreseeable future.

Current tax
Current tax consists of the expected tax
payable to or receivable from the taxation
authorities for the year and any adjustment
to the tax payable or receivable in respectof previous years. The tax rates and tax laws
used to compute the charge are those thatare enacted or substantively enacted on thereporting date. Current tax also includes any tax
arising from dividends. Accordingly, provision
for taxation is based on the profit for the year
adjusted for taxation purposes in accordancewith the provisions of the Inland Revenue Act,
No. 24 of 2017 and amendments there to, at therates specified in Note 17.2 of these Financial
Statements..
Provision for taxation of the foreign subsidiaries
is made on the basis of the accounting profit
for the year, as adjusted for taxation purposes,
in accordance with the provisions of therelevant statutes in those countries, using the
tax rates enacted or substantively enacted as at
the reporting date.

Deferred Tax
Deferred tax is recognised for temporary
differences between the tax bases of assets
and liabilities and their carrying amounts
for financial reporting purposes. Deferred
tax liabilities are recognised for all taxable
temporary differences, except:

196

National Development Bank PLC

Deferred tax assets are recognised for all
deductible temporary differences, carriedforward unused tax credits and unused tax
losses (if any), to the extent that it is probablethat taxable profit will be available against
which the deductible temporary differences,carried forward unused tax credits and unused
tax losses can be utilised except:yWhere the deferred tax asset relating to
the deductible temporary differences
arising from the initial recognition of anasset or liability in a transaction that is nota business combination, at the time of thetransaction, affects neither the accounting
profit nor taxable profit or loss and at thetime of the transaction, does not give riseto equal taxable and deductible temporary
differences.

y

In respect of deductible temporary
differences associated with investments
in subsidiaries and associates, deferred tax
assets are recognised only to the extent
that it is probable that the temporary
differences will reverse in the foreseeable
future and taxable profit will be available
against which the temporary differences
can be utilised.

Annual Report 2023

Notes to the Financial Statements

The carrying amount of deferred tax assets isreviewed at each reporting date and reduced
to the extent that it is probable that sufficienttaxable profit will be available to allow thedeferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at eachreporting date and are recognised to theextent that it has become probable that futuretaxable profit will allow the deferred tax asset
to be recovered. Deferred tax assets andliabilities are measured at the tax rates that are
expected to apply in the year when the asset isrealised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Current and deferred tax assets and liabilities
are offset only to the extent that they relate toincome taxes imposed by the same taxation
authority, there is a legal right and intentions tosettle on a net basis and it is allowed under the
tax laws of the relevant jurisdiction. Details ofdeferred tax liabilities/(assets) are given in Note
40 to the Financial Statements.

IFRIC Interpretation 23 “Uncertainty over
Income Tax Treatment”
The Interpretation addresses the accounting
for income taxes when tax treatments involve
uncertainty that affects the application of LKAS
12, Income Taxes. It does not apply to taxes orlevies outside the scope of LKAS 12, nor doesit specifically include requirements relating tointerest and penalties associated with uncertain
tax treatments. The Interpretation specificallyaddresses the following:yWhether an entity considers uncertain tax
treatments separatelyyThe assumptions an entity makes about
the examination of tax treatments by
taxation authoritiesyHow an entity determines taxable profit(tax loss), tax bases, unused tax losses,
unused tax credits and tax ratesy

How an entity considers changes in facts
and circumstances

ACCOUNTING POLICYThe Group applies IFRIC Interpretation 23,“Uncertainty Over Income Tax Treatment” indetermination of taxable profit, tax bases,
unused tax losses, unused tax credits andtax rates, when there is uncertainty over theincome tax treatment. The Group determines
whether to consider each uncertain tax
treatment separately or together with one
or more other uncertain tax treatments anduses the approach that better predicts theresolution of the uncertainty. The Groupapplies significant judgement in identifying
uncertainties over income tax treatments.
It assessed whether the Interpretation had
an impact on its consolidated Financial

Statements. Upon adoption of theInterpretation, the Group considered whether
it has any uncertain tax positions. Accordingly
the Group has already estimated and recorded
the probable effect of uncertainty over income
tax treatment in its consolidated Financial
Statements.

Significant Accounting Estimates &Assumptions

Management periodically evaluates the
positions taken in the tax returns, withrespect to situations in which applicable tax
regulations are subject to interpretation andestablishes provisions where appropriate.
Significant management judgment is required
to determine the amount of deferred tax
assets that can be recognised, based upon thelikely timing and level of future taxable profits
together with future tax planning strategies.

The amount of current tax receivable orpayable is the best estimate of the tax amount
expected to be received or paid that reflects
uncertainty related to income taxes, if any.

The components of the income tax expenses for the years ended 31 December 2023 and 2022 are:
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Taxation based on the profit for the year

4,080,574

5,868,752

4,337,945

6,074,946

Under/(over) provision in respect of previous years(913,704)(222,838)(867,626)(216,621)

Total current tax expense

3,166,870

5,645,914

3,470,319

5,858,325

Deferred tax reversal (Note 40.2)(1,191,280)(7,721,972)(1,174,290)(7,465,282)

Total income tax charged/(reversal) to the Statement of Profit or Loss (Note 17.1)

1,975,590(2,076,058)

2,296,029(1,606,957)

Effective tax rate (including deferred tax) (%)

27

(249)

28

(109)

Effective tax rate (excluding deferred tax) (%)

43

678

43

399

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Profit before taxation

7,345,917

832,987

8,154,239

1,468,847

Income tax expenses for the year (accounting profit @ applicable tax rate)

2,203,775

180,8592,546,830

415,178-

22,355-59,511

1,363,123

344,080

1,389,760

360,490

Current tax expense

Deferred tax expense

17.1

Reconciliation of the Accounting Profit to Income Tax Expenses
BANK

Income tax expenses for the year (dividend @ applicable tax rate)

GROUP

Tax effect on
Disallowable expenses
Tax deductible expenses
Exempt income
Change in tax rate
Tax losses
Total income tax for the year

(3,364)(388)(43,142)(23,700)(674,240)(921,786)(714,668)(929,540)-(1,478,340)-(1,272,275)--(15,125)-

2,889,294(1,853,220)

3,163,655(1,390,336)

Under/(over) provision in respect of previous years(913,704)(222,838)(867,626)(216,621)

Total income tax charged/(reversal) to the Statement of Profit or Loss

1,975,590(2,076,058)

2,296,029(1,606,957)

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

197

17.2

Applicable Income Tax Rates
The applicable income tax rates of the Bank and the subsidiary companies for the years 2023 and 2022 are as follows:
2023

2022

%

%

National Development Bank PLC

30

24 & 30NDB Capital Holdings Limited

30

24 & 30Development Holdings (Pvt) Limited

30

24 & 30NDB Investment Bank Limited

30

24 & 30NDB Securities (Pvt) Limited

30

24 & 30

NDB Wealth Management Limited
NDB Zephyr Partners Lanka (Pvt) Limited

30

24 & 30

ExemptExemptNDB Zephyr Partners Limited (Mauritius)*

15

15

NDB Capital Limited (Bangladesh)**

37.5

37.5

*The Company is however, entitled to a tax credit equivalent to the higher of actual foreign tax suffered or 80% of the Mauritius tax chargeable on its foreignsource income.
**The Company is liable to pay income tax at the rate of 37.5% on the taxable profits or 0.6% on gross receipts which ever is higher.
The income tax rate of 24% was increased to 30% with effect from 01 October 2022 with the legalisation of the Inland Revenue (Amendment) Act, No. 45 of
2022 during the previous period. Accordingly, the Group computed the income tax liability for the first six months of the year of assessment 2022/2023 byapplying the income tax rate of 24%. The revised income tax rate of 30% and other amendments in line with the Inland Revenue (Amendment) Act, No. 45
of 2022 were considered to calculate the income tax liability of the Group for the second six months of the same year of assessment. The income tax rateapplicable for the current year is 30%.
Dividend received out of taxable profits was liable to income tax at 14% up to 30 September 2022. During the period from 01 October 2022 to 31 December
2022, dividend received out of taxable profits were liable to income tax at 15%.						17.3The Deferred Tax (Credit)/Charge in the Statement of Profit or Loss Comprise the Following:
BANK(Reversal)/origination of deferred tax liabilities

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000(98,991)(37,522)(55,682)

242,508

Origination of deferred tax assets(1,092,289)(7,684,450)(1,118,608)(7,707,790)

Deferred tax (credit)/charge to the Statement of Profit or Loss (Note 40.2)(1,191,280)(7,721,972)(1,174,290)(7,465,282)

The deferred tax assets/liabilities of the Group as at 31 December 2023 and 2022 were computed using the revised income tax rate of 30%.

18.

BASIC/DILUTED EARNINGS PER SHAREACCOUNTING POLICYThe Group presents basic and diluted Earning Per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary equity shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted
EPS is determined by adjusting both the profit attributable to the ordinary equity shareholders and the weighted average number of ordinary shares
outstanding, for the effects of all dilutive potential ordinary shares, if any. The Group did not have any dilutive potential ordinary shares as at 31
December 2023.

198

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Earnings per Share: Basic/Diluted
BANK

GROUP

2023

2022

2023

2022

5,370,327

2,909,045

5,759,436

3,008,737

399,464,362

399,464,362

399,464,362

399,464,362

13.44

7.28

14.42

7.53

Amount used as the numerator
Profit attributable to equity holders of the parent (LKR ’000)
Amount used as the denominator
Weighted average number of ordinary shares [Note 18.1]
Basic/diluted earnings per share (LKR)

18.1

Weighted Average Number of Ordinary Shares for Basic/Diluted EPSBANK & GROUP

Number of shares held as at 01 January as per stated capital

19.

2023

2022

380,094,722

357,123,647

Add: Number of shares issued due to final scrip dividend for the year 2021-

22,971,075

Add: Number of shares issued due to final scrip dividend for the year 2022

19,369,640

19,369,640

Weighted average number of shares held as at 31 December used as the denominator for EPS

399,464,362

399,464,362

DIVIDEND PER SHAREACCOUNTING POLICYInterim and final dividends are recognised and accrued when the dividends are recommended and declared by the Board of Directors in accordancewith the Companies Act No. 7 of 2007.
The Board of Directors will consider a declaration of dividends for the year 2023 in due course. The Bank paid a final dividend of LKR 2.50 per share as a scrip
dividend for the financial year 2022.
BANK & GROUP
2022

LKR

LKR

Final dividend per share - Cash--

Final dividend per share - Scrip

-

2.50

Total dividend per share

-

2.50

BANK & GROUP

Dividend Paid during the Year
Dividend per
Share

2023

Dividend per
Share

2022

LKR

LKR ’000

LKR

LKR ’000

Final scrip dividend declared and paid for the prior year

2.50

950,237

4.50

1,607,056

Final cash dividend declared and paid for the prior year

-

-

1.00

357,1242.50

950,2375.50

1,964,180

Gross dividends declared and paid during the year with respect of prior year

20.

2023

Reversal of dividends paid in prior years(20,156)(4,215)

Dividends to equity holders

930,081

1,959,965

ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASISACCOUNTING POLICY
Financial instruments in the Statement of Financial Position are measured on an ongoing basis either at fair value or at amortised cost. The Accounting
Policies describe how each category of financial instrument is measured and how income and expenses, including fair value gains and losses arerecognised. The following tables analyse the carrying amount of the financial instruments by category as defined in Sri Lanka Accounting StandardSLFRS 9 - ‘Financial Instruments’ under headings of the Statement of Financial Position:

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

199

20.

ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS (CONTD.)BANKFair value
through profit
or loss

Amortised cost

Fair value
through othercomprehensive
income

Total

Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000

21
22
23
24
25

3,083,815
24,021,340

28,100,515
7,040,421
33,743,602--

28,100,515
7,040,421
33,743,602
3,083,815
24,021,340

26-

452,660,461-

452,660,461

27
28

-

125,672,370-

83,805,398

125,672,370
83,805,398

35

27,105,155

1,427,296
648,644,665

83,805,398

1,427,296
759,555,218

Fair value
through profit
or loss

Amortised
cost

Total

Note

LKR ’000

LKR ’000

LKR ’00036
24

93,361

7,679,195-

7,679,195
93,361

37.1
37.2
37.3
38
42.1

93,361

615,643,999
15,632,569
24,636,539
29,388,875
2,391,221
695,372,398

615,643,999
15,632,569
24,636,539
29,388,875
2,391,221
695,465,759

As at 31 December 2023

AssetsCash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss - measured at fairvalue
Financial assets at amortised cost - loans and receivables to othercustomers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive
incomeOther financial assets
Total financial assets

BANK
As at 31 December 2023

Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost - due to depositors
Financial liabilities at amortised cost - due to debt securities holders
Financial liabilities at amortised cost - due to other borrowers
Debt securities issued
Other financial liabilities
Total financial liabilities

GROUP
Fair value
through profit
or loss

Amortised
cost

Fair value
through othercomprehensive
income

Total

Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000

21
22
23
24
25

3,083,815
26,040,046

28,580,676
7,040,421
33,743,602--

28,580,676
7,040,421
33,743,602
3,083,815
26,040,046

26-

452,739,928-

452,739,928

27
28

-

125,672,370-

84,645,423

125,672,370
84,645,423

35

29,123,861

1,965,544
649,742,541

84,645,423

1,965,544
763,511,825

As at 31 December 2023

AssetsCash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss - measured at fairvalue
Financial assets at amortised cost - loans and receivables to othercustomers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive
incomeOther financial assets
Total financial assets

200

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

GROUPAs at 31 December 2023

Note

Fair value
through profit
or loss

Amortised
cost

Total

LKR ’000

LKR ’000

LKR ’000

7,679,195

Liabilities
Due to banks

36-

7,679,195

Derivative financial instruments

24

93,361-

93,361

Financial liabilities at amortised cost - due to depositors

37.1

-

615,232,470

615,232,470

Financial liabilities at amortised cost - due to debt securities holders

37.2

-

15,632,569

15,632,569

Financial liabilities amortised cost - due to other borrowers

37.3

-

24,636,539

24,636,539
29,388,875

Debt securities issued

38-

29,388,875

Other financial liabilities

42.1

-

2,592,786

2,592,786

93,361

695,162,434

695,255,795

Total financial liabilities

BANK
Fair value
through profit
or loss

Amortised
cost

Fair value
through othercomprehensive
income

Total

Note

LKR ’000

LKR ’000

LKR ’000

LKR ’00021-

34,849,521-

34,849,521
18,187,547

As at 31 December 2022

AssetsCash and cash equivalents
Balances with the Central Bank of Sri Lanka

22-

18,187,547-

Placements with banks

23-

4,108,989-

4,108,989

Derivative financial instruments

24

7,909,252--

7,909,252

Financial assets recognised through profit or loss - measured at fair
value

25

19,318,483--

19,318,483

Financial assets at amortised cost - loans and receivables to othercustomers

26-

545,873,027-

545,873,027

Financial assets at amortised cost - debt and other instruments

27-

135,047,886-

135,047,886

Financial assets measured at fair value through other comprehensive
income28--

44,685,230

44,685,230

Other financial assets

35

Total financial assets-

1,963,077-

1,963,077

27,227,735

740,030,047

44,685,230

811,943,012

BANK
As at 31 December 2022

Note

Fair value
through profit
or loss

Amortised
cost

Total

LKR ’000

LKR ’000

LKR ’000

20,251,657

Liabilities
Due to banks

36-

20,251,657

Derivative financial instruments

24

96,246-

96,246

Financial liabilities at amortised cost - due to depositors

37.1

-

672,314,023

672,314,023

Financial liabilities at amortised cost - due to debt securities holders

37.2

-

130,541

130,541

Financial liabilities at amortised cost - due to other borrowers

37.3

-

32,372,265

32,372,265

Debt securities issued

38-

27,979,631

27,979,631

Other financial liabilities

42.1

-

2,958,157

2,958,157

96,246756,006,274

756,102,520

Total financial liabilities

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

201

20.

ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS (CONTD.)GROUP
Fair value
through profit
or loss

Amortised
cost

Fair value
through othercomprehensive
income

Total

Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000

21
22
23
24
25

7,909,252
20,788,523

35,727,665
18,187,547
4,108,989--

35,727,665
18,187,547
4,108,989
7,909,252
20,788,523

26-

545,919,824-

545,919,824

27
28

-

135,047,886-

45,454,490

135,047,886
45,454,490

35

28,697,775

2,424,812
741,416,723

45,454,490

2,424,812
815,568,988

As at 31 December 2022

AssetsCash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss - measured at fairvalue
Financial assets at amortised cost - loans and receivables to othercustomers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive
incomeOther financial assets
Total financial assets

GROUP
Fair value
through profit
or loss

Amortised
cost

Total

Note

LKR ’000

LKR ’000

LKR ’000

36
24
37.1
37.2
37.3
38
42.1

96,246
96,246

20,298,844
671,713,337
130,541
32,372,265
27,979,631
3,273,911
755,768,529

20,298,844
96,246
671,713,337
130,541
32,372,265
27,979,631
3,273,911
755,864,775

As at 31 December 2022

Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost - due to depositors
Financial liabilities at amortised cost - due to debt securities holders
Financial liabilities amortised cost - due to other borrowers
Debt securities issued
Other financial liabilities
Total financial liabilities

21.

CASH AND CASH EQUIVALENTS
ACCOUNTING POLICY
For the purpose of reporting in the Statement of Financial Position, cash and cash equivalents comprise of cash in hand and balances with banks. The
cash in hand comprises of both local currency and foreign currency. Balances with banks represent local and foreign Nostro accounts. The balances ofcash in hand are recorded at book value and the balances with banks are carried at amortised cost in the Statement of Financial Position.

BANK

Cash in hand
Local currency
Foreign currency
Balances with banks
Local currency
Foreign currency
Sub Total
Less : Impairment allowance (Note 21.1)
Total

202

National Development Bank PLC

Annual Report 2023

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

9,780,585
321,145

7,579,661
295,246

9,780,780
321,180

7,579,849
295,311

1,759,615
16,243,070
28,104,415
3,900
28,100,515

997,999
25,984,594
34,857,500
7,979
34,849,521

1,759,615
16,723,001
28,584,576
3,900
28,580,676

1,670,324
26,190,160
35,735,644
7,979
35,727,665

Notes to the Financial Statements

21.1

Movement in Impairment Allowance During the year
BANK

22.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Stage 1
Balance as at 01 January

7,979

669

7,979

669

Charges/(reversals) for the year
Balance as at 31 December(4,079)
3,900

7,310
7,979

(4,079)
3,900

7,310
7,979

BALANCES WITH THE CENTRAL BANK OF SRI LANKA
Balances with the Central Bank of Sri Lanka include the cash balance that is required to be maintained with the Central Bank of Sri Lanka as per theprovisions of the Monetary Law Act. The Monetary Law Act requires that all commercial banks operating in Sri Lanka to maintain a statutory reserveon all deposit liabilities denominated in Sri Lankan Rupees. There is no reserve requirement for foreign currency deposits liabilities of the Domestic
Banking Unit (DBU) and the deposit liabilities of the Offshore Banking Unit (OBU) in Sri Lanka. Balances with the Central Bank of Sri Lanka is carried atamortised cost in the Statement of Financial Position.
The minimum cash reserve requirement to be maintained by the Bank during the year was as follows.
PeriodReserve
Requirement (SRR)

Period2023
All Rupee deposit liabilities

01.01.2023 - 15.08.2023
16.08.2023 - 31.12.2023

2022
4.0%
2.0%

01.01.2022 - 31.12.2022

BANK

Statutory balances with the Central Bank of Sri Lanka
Total

23.

Reserve
Requirement (SRR)

4.0%

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

7,040,421
7,040,421

18,187,547
18,187,547

7,040,421
7,040,421

18,187,547
18,187,547

PLACEMENTS WITH BANKSACCOUNTING POLICY
Placements with Banks include short-term deposits placed in banks and are subjected to insignificant risk of changes in fair value, and are used by theGroup in the management of its short-term commitments. These are recorded in the Financial Statements at the face values or the gross values, whereappropriate, net of impairment charges.

BANK

Placements - in local banks
Local Currency
Foreign Currency
Placements - in Foreign banks
Sub total
Less : Impairment allowance (Note 23.1)
Total

Notes to the Financial Statements

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

450,334
3,936,674
29,405,862
33,792,870
49,26833,743,602

4,109,227
4,109,227
238
4,108,989

450,334
3,936,674
29,405,862
33,792,870
49,26833,743,602

4,109,227
4,109,227
238
4,108,989

National Development Bank PLC

Annual Report 2023

203

23.1

Movement in Impairment Allowance during the year
BANK

Stage 1
Balance as at 01 January
Charges/(reversals) for the year
Balance as at 31 December

24.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

238
49,03049,2682,091(1,853)238

238
49,03049,2682,091(1,853)238

DERIVATIVE FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
A derivative is a financial instrument orother contract with all three of the following
characteristics:yyy

Its value changes in response to thechange in a specified interest rate, financial
instrument price, commodity price, foreignexchange rate, index of prices or rates,
credit rating or credit index, or othervariable, provided that, in the case of anon-financial variable, it is not specific to a
party to the contract.
It requires no initial net investment or
an initial net investment that is smaller
than would be required for other typesof contracts expected to have a similar
response to changes in market factors.
It is settled at a future date.

The Group enters into derivative transactions
with various counterparties. These include,
cross-currency swaps, forward foreignexchange contracts and currency options.
Derivatives are recorded at fair value andcarried as assets when their fair value ispositive and as liabilities when their fair value
is negative.

The changes in the fair value of derivatives areincluded in ‘Net gains/(losses) from trading
except the currency SWAP entered with theCentral Bank of Sri Lanka.
The method of recognising the resulting
fair value gain or loss depends on whether
the derivative is designated as a hedging
instrument and if so, the nature of the item
being hedged. The Bank only has hedges ofhighly probable future cash flows attributable
to a recognised asset or liability or a forecast
transaction (cash flow hedge).

Hedge Accounting
The Group elected to continue to apply
hedge accounting in accordance with SLFRS 9
Financial Instruments.
Hedge accounting is used for derivatives
designated in this way, provided certain criteria
are met. At the inception, the Group document
the transaction, the relationship between
hedging instruments and hedged items as wellas its risk management objective and strategy
for undertaking various hedge transactions.
The Group also document their assessment,
both at the inception of the hedge and on an
ongoing basis, if the derivatives that are usedin hedging transactions are highly effective inoffsetting changes in fair values or cash flowsof hedged items.

Cash Flow Hedge
The effective portion of the changes in thefair value of derivatives that are designatedand qualify as cash flow hedging instruments
is recognised in equity. The gain or loss
relating to the ineffective portion is recognised
immediately in the Statement of Profit or Loss.
The amounts accumulated in Equity arereclassified to the Statement of Profit or Loss inthe periods in which the hedged items, affect,
profit or loss. When a hedging instrument is
expired or is sold, or when a hedge no longer
meets the criteria for hedge accounting. Any
cumulative gain or loss existing in Equity atthat time remains in Equity and is recognised
when the forecast transaction is ultimately
recognised in the Statement of Profit or Loss.
When a forecast transaction is no longer
expected to occur, the cumulative gains
or losses that were reported in Equity are
immediately transferred to the Statement ofProfit or Loss.
The changes in the fair value of any derivative
instrument which do not qualify for hedge
accounting are recognised immediately in theStatement of Profit or Loss.

BANK & GROUP
Financial
AssetsFinancial
AssetsFinancial
Liabilities

2023

2023

2022

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Forward foreign exchange contracts

344,343

93,361

209,134

96,246

Currency SWAP (Note 24.1)

2,739,472-

7,700,118

-

Total

3,083,815

93,361

7,909,252

96,246

					

204

Financial
Liabilities

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notionalamounts indicate the volume of transactions outstanding as at 31 December 2023 and are indicative of neither the market risk nor the credit risk.
BANK & GROUP
AssetsLiabilities

Notional
AmountAssetsLiabilities

Notional
Amount

2023

2023

2023

2022

2022

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Forward foreign exchange contracts- Sales

24.1

574

15

34,114,080

20,20068,177

17,608,734- Purchases

343,769

93,34634,438,553

188,934

28,06917,726,451

Currency SWAP - Purchases [Note 24.1]

2,739,472-

10,692,000

7,700,118-

13,212,000

Total

3,083,815

93,361

79,244,633

7,909,252

96,24648,547,185

Currency SWAP
The Bank entered in to a SWAP arrangement with the Central Bank of Sri Lanka effective from 18 March 2022 USD 36 Mn out of a total foreign borrowing
value of USD 50 Mn which has a tenure of seven years with a grace period of 1 year for the repayment of capital.
The SWAP arrangement is with twelve cross currency SWAPS which are maturing semi annually over the tenure of the foreign borrowings.
As per Sri Lanka Accounting Standard - SLFRS 9 - Financial Instruments, the Bank identified this particular transaction as a ‘Cash Flow Hedge’ after
documenting the hedge relationship.
A brief description of the cash flow hedge is given below:

24.1(a) SWAP agreement
Details

Description of the Hedge

Hedged instrument

SWAP contract - 12 cross currency swaps
Counterparty - Central Bank of Sri Lanka
Notional amount - USD 36 Mn which is 72% of the total amount of the foreign
borrowings that is hedged.

Hedged item

USD denominated borrowing - USD 50 Mn with a tenure of 7 years and grace
period of 1 year. Repayment periods commenced from April 2023 until 2029
which is paid once in three months.

The periods when the cash flows are expected to occur

As explained above

The amount recognised in other comprehensive income

LKR 2.2 Bn debit to the cash flow hedge reserve (net of tax)

Fair value of the hedged item

LKR 14.04 Bn

Fair value of the hedged instrument

LKR 2.7 Bn

Any forecast transaction for which hedge accounting had previously
been used but which is no longer expected to occur

None

The amount that was reclassified from equity to profit or loss as areclassification adjustment

None

24.1(b) Total amount recognised in the Statement of Comprehensive Income relating to the cash flow hedge
BANK & GROUP

Cash flow hedge reserve-SWAP
Deffered Tax-effect on gains/(losses) of cash flow hedge reserve
Total

Notes to the Financial Statements

National Development Bank PLC

2023

2022

LKR ’000

LKR ’000(3,191,786)

4,385,238

957,535(1,315,571)(2,234,251)

3,069,667

Annual Report 2023

205

24.1(c) Sensitivity analysis of effective interest rate of discounting factor on cash flow hedge
The fair value of derivative financial assets/liability discounted based on effective interest rate and sensitivity analysis presented below
BANK & GROUP
Sensitivity Effect on Other Comprehensive
Income Increase/ (Decrease) in
Comprehensive Income
2023

Sensitivity Effect on Other Comprehensive
Income Increase/(Decrease) in
Comprehensive Income
2022

LKR ’Mn

LKR ’Mn(552)

Increase/(Decrease) in Discount rate %

25.

2.00

(159)

(2.00)

172

604

1.00

(81)

(282)

(1.00)

84

295

FINANCIAL ASSETS RECOGNISED THROUGH PROFIT OR LOSS - MEASURED AT FAIR VALUEACCOUNTING POLICYThe Group classifies financial assets asfinancial assets recognised through profit
or loss when they have been purchased or
issued primarily for short-term profit making
through trading activities or form part ofa portfolio of financial instruments thatare managed together, for which there isevidence of a recent pattern of short-term
profit taking. Financial assets recognised
through profit or loss are recorded andmeasured in the Statement of Financial

Position at fair value. The changes in fair value
are recognised in the Statement of Profit or
Loss under Net gains/(losses) from financial
assets at fair value through profit or loss.
Financial assets recognised through profit orloss include of quoted equity securities, Unit
Trust Investments and Sri Lanka Government
Debt Securities, that have been acquired
principally for the purpose of selling or
repurchasing in the near term, and arerecorded at fair values using assumptions

that a market participant would make, whenvaluing such instruments. The quoted equity
securities are valued using the market prices
published by the Colombo Stock Exchange.
Sri Lanka Government Securities are valued
based on the market rates publish by themoney brokers. Investment in private equity
funds are measured at fair value based on thechange in the net asset value of the funds
and is recognised through profit or loss. The
unit trust investments are valued at unit
prices available in the market.

Accounting Judgements, Estimates and Assumptions
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using quoted market prices.
BANK
2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

3,964,209
20,057,131
24,021,340

1,790,818
17,527,665
19,318,483

3,964,209
20,057,131
430,552
126,200
701,718
760,236
26,040,046

1,790,818
17,527,665
242,957
126,200
749,668
351,215
20,788,523

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

By collateralisation
Pledged as collateral
Unencumbered
Total

421,499
23,599,841
24,021,340

19,318,483
19,318,483

421,499
25,618,547
26,040,046

20,788,523
20,788,523

By currency
Sri Lanka Rupee
United States Dollar
Total

24,021,340
24,021,340

19,318,483
19,318,483

25,338,328
701,718
26,040,046

20,038,855
749,668
20,788,523

Sri Lanka Government Securities - treasury bonds
Sri Lanka Government Securities - treasury bills
Quoted ordinary shares
Non-quoted ordinary shares
Investment in private equity fundInvestment in unit trusts
Total

25.1

GROUP

Analysis of financial assets recognised through profit or loss measured at fair value
BANK

206

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

GROUP

26.

FINANCIAL ASSETS AT AMORTISED COST - LOANS AND RECEIVABLES TO OTHER CUSTOMERSACCOUNTING POLICY

contractual cash flows and the contractual
terms of the assets that give rise on specificdates to cash flows that are solely paymentof principal and interest on the principal
outstanding.

The accounting policy applied by the Groupfor Financial assets at amortised cost Loans and receivables to other customers,
impairment, collateral valuations, write-off ofloans and receivables to other customers andrestructured/rescheduled loan facilities aredescribed in Note 3.1, Financial instruments SLFRS 9 and Note 11, Impairment charges.

When the Group is the lessor in a leaseagreement that transfers substantially all risks
and rewards incidental to ownership of theasset to the lessee, the arrangement is classified
as a finance lease. Amounts receivable underfinance leases, net of initial rentals received,
unearned lease income and impairment
allowance are classified as leasing and arepresented within “Loans and receivables toother customers” in the Statement of Financial
Position.

Financial assets at amortised cost - Loans andreceivables to other customers include, loans
and receivables and lease receivables of theGroup. As per SLFRS 9, “Loans and receivables
to other customers” are assets that are held
within a business model with the objectiveof holding the assets in order to collect

After initial measurement, “Loans andreceivables to other customers” aresubsequently measured at amortised costusing the Effective Interest Rate (EIR), less
impairment allowance, except when theGroup designates loans and receivables at fairvalue through profit or loss. Amortised costis calculated by considering any discount or
premium on acquisition and fees and costs.
The amortisation is included in “Interest
Income” in the Statement of Profit or Loss.
The losses arising from impairment arerecognised in the Statement of Profit or Loss as“Impairment charges for loans and receivables
to other customers”.

BANK

Gross loans and receivables to other customers

26.1

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

496,068,383

579,560,964

496,147,850

579,607,761

Less: Impairment allowance for loans and receivables to other customers (Note 26.1)

43,407,922

33,687,937

43,407,922

33,687,937

Net loans and receivables to other customers

452,660,461

545,873,027

452,739,928

545,919,824

Loans and Receivables to Other Customers - Stage wise Analysis
BANK
2023

2022

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Individually impaired loans-

17,478,525

52,017,957

69,496,482-

65,750,586

43,555,523

109,306,109

Collectively impaired loans

310,214,726

85,826,186

30,530,989

426,571,901

336,560,467

112,103,321

21,591,067

470,254,855

Gross loans and receivables to othercustomers (a)310,214,726

103,304,711

82,548,946

496,068,383

336,560,467

177,853,907

65,146,590

579,560,964

Individual impairment [Note 26.6.(a)]-2,897,936

23,103,845

26,001,781-

2,336,073

19,400,586

21,736,659

Collective impairment [Note 26.6.(a)]3,348,395

3,178,694

10,879,052

17,406,141

3,688,573

3,019,038

5,243,667

11,951,278

Total impairment allowance (b)3,348,395

6,076,630

33,982,897

43,407,922

3,688,573

5,355,111

24,644,253

33,687,937

306,866,331

97,228,081

48,566,049

452,660,461

332,871,894

172,498,796

40,502,337

545,873,027

Net loans and receivables to othercustomers (a)-(b)

GROUP
2023

2022

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Individually impaired loans-

17,478,525

52,017,957

69,496,482-

65,750,586

43,555,523

109,306,109

Collectively impaired loans

310,294,193

85,826,186

30,530,989

426,651,368

336,607,264

112,103,321

21,591,067

470,301,652

Gross loans and receivables to othercustomers (a)310,294,193

103,304,711

82,548,946

496,147,850

336,607,264

177,853,907

65,146,590

579,607,761

Individual impairment [Note 26.6.(a)]-2,897,936

23,103,845

26,001,781-

2,336,073

19,400,586

21,736,659

Collective impairment [Note 26.6.(a)]3,348,395

3,178,694

10,879,052

17,406,141

3,688,573

3,019,038

5,243,667

11,951,278

Total impairment allowance (b)3,348,395

6,076,630

33,982,897

43,407,922

3,688,573

5,355,111

24,644,253

33,687,937

306,945,798

97,228,081

48,566,049

452,739,928

332,918,691

172,498,796

40,502,337

545,919,824

Net loans and receivables to othercustomers (a)-(b)Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

207

26.2

Loans and Receivables to Other Customers - By Product
BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Long-term loans

136,295,624

157,268,970

136,295,624

157,268,970

Medium and short-term loans

104,077,967

131,870,229

104,077,967

131,870,229

154,519

219,352

154,519

219,352

Overdrafts

67,132,135

91,368,075

67,132,135

91,368,075

Consumer loans

49,429,148

55,359,969

49,429,148

55,359,969

Trade finance loans

57,260,792

58,282,323

57,260,792

58,282,323

Leasing and hire purchases (Note 26.7)

22,021,922

23,510,550

22,021,922

23,510,550

Housing loans

17,815,976

19,219,995

17,815,976

19,219,995

Islamic loans

14,821,426

16,471,991

14,821,426

16,471,991

Credit cards

8,860,732

8,329,859

8,860,732

8,329,859

Auto finance loans

2,644,898

3,453,044

2,644,898

3,453,044

Pawning

12,996,626

11,864,851

12,996,626

11,864,851

Micro finance loans

Staff loans

2,556,618

2,341,756

2,636,085

2,388,553

496,068,383

579,560,964

496,147,850

579,607,761

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Rupee

381,552,152

448,718,704

381,631,619

448,765,501

United States Dollar

113,390,503

126,046,161

113,390,503

126,046,161

956,2484,650,615

956,2484,650,615

1,224

1,454

1,224

1,454

Others168,256

144,030

168,256

144,030

Total

496,068,383

579,560,964

496,147,850

579,607,761

Total

26.3

GROUP

2023

Loans and Receivables to Other Customers - By Currency
BANK

Euro
Great Britain Pound

26.4

GROUP

Loans and Receivables to Other Customers - By Industry
BANK
2023
LKR ’0002022%

LKR ’000%

Agriculture, forestry and fishing

28,042,379

6

35,375,808

6

Manufacturing

94,265,828

19

116,077,903

20

Tourism

35,285,674

7

41,051,063

7Transportation and storage

4,491,459

1

6,787,754

1

Construction

24,112,792

5

28,576,796

5

Infrastructure development

61,901,361

12

72,450,680

13Wholesale and retail trade73,148,126

15

88,999,335

15

Information technology and communication services

1,448,842-

1,088,222-

Financial services

34,012,452

7

55,007,498

9Professional, scientific and technical activities

16,862,036

3

12,597,834

2

10,749---1,108,761-

1,507,636-

Arts, entertainment and recreation
Education
Health care, social services and support services

552,635-

1,011,453-

Consumption

120,825,289

25

119,028,982

22

Total

496,068,383

100

579,560,964100

As per the Central Bank requirements, mandatory lending to the agriculture sector is minimum of 10% of the total loans and advances. The Bank iscomplied with the said requirement as at 31 December 2023 and 31 December 2022. The computation method used to derive the CBSL mandatory lending
requirement to agriculture sector is different from the method used for the above note.						

208National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

26.5

Loans and Receivables to Other Customers - By Province
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Western Province

421,835,158

494,840,521

421,914,625

494,887,318

Southern Province

15,336,582

17,410,309

15,336,582

17,410,309

North-Western Province

13,994,887

14,935,706

13,994,887

14,935,706

Central Province

14,989,823

16,914,840

14,989,823

16,914,840

Sabaragamuwa Province

8,775,455

9,525,702

8,775,455

9,525,702

North-Central Province

7,788,793

10,891,945

7,788,793

10,891,945

Eastern Province

4,693,019

5,704,520

4,693,019

5,704,520

Northern Province

4,216,417

4,792,202

4,216,417

4,792,202

Uva Province

4,438,249

4,545,219

4,438,249

4,545,219

496,068,383

579,560,964

496,147,850

579,607,761

Total

The province-wise disclosure is made based on the location of the branch from which the facilities have been disbursed.

26.6

Impairment Allowance for Loans and Receivables to Other Customers

26.6 (a) Movement in impairment allowance during the year
BANK & GROUP

Total

COLLECTIVE

INDIVIDUAL

Stage 1

Stage 2

Stage 3Sub total

Stage 2

Stage 3Sub total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Balance as at 01 January 2023

3,688,573

3,019,038

5,243,667

11,951,278

2,336,073

19,400,586

21,736,659

33,687,937

Charges/(reversals) for the year
[Note 11.1](340,178)

159,656

5,680,557

5,500,035

561,863

9,605,773

10,167,636

15,667,671

Net amount written off--(45,172)(45,172)-(5,902,514)(5,902,514)(5,947,686)

Other movement

-

-

-

-

-

-

-

-

3,348,395

3,178,694

10,879,052

17,406,141

2,897,936

23,103,845

26,001,781

43,407,922

Balance as at 31 December 2023

BANK & GROUP

Total

COLLECTIVE

INDIVIDUAL

Stage 1

Stage 2

Stage 3Sub total

Stage 2

Stage 3Sub total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Balance as at 01 January 2022

3,353,843

2,524,258

4,339,645

10,217,746

1,514,732

9,869,596

11,384,328

21,602,074

Charges/(reversals) for the year
[Note 11.1]

334,730

494,780

904,022

1,733,532

821,341

9,951,504

10,772,845

12,506,377

Net amount written off

-

-

-

-

-

(578,490)(578,490)(578,490)

Other movement

-

-

-

-

-

157,976

157,976

157,976

3,688,573

3,019,038

5,243,667

11,951,278

2,336,073

19,400,586

21,736,659

33,687,937

Balance as at 31 December 2022

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

209

210

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

7,022,849

7,267,357
2,973,376
10,240,733

61,713,800

26,324,947

19,057,590

Individual impairment

Collective impairment

As at 31 December 2023

Gross amount of loans individually
determined to be impaired,
before deduction of individuallyassessed impairment allowances

Gross amount of loans individually
impaired, before deduction ofindividually assessed impairment
allowances

Gross amount of loans individually
impaired, after deduction ofindividually assessed impairment
allowances

10,240,733

18,148,556

31,292,190

44,255,954

15,975,128

2,831,493

13,143,635

15,975,128(4,475,696)

3,915,629(99,842)

13,427,975

6,424,946

LKR ’000

LKR ’000

As at 31 December 2023

Amount (written off )/written backCharges/(reversals) for the year

As at 01 January 2023

Medium &Short-term
LoansLong-term
Loans

2,629,347

4,538,965

8,244,345

4,879,202

2,969,499

1,909,703

4,879,202(495,212)

536,751

4,837,663

LKR ’000

Overdrafts

2,848,339

5,379,619

12,276,250

3,839,300

1,308,020

2,531,280

3,839,300(67,375)

2,102,280

1,804,395

LKR ’000

Trade
FinanceLoans

26.6 (b) Impairment allowance for loans and receivables to other customers - by product-414,046

414,046

3,280,101

2,866,055

414,046

3,280,101(137,982)

572,754

2,845,329

LKR ’000

Consumer
Loans

181,252

572,929

1,998,248

1,684,236

1,292,559

391,677

1,684,236(138,569)

285,417

1,537,388

LKR ’000

214,289

237,277584,793

1,176,576

1,153,588

22,988

1,176,576(9,377)371,105

814,848

LKR ’000

Housing
Loans

BANK & GROUP
Leasing& HirePurchase
RentalReceivables

-

-

-

1,490,902

1,490,902-

1,490,902(523,633)

613,738

1,400,797

LKR ’000

Credit
Cards

-

-

-

1,368

1,368

-

1,368

-

(43,157)

44,525

LKR ’000

Pawning415,328

736,5093,263,812

839,558

518,463

321,095

839,558-

290,305549,253

LKR ’000

Islamic
Banking

-

-

-

818

818

-

818

-

-

818

LKR ’000

Staff
Loans

43,494,701

69,496,482

132,751,248

43,407,922

17,406,141

26,001,781

43,407,922(5,947,686)

15,667,671

33,687,937

LKR ’000

Total

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

211

6,283,317

4,435,711
1,894,857

As at 01 January 2022

Charges/(reversals) for the year

6,424,943

69,383,478

54,829,068

49,177,347

Gross amount of loans individually
determined to be impaired,
before deduction of individuallyassessed impairment allowances

Gross amount of loans individually
impaired, before deduction ofindividually assessed impairment
allowances

Gross amount of loans individually
impaired, after deduction ofindividually assessed impairment
allowances

773,222

As at 31 December 2022

5,651,721

Individual impairment

Collective impairment-

26,138,572

38,138,252

46,315,211

13,427,975

1,428,295

11,999,680

13,427,975

6,424,946(728,574)

94,378As at 31 December 2022

Other movement

Amount (written off )/written back

LKR ’000

LKR ’000

7,873,232

Medium &Short-term
LoansLong-term
Loans

5,520,792

7,757,965

12,085,347

4,837,664

2,600,491

2,237,173

4,837,663-(11,411)

1,527,835

3,321,239

LKR ’000

Overdrafts

6,050,631

7,196,818

14,027,803

1,804,395

658,208

1,146,187

1,804,395-(4,077)

377,936

1,430,536

LKR ’000

Trade
FinanceLoans

26.6 (c) Impairment allowance for loans and receivables to other customers - by product16,34532,572

34,1502,845,329

2,829,102

16,2272,845,329--

45,1642,800,165

LKR ’000

ConsumerLoans

216,418

514,213

2,735,623

1,537,388

1,239,593

297,795

1,537,388-

71,194

19,7691,446,425

LKR ’000

267,142

312,756

688,020814,848769,234

45,614

814,848--

136,607678,241

LKR ’000

Housing
Loans

BANK & GROUP
Leasing& HirePurchase
RentalReceivables

1,774

24,461

24,7801,400,798

1,378,111

22,6871,400,797--

569,416

831,381

LKR ’000

Credit
Cards

-

2,141

2,141

44,52542,3842,141

44,525--39,478

5,047

LKR ’000

Pawning

180,429

497,863

659,516549,254

231,820

317,434

549,253

157,976-

22,083369,194

LKR ’000

Islamic
Banking

-

-

-

818

818

-

818

-

-

-

818

LKR ’000

Staff
Loans

87,569,450

109,306,109

145,956,069

33,687,937

11,951,278

21,736,659

33,687,937

157,976(578,490)

12,506,377

21,602,074

LKR ’000

Total

26.7

Leasing and Hire Purchases
BANK & GROUP
2023

2022

LKR ’000

LKR ’000

Gross lease and hire purchase rental receivables

26,963,013

27,666,807

Less: Unearned income

4,941,091

4,156,257

Total lease and hire purchase rental receivables (Note 26.2)

22,021,922

23,510,550

Less: Impairment allowance [Note 26.7.(a)]1,684,236

1,537,388

Total

20,337,686

21,973,162

26.7 (a) Impairment allowance
BANK & GROUP

Total

COLLECTIVE

INDIVIDUAL

Stage 1

Stage 2

Stage 3Sub total

Stage 2

Stage 3Sub total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000
1,537,388

Balance as at 01 January 2023

168,167

554,038

517,3881,239,593

4,442

293,353

297,795

Charges/(reversals) for the year

39,340(250,518)

264,144

52,966

11,414

221,037

232,451

285,417

Amount (written off )/written back

-

-

-

-

-

(138,569)(138,569)(138,569)

Balance as at 31 December 2023

207,507

303,520

781,532

1,292,559

15,856375,821391,677

1,684,236

Gross amount of loans individually determined to be impaired, before deduction of the individually assessed impairment allowance

1,998,248

Gross amount of loans individually impaired, before deduction of the individually assessed impairment allowance

572,929

Gross amount of loans individually impaired, after deduction of the individually assessed impairment allowance

181,252BANK & GROUP

Total

COLLECTIVE

26.8

INDIVIDUAL

Stage 1

Stage 2

Stage 3Sub total

Stage 2

Stage 3Sub total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Balance as at 01 January 2022

190,512426,769

501,205

1,118,486

331

327,608

327,939

1,446,425

Charges/(reversals) for the year

(22,345)

127,269

16,183

121,107

4,111(105,449)(101,338)

19,769Amount (written off )/written back

-

-

-

-

-

71,194

71,194

71,194

Balance as at 31 December 2022

168,167

554,038

517,3881,239,593

4,442

293,353

297,795

1,537,388

Gross amount of loans individually determined to be impaired, before deduction of the individually assessed impairment allowance

2,735,623

Gross amount of loans individually impaired, before deduction of the individually assessed impairment allowance

514,213Gross amount of loans individually impaired, after deduction of the individually assessed impairment allowance

216,418

Maturity of Leasing and Hire Purchases
BANK & GROUP
2023
Less than
1 Year

1-5 Years

More than
5 Years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Total rental receivables

2,364,988

24,353,725

244,300

26,963,013

Less : Impairment allowance

525,441

1,121,338

37,457

1,684,236

Unearned income

66,646

4,783,559

90,886

4,941,091

Net rentals receivables

1,772,901

18,448,828

115,957

20,337,686

Gross lease and hire purchase rentals receivables

212

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

BANK & GROUP
2022
Less than
1 Year

1-5 Years

More than
5 Years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Total rental receivables

2,175,609

25,317,190

174,008

27,666,807

Less : Impairment allowance

327,810

1,206,436

3,142

1,537,388

Gross lease and hire purchase rentals receivables

27.

Unearned income

64,193

4,031,675

60,3894,156,257

Net rentals receivables

1,783,606

20,079,079

110,477

21,973,162

FINANCIAL ASSETS AT AMORTISED COST - DEBT AND OTHER INSTRUMENTS
ACCOUNTING POLICY
In line with the requirements of SLFRS 9, the Group applies the amortised cost method to measure financial instruments for which an entity has abusiness model to hold the financial asset to collect the contractual cash flows. The characteristics of the contractual cash flows are that of solely
payments of the principal amount and interest (referred to as “SPPI”).
y

Principle is the fair value of the instrument at initial recognition.

yInterest is the return within a basic lending arrangement and typically consists of consideration for the time value of money, and credit risk. It may
also include consideration for other basic lending risks such as liquidity risk as well as a profit margin.

The Group determines its business model at the level that best reflect how it manages the financial assets to achieve its business objective. The detailsof the accounting policy on financial assets at amortised cost - debt and other instruments and impairment are described in Notes 3.1 and 11.

Accounting Judgements Estimates and Assumptions
The Group assesses impairment of financial assets measured at amortised cost - debt and other instruments in line with the same principles used forassessment of impairment of loans and receivables as described in Note 11. The impairment loss on financial assets measured at amortised cost - debt
and other instruments is disclosed in Note 27.1 (d) to the financial statements.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Government Securities - treasury bonds

53,940,949

32,340,388

53,940,949

32,340,388

Sri Lanka Government Securities - treasury bills

39,819,701

40,292,351

39,819,701

40,292,351

Sri Lanka Development Bonds-

22,206,894-

22,206,894

Sovereign Bonds

51,091,414

54,105,234

51,091,414

54,105,234

Quoted debentures

6,611,788

6,606,309

6,611,788

6,606,309

Sub Total

151,463,852

155,551,176

151,463,852

155,551,176

Less: Impairment allowance [Note 27.1 (d)]25,791,482

20,503,290

25,791,482

20,503,290

Total

125,672,370

135,047,886

125,672,370

135,047,886

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

213

27.1 (a) Analysis of financial assets at amortised cost - Debt and other instruments
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

8,245,387

160,8028,245,387

160,802

Unencumbered

143,218,465

155,390,374

143,218,465

155,390,374

Gross total

151,463,852

155,551,176

151,463,852

155,551,176

Sri Lanka Rupee

100,372,438

79,239,048

100,372,438

79,239,048

United States Dollar

51,091,414

76,312,128

51,091,414

76,312,128

Gross total

151,463,852

155,551,176

151,463,852

155,551,176

By collateralisation
Pledged as collateral

By currency

27.1 (b) Financial assets at amortised cost - Debt and other instruments - stage wise analysis
Staging and allowances for expected credit loss of sovereign bonds
International Sovereign Bonds issued by GOSL (SLISBs) are classified under stage 2 in line with Banking Act Direction No. 14 of 2021- Classification,
Recognition and Measurement of Financial Assets Other than Credit Facilities in Licensed Banks.
The Bank considered the latest available information including the indicative terms of the debt restructuring exercise currently being undertaken by theGovernment of Sri Lanka in estimating the impairment allowance of SLISB’s as at 31st December 2023.				
BANK & GROUP
2023
Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Government securitiestreasury bonds

53,940,949--

53,940,949

32,340,388--

32,340,388

Sri Lanka Government Securities treasury bills

39,819,701--

39,819,701

40,292,351--

40,292,351

-

-

-

-

-

22,206,894-

22,206,894

Sri Lanka Development Bonds
Sovereign Bonds-

51,091,414-

51,091,414-

54,105,234-

54,105,234

6,366,788-

245,000

6,611,788

6,361,309-

245,000

6,606,309

-

-

-

-

-

-

-

-

100,127,438

51,091,414

245,000

151,463,852

78,994,048

76,312,128

245,000

155,551,176

775

25,545,707

245,000

25,791,482

496

20,257,794

245,000

20,503,290

Total

100,126,663

25,545,707-

125,672,370

78,993,552

56,054,334-

135,047,886

National Development Bank PLC

Annual Report 2023

Quoted debentures
Securities purchased under resaleagreements (Note 27.1 (c))
Sub Total
Less: Impairment allowance forinvestments [Note 27.1 (d)]

214

2022

Stage 1

Notes to the Financial Statements

27.1 (c) Disclosure as per the direction No. 01 of 2019 dated 20 December 2019 on repurchase and reverse repurchase transactions of dealer
direct participants in scripless treasury bonds and scripless treasury bills
Carrying value of Securities Allocated for Repurchase Transactions
BANK

As at 31 December
Face value of
securities
allocated for Repos

Market value of
securities allocatedfor Repo

Face value of
securities
allocated for Repos

Market value of
securities allocatedfor Repo

2023

2023

2022

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial assets recognised through profit or loss
measured at fair value (Note 25.1)

421,499

397,511--

Financial assets at amortised cost - Debt and other
instruments (27.1 (a) )8,245,387

8,432,799

160,802143,273

Financial assets measured at Fair Value through
Other Comprehensive Income (FVOCI) (28.1 (a))

8,184,566

7,856,452

-

-

Total

16,851,452

16,686,762

160,802143,273

Face Value of
securities received
for Reverse Repos

Market value of
securities received for
Reverse Repos

Market value of Securities Received for Reverse Repurchase Transactions
BANK

As at 31 December
Face Value of
securities received
for Reverse Repos

Reverse Repurchase Agreements

Market value of
securities received for
Reverse Repos

2023

2023

2022

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Nil

Nil

Nil

Nil

Bank’s policy on haircuts for repurchase and reverse repo transactions are explained below.
The Bank’s Board approved Policy Guideline outlines the allocation of securities and haircut rules for Repurchase and Reverse Re-purchase agreements
and valuation process. The Policy has been formulated in line with Central Bank Direction No. 01 of 2019 and considering the market practice. Securities areallocated/obtained as per the set guidelines and the Bank was not exposed to any penalties due to non-compliance.
The Bank was not liable to any penalties imposed for the non compliance with the Direction No. 01 of 2019 on Registered Stock and Securities Ordinanceand Local Treasury Bills Ordinance dated 20 December 2019 issued by the Monetary Board of the Central Bank of Sri Lanka.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

215

27.1 (d) Movements in impairment allowance during the year
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Stage 1
Balance as at 01 January496

2,652,491

496

2,652,491

Transfer / Adjustment-(2,651,815)-(2,651,815)

Charges/(reversals) to Statement of Profit or Loss

279

(180)

279

(180)

Balance as at 31 December

775

496

775

496

Stage 2
Balance as at 01 January

20,257,794-

20,257,794-

Transfer / Adjustment

155,600

2,832,284

155,600

2,832,284

Charges/(reversals) to Statement of Profit or Loss

5,132,313

17,425,510

5,132,313

17,425,510

Balance as at 31 December

25,545,707

20,257,794

25,545,707

20,257,794

245,000

245,000

245,000

245,000

Stage 3
Balance as at 01 January
Charges/(reversals) to Statement of Profit or Loss
Balance as at 31 December
Total

28.

-

-

-

245,000

245,000

245,000

25,791,482

20,503,290

25,791,482

20,503,290

FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
ACCOUNTING POLICY

Debt Instruments at Fair Value through
Other Comprehensive Income (FVOCI)The Group categorised debt instruments
measured at FVOCI under SLFRS 9 when bothof the following conditions are met:y

The instrument is held within a businessmodel, the objective of which is achieved
by both collecting contractual cash flows
and selling financial assets.

y

The contractual terms of the financial
assets are solely payments of the principle
amount and the interest (SPPI).

FVOCI debt instruments are subsequently
measured at fair value with gains andlosses arising due to changes in fair value
recognised in OCI. Interest income and foreignexchange gains and losses are recognised in
the Statement of Profit or Loss in the samemanner as for financial assets measured

216

245,000

National Development Bank PLC

at amortised cost as explained in Note 27.
The ECL calculation for debt instruments at
FVOCI is explained in Note 11, impairment
charges. Where the Bank holds more than
one investment in the same security, they
are deemed to be disposed of on a first-in
first- out basis. On derecognition, cumulative
gains or losses previously recognised in OCI
are reclassified from OCI to Statement of Profit
or Loss.
The accounting policy applied by the Groupfor the Debt Instruments at Fair Value through
Other Comprehensive Income (FVOCI) and
impairment is described in Notes 3.1 and 11.

Equity Instruments at Fair Value through
Other Comprehensive Income (FVOCI)
Upon initial recognition, the Bank occasionallyelects to classify irrevocably some of its equity
investments as equity instruments at FVOCIAnnual Report 2023

Notes to the Financial Statements

when they meet the definition of Equity underSLFRS 9, Financial Instruments and are not held
for trading. Such classification is determined on
an instrument-by-instrument basis.
Gains and losses on these equity instruments
are never recycled to profit. Dividends arerecognised in the Statement of Profit or Lossas other operating income when the right toreceive the payment has been established,
except when the Group benefits from suchproceeds as a recovery of part of the cost of
the instrument, in which case, such gains arerecorded in OCI. Equity instruments at FVOCI
are not subject to an impairment assessment.

BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Government Securities - treasury bonds

38,890,209

18,248,043

39,264,956

18,248,043

Sri Lanka Government Securities - treasury bills

43,772,475

25,651,529

44,143,876

26,354,221

Quoted ordinary shares (Note 28.2)

1,136,489

779,434

1,136,489

779,434

16,56916,56816,56916,568--93,87766,56883,815,742

44,695,574

84,655,767

45,464,834

Non-quoted ordinary shares (Note 28.3)
Quoted debentures
Sub total
Less: Impairment allowance
Total

10,344

10,344

10,344

10,34483,805,398

44,685,230

84,645,423

45,454,490

28.1 (a) Analysis of financial assets measured at Fair Value through Other Comprehensive Income (FVOCI)
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

By collateralisation
Pledged as collateral

8,184,566-

8,184,566-

Unencumbered

75,631,176

44,695,574

76,471,201

45,464,834

Total

83,815,742

44,695,574

84,655,767

45,464,834

83,815,742

44,695,574

84,655,767

45,464,834

-

-

-

-

83,815,742

44,695,574

84,655,767

45,464,834

By currency
Sri Lanka Rupee
United States Dollar
Total

28.1 (b) Financial assets measured at Fair Value through Other Comprehensive Income (FVOCI) - stage wise analysis
BANK
2023

2022

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Government Securities- treasury bonds

38,890,209--

38,890,209

18,248,043--

18,248,043

Sri Lanka Government Securities- treasury bills

43,772,475--

43,772,475

25,651,529--

25,651,529

Quoted ordinary shares (Note 28.2)

1,136,489--

1,136,489

779,434--

779,434

Non-quoted ordinary shares(Note 28.3)
Sub Total
Less: Impairment allowance forinvestments
Total

Notes to the Financial Statements

6,225

-

10,344

16,5696,224-

10,344

16,56883,805,398-

10,344

83,815,742

44,685,230-

10,344

44,695,574--

10,344

10,344--

10,344

10,34483,805,398--

83,805,398

44,685,230--

44,685,230

National Development Bank PLC

Annual Report 2023

217

28.

FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (CONTD.)
GROUP
2023

Sri Lanka Government Securities- treasury bonds
Sri Lanka Government Securities- treasury bills
Quoted ordinary shares (Note 28.2)
Non-quoted ordinary shares(Note 28.3)
Quoted debentures
Sub Total
Less: Impairment allowance forinvestments
Total

2022

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

39,264,956--

39,264,956

18,248,043--

18,248,043

44,143,876
1,136,489--

44,143,876
1,136,489

26,354,221
779,434--

26,354,221
779,434

6,225
93,877
84,645,423-

10,344
10,344

16,56993,87784,655,767

6,224
66,56845,454,490-

10,344
10,344

16,56866,56845,464,834

84,645,423-

10,344-

10,344
84,645,423

45,454,490-

10,344-

10,34445,454,490

28.1(c) Movement in impairment allowance during the year
BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000-

181,155(181,155)--

181,155(181,155)-

Stage 3
Balance as at 01 January
Impairment charges

10,344-

10,344-

10,344-

10,344-

Balance as at 31 December

10,344

10,344

10,344

10,344

Stage 1
Balance as at 01 January
Impairment allowance transferred to financial assets at amortised cost
Balance as at 31 December

28.2

GROUP

2023

Quoted ordinary shares
BANK & GROUP
2023

Cost of investments as at 01 January
Scrip dividend received during the year
Cost of the investments as at 31 December

No of
Ordinary
Shares
24,665,596
1,222,493
25,888,089

Gains/(losses) from fair valuations as at 01 January
Unrealised gains/(losses) during the year
Gains/(losses) from fair valuations as at 31 December
Market value2022

LKR ’000

No of
Ordinary
Shares

LKR ’000

2,080,367
41,932
2,122,299

23,056,971
1,608,625
24,665,596

2,011,196
69,1712,080,367(1,300,933)
315,123(985,810)
1,136,489(996,688)(304,245)(1,300,933)
779,434

28.2.(a) Quoted ordinary shares
Details of quoted ordinary shares - 31 December 2023
BANK & GROUP
Name of the Company

No ofSharesSeylan Bank PLC

218

National Development Bank PLC

25,888,089

Annual Report 2023

Notes to the Financial Statements

Market value

LKR

Cost ofInvestments
LKR ’000

43.90

2,122,299

1,136,489

Market price

LKR ’000

Details of quoted ordinary shares - 31 December 2022
BANK & GROUP
Name of the Company

No ofSharesSeylan Bank PLC

28.3

24,665,596

Market value

LKR

Cost ofInvestments
LKR ’000

31.60

2,080,367

779,434

Market price

LKR ’000

Non-quoted ordinary shares
The majority of non-quoted ordinary shares held by the Bank include share investments that have been made primarily for regulatory purposes. Suchinvestments are recorded at cost due to unavailability of information to value such investments at fair value.

29.

INVESTMENTS IN SUBSIDIARY COMPANIESACCOUNTING POLICY
Subsidiaries are investees that are controlled by the Group. The Group is presumed to control an investee when it is exposed to, or has rights to,variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. At eachreporting date, the Group reassesses whether it controls an investee, if facts and circumstances indicate that there are changes to one or moreelements of control mentioned above.
The Financial Statements of subsidiaries are fully consolidated from the date on which control is transferred to the Bank and continue to beconsolidated until the date when such control ceases. The Financial Statements of the Bank’s subsidiaries are prepared for the same reporting year as
per the Bank, using consistent accounting policies.
The cost of acquisition of a subsidiary is measured at fair value of the consideration, including contingent consideration. The acquired identifiable
assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition.
Subsequent to the initial measurement, investments in subsidiary companies are accounted at cost less impairment allowance in the Financial
Statements of the Bank. The net assets of each subsidiary company are reviewed at each reporting date to determine whether there is any indicationof impairment. If any such indication exists, then the recoverable amount of the investment is estimated and the impairment loss is recognised to theextent of its loss in net assets.

2023
Corporate
StatusCost
LKR ’000

Percentage
Holding (%)

Cost
LKR ’000NDB Capital Holdings Limited

Non-quoted

99.9

802,88899.9

802,888

Development Holdings (Pvt) Limited

Non-quoted

58.7

228,15058.7

228,150NDB Capital Limited (Bangladesh)

Non-quoted

41.8

180,552

41.8

Sub total

29.1

2022

Percentage
Holding (%)

1,211,590

Less: Impairment allowance for investments (Note 29.1)

102,818

95,796

Total

1,108,772

1,115,794

Movement in impairment allowance for investments in subsidiary companies
2023

2022

LKR ’000

LKR ’000

As at 01 January

95,79680,674Charges/(reversals) to the Statement of Profit or Loss (Note 29.2)

7,022

15,122

102,818

95,796As at 31 December

29.2

180,552
1,211,590

During the annual review of impairment allowance of investment in subsidiary companies, it was noted that the net assets position of NDB Capital
Limited as at 31 December 2023 had decreased from LKR 202.9 Mn to LKR 186.1 Mn which is excluding the currency conversion impact on exchange
rate movement. Accordingly, an impairment charge of LKR 7 Mn was recorded during the year to reflect the Bank’s share of the net assets position of theCompany as at 31 December 2023. The Bank assumed that the net book value of the company is the best approximate to the fair value less cost to sale.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

219

29.3

Summarised Financial Information of the NDB Group’s Investments in Subsidiaries
Total

Development
Holdings (Pvt)
LimitedNDB Capital
Limited(Bangladesh)

NDB Capital
Holdings
Limited(NCAP)NDB
Investment
Bank Limited(Held through
NCAP)

NDB WealthManagement
Limited (HeldthroughNCAP)

NDB Securities(Pvt) Limited(Held throughNCAP)

NDB ZephyrPartners Limited(Group)(Held throughNCAP)

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Total assets

9,418,790

4,183,569

244,508

2,813,757

475,918

586,432

974,514140,092

Total liabilities

1,944,213

943,009

9,707

278,616

105,062

258,744318,338

30,737

Net assets

7,474,578

3,240,560

234,800

2,535,141

370,856

327,688

656,177

109,356

Gross income

2,348,375

534,432

81,959387,014

171,740

817,806

282,143

73,281

Profits/(losses)

653,833

314,763(21,713)137,294(36,084)

213,475

55,229(9,131)

Cash flows from operating activities

314,431

115,995

54,925

129,619(130,176)

146,250(862)(1,320)Cash flows from investing activities(758,332)(28,541)(122,877)(190,457)

22,178(146,618)(272,863)(19,154)

Cash flows from financing activities(143,097)(97,310)

-

-

-

-

-

(45,787)

Total

Development
Holdings (Pvt)
LimitedNDB Capital
Limited(Bangladesh)

NDB Capital
Holdings
Limited(NCAP)NDB
Investment
Bank Limited(Held through
NCAP)

NDB WealthManagement
Limited (HeldthroughNCAP)

NDB Securities(Pvt) Limited(Held throughNCAP)

NDB ZephyrPartners Limited(Group)(Held throughNCAP)

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

225,8812023

Cash Flow2022
Total assets

8,968,597

3,916,753

365,027

2,551,575

528,698

301,721

1,078,942

Total liabilities

1,871,414

875,455

59,532

156,334

106,862

178,357

471,520

23,354

Net assets

7,097,183

3,041,298

305,495

2,395,241

421,836

123,364

607,422202,527

Gross income

2,389,028

517,748

61,993640,667

245,537

430,498

403,51189,074

Profits/(losses)

703,451

175,515(56,138)

374,488

6,740

57,615

138,715

6,516

Cash flows from operating activities

813,397

184,930(13,231)452,937(72,006)(65,375)

286,769

39,373

Cash flows from investing activities

369,321(66,771)

49,704(153,823)

199,771324,604

15,836-

Cash flows from financing activities(597,420)(97,310)-(250,077)-(250,033)--

Cash Flow30.

INVESTMENTS IN ASSOCIATE COMPANIESACCOUNTING POLICY
An associate is an entity in which the Group has significant influence, but not control, over the variable returns through its power over the investee. An
associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither asubsidiary nor an interest in a joint venture. The Group’s investments in its associate companies are accounted for by using the equity method. Under
the equity method, the investment in the associate is carried in the Statement of Financial Position at cost plus post-acquisition changes in the Group’s
share of net assets of the associate. The carrying value of the investment in associates is reviewed for impairment at each reporting period.
The Bank’s investments in Associate companies represent Ayojana Fund (Pvt) Limited (a 50% share holding) at a cost of LKR 100,000 for which full
impairment allowance has been made as the companies under liquidation.

220

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

31.

INVESTMENT PROPERTYACCOUNTING POLICY

Basis of Recognition
An investment property is recognised, if itis probable that future economic benefits
that are associated with the investment
property will flow to the Group and cost of theinvestment property is reliably measured.

Distinction Between Investment
Properties and Owner-Occupied
Properties
The Group determines whether a property
qualifies as an investment property byconsidering whether the property generates
cash flows largely independently of the otherassets held by the entity. Some properties
comprise a portion that is held to earn rentals
or for capital appreciation and another portion
that is held for use in the production or supply
of goods or services or for administrative
purposes. If these portions can be soldseparately (or leased out separately undera finance lease), the Group accounts for the
portions separately. If the portions cannot
be sold separately, the property is accounted
for as an investment property only if an
insignificant portion is held for use in the
production or supply of goods or services
or for administrative purposes. The Groupconsiders each property separately in making
its judgment.

Measurement

De-Recognition

The Land and Building of Development
Holdings (Pvt) Limited, which is held to earnrental income and for capital appreciation has
been classified as an ‘investment property’,and
is reflected at fair value in accordance with
LKAS 40, Investment Property. Investment
properties are initially recognised at cost.
Subsequent to the initial recognition, theinvestment properties are stated at fair values.
In estimating the fair values, the Independent
Valuer considers current market prices ofsimilar assets, so as to reflect market conditions
at the reporting date. Gains or losses arisingfrom changes in the fair values are includedin the Statement of Profit or Loss, in the year
in which they arise. Cost includes expenditurethat is directly attributable to the acquisitionof the investment property. The cost of selfconstructed investment property includes thecost of materials, direct labour and any othercosts directly attributable to bringing theinvestment property to a working condition for
their intended use. Owner-occupied portionof an investment property is recognised andmeasured in line with the accounting policy
used for property, plant & equipment of theGroup and are presented under property, plant& equipment in the Financial Statements.

Investment properties are derecognised when
disposed or permanently withdrawn fromuse because no future economic benefits are
expected. Any gains or losses on retirement
or disposal are recognised in the Statementof Profit or Loss in the year of retirement or
disposal.

Basis of Valuation
As at 31 December 2023, the fair value ofthe property was based on the valuation
performed by an Independent Professional
Valuer, A A M Fathihu, B.Sc. (Hons.) EMV,FIV Sri Lanka who is having appropriate
recognised professional qualifications andrecent experience in the location and categoryof property being valued, to determine thefair value of land and buildings. The income
approach using the current market rent
including passing rents has been used as
the methodology by the Valuer to value theinvestment property as recommended by
SLFRS 13 - ‘Fair Value Measurements’.

Significant Assumptions Used for the
ValuationyOutgoing at 35% of estimated rent
(2022 - 40%)yCapitalise YP at 16% (2022 - 16%)

GROUP
2023

2022

LKR ’000

LKR ’000

2,879,091

2,528,228

24,400

182,594

Change in the fair value during the year

253,600

235,406

Less: Fair value of the owner-occupied portion

42,04867,137

Net change in the fair value during the year (Note 10)

211,552

168,269

As at 01 January
Additions during the year

Less: Change in the owner occupied portion
As at 31 December

2,603

-

3,112,440

2,879,091

The maturity analysis of investment property is given in Note 50 - Maturity Analysis.
There were no capitalised borrowing cost related to the acquisition of investment property during the year 2023 (2022-Nil).

31.1

Statement of Income and Expenditure of the Investment Property
GROUP
2023

2022

LKR ’000

LKR ’000

Rental income derived from investment property

225,484

236,865

Direct operating expenses (including repair and maintenance) in generating rental income(42,329)(38,187)

Direct operating expenses (including repair and maintenance) that did not generate rental income(36,315)(27,223)

Profit arising from investment property carried at fair value

146,840

171,455

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

221

31.2

Information on Investment Property of the Group - Extent and Locations
As required by Rule No 7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange
Business location of thepremisesThrough the subsidiarycompany of Development
Holdings (Pvt) Limited (DHPL)

Number of
Buildings

No: 42 Nawam
Mawatha, Colombo 02

1

Land Extent

Building

Fair Value as at 31
December 2023

Fair Value as at 31
December 2022

(Perches)

Sq ft.

LKR ’000

LKR ’000

71.27

175,190

3,708,000

3,430,000

Valuation amounts include fair value of owner occupied portion of LKR 595 Mn (2022 - LKR 551 Mn).
The Group has no restrictions on the realisability of its investment property and no contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance and enhancement.
Fair value hierarchy disclosures for investment property are given in Note 55 (a), to these Financial Statements.

32.

PROPERTY, PLANT & EQUIPMENTACCOUNTING POLICY

Basis of Recognition
Property, plant & equipment are recognised,
if it is probable that future economic benefits
associated with the asset will flow to the Groupand the cost or the fair value of the asset canbe reliably measured.

Basis of Measurement
An item of property, plant & equipment that
qualifies for recognition as an asset is initiallymeasured at its cost. Cost includes expenditurethat is directly attributable to the acquisition of
the assets and subsequent cost as explained
below. The cost of self­constructed assets
includes the cost of the materials and direct
labour, any other cost directly attributable tobringing the assets to a working condition for
its intended use and cost of dismantling andremoving the old items and restoring the siteon which they are located. Purchased software
which is integral to the functionality of therelated equipment is capitalised as part ofcomputer equipment.

Cost Model
The Group applies the ‘Cost Model’ to allproperty, plant & equipment other thanfreehold land and buildings and record at
cost of purchase together with any incidental
expenses thereon, less accumulated
depreciation and any accumulated impairment
losses.

Revaluation Model
The Group applies the revaluation model forthe entire class of freehold land and buildings.
Such properties are carried at revalued
amounts, being their fair value at the reporting
date, less any subsequent accumulated
depreciation on land and buildings and any
accumulated impairment losses charged
subsequent to the date of the valuation.

222

National Development Bank PLC

Freehold land and buildings of the Group arerevalued every three years or more frequently
if the fair values are substantially different
from their carrying amounts to ensure that thecarrying amounts do not differ from the fairvalues at the reporting date.
A letter of confirmation is obtained from the
Independent Professional Valuer annually,
except the year in which full valuation iscarried out by the Group, to ensure that the fairvalues of the freehold land and building at thereporting date do not significantly vary fromtheir carrying amounts.

Subsequent Cost
These are costs that are recognised in the
carrying amount of an item if it is probablethat the future economic benefits embodied
within that part will flow to the Group and it
can be reliably measured. Ongoing repairs andmaintenance are expensed as incurred.

Capital Work-in-Progress
These are expenses of a capital nature directly
incurred in the construction of buildings, major
plant and machinery and system development,
which will be capitalised with the completionof the project and when the asset is ready to
be used. These are stated in the Statementof Financial Position at cost. Capital workin-progress is transferred to the relevant
asset when it is completed and converted
into a usable condition as expected by theManagement of the Group.

Derecognition
An item of property, plant & equipment isderecognised upon disposal or when no future
economic benefits are expected. Any gainor loss arising on derecognition of the asset(calculated as the difference between the net
disposal proceeds and the carrying amount

Annual Report 2023

Notes to the Financial Statementsof the asset) is included in the Statement ofProfit or Loss in the year, in which the asset isderecognised.

Depreciation and amortisation
The accounting policy and the judgement
and estimates used in the computation ofdepreciation and amortisation of property,
plant & equipment are explained in detail in
Note 13 on page 194.

Accounting Judgements, Estimates andAssumptions
Fair value of freehold land and buildings
The freehold land and buildings of theGroup are reflected at fair value. The Group
engaged an Independent Professional Valuer,
A A M Fathihu, B.Sc. (Hons.) EMV, FIV Sri
Lanka to determine the fair value of freehold
land and buildings in terms of Sri Lanka
Accounting Standard- SLFRS 13 on “Fair Value
Measurement”. In estimating the fair values, theIndependent Valuer considered current market
prices of similar assets.
The methods used to determine the fair valueof the freehold land and buildings are further
explained in Note 55 & 55(c) to the financial
statements.

Useful Life Time of Property, Plant &Equipment
The Group reviews the residual values, useful
lives and methods of depreciation of property,
plant and equipment at each reporting date.
Management exercises judgement in theestimation of these values, rates, methods andhence those are subject to uncertainty.

32.1

The Movement in Property, Plant & Equipment - Bank
FreeholdLand

Freehold
Buildings

Leasehold
Buildings

ComputerEquipment

Motor
VehiclesOfficeEquipment &Furniture

Capital Workin- Progress

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

6,240,804(a) Cost or Valuation
919,305

1,374,679

566,922

1,989,130

69,6201,221,617

99,531

Additions during the year

As at 1 January 2022-

19,897

37,159142,609-81,462

17,879299,006

Disposals during the year

-

(134)

(32,639)(186,866)-(51,089)-(270,728)

104,695

144,956

-

-

-

-

-

249,651

-

-

-

-

-

(39)

(33,020)(33,059)

1,024,000

1,539,398

571,442

1,944,873

69,6201,251,951

84,3906,485,674

Revaluation adjustment during the year
Transfers/adjustments
As at 31 December 2022
Additions during the year

-

6,433

18,159151,238-

96,6049,527

281,961

Disposals during the year

-

(147)

(4,746)(29,896)(3,100)(32,417)-(70,306)

Revaluation adjustment during the year-

50,483

-

-

-

-

-

50,483

Transfers/adjustments

-

-

-

(9,884)--(53,545)(63,429)

1,024,000

1,596,167

584,855

2,056,331

66,5201,316,138

40,372

6,684,383

3,096,974

As at 31 December 2023
(b) Depreciation/Amortisation

32.2

As at 1 January 2022-

339,985

435,341

1,266,712

67,746

987,190-

Charge for the year (Note 13)-

50,55453,940188,212775

104,267-

397,748

On disposals

-

(134)

(32,628)(186,664)-(51,024)-(270,450)

Transfers/Adjustments

-

(6)

-

6

-

40

-

40

As at 31 December 2022-

390,399456,653

1,268,266

68,521

1,040,473-

3,224,312

Charge for the year (Note 13)-

56,86650,402

191,446326

94,296-393,336

On disposals

-

(98)

(4,678)(29,702)(2,328)(31,920)-(68,726)

Transfers/Adjustments

-

-

-

(5,656)---(5,656)As at 31 December 2023-

447,167

502,377

1,424,354

66,5191,102,849-

3,543,266

Net book value as at 31 December 2023

1,024,000

1,149,000

82,478631,9771

213,289

40,372

3,141,117

Net book value as at 31 December 2022

1,024,000

1,149,000

114,789

676,607

1,099

211,478

84,3903,261,362

Details of Revalued Freehold Land and Buildings - Bank
As at 31 December 2023
The freehold land and building of the Bank have been revalued by the independent professional Valuer A A M Fathihu, B.Sc (Hons) EMV, FIV Sri Lanka, for theyear ended 31 December 2023. Accordingly gains/(losses) on revaluation of land and building has been recognised during the year as given below.

Date of valuation - 31 December 2023
Freehold Land

ExtentRevaluationof LandBook Value before
Revaluation

Revaluation
Gains/(Losses)
Recognised on Land

(Perches)

LKR ’000

LKR ’000

LKR ’000Head Office No. 103A, Dharmapala Mawatha, Colombo 07
Head Office No. 40, Nawam Mawatha, Colombo 02
Sub Total (a)

60.00
1.43

1,000,000
24,0001,024,000

1,000,000
24,0001,024,000-

Freehold building

ExtentRevaluationof BuildingsBook Value before
Revaluation

Revaluation
Gains/(Losses)
Recognised on
Buildings(Square Feet)

LKR ’000

LKR ’000

LKR ’000Head Office No. 103A, Dharmapala Mawatha, Colombo 07

41,143383,000

369,580

13,420

Head Office No. 40, Nawam Mawatha, Colombo 02

95,343766,000

728,937

37,063

Sub Total (b)1,149,000

1,098,517

50,483

Total (a)+(b)2,173,000

2,122,517

50,483

Location

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

223

32.3

Freehold Land and Buildings on Cost Basis - Bank
The carrying amount of the Bank’s revalued freehold land and buildings that would have been included in the Financial Statements at cost lessaccumulated depreciation is as follows:
2023

32.4

2022

Cost

Accumulated
Depreciation

Net Book
Value

Cost

Accumulated
Depreciation

Net BookValue

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000Class of assets
Freehold land

165,016-

165,016

165,016-

165,016

Freehold buildings
Total

613,598
778,614507,047
507,047

106,551
271,567

608,365
773,381494,775
494,775

113,590278,606

The Movement in Property, Plant & Equipment - Group
FreeholdLand

Freehold
Buildings

Leasehold
Buildings

ComputerEquipment

Motor
VehiclesOfficeEquipment &Furniture

Capital Workin- Progress

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

7,263,110(a) Cost or Valuation
919,305

1,885,882

588,004

2,076,007

88,0801,606,302

99,530Additions during the year

As at 1 January 2022-

19,897

37,159151,168-

95,72351,859355,806

Disposals during the year

-

(134)

(32,639)(186,911)-(51,881)-(271,565)

104,695

212,093

-

-

-

-

-

316,788

-

-

146

3,693

5,923

7,238

(66,999)(49,999)

1,024,000

2,117,738

592,670

2,043,957

94,003

1,657,382

84,3907,614,140

Additions during the year-

48,481

18,159160,924-

101,865

9,527

338,956

Disposals during the year

-

(147)

(4,746)(30,255)(3,100)(144,584)-(182,832)

Revaluation adjustment during the year-

50,483

-

-

-

-

-

50,483

Transfers/adjustments

-

-

-

(11,388)(3,708)(4,688)(53,545)(73,329)

1,024,000

2,216,555

606,083

2,163,238

87,195

1,609,975

40,372

7,747,418

3,527,812

Revaluation adjustment during the year
Transfers/adjustments
As at 31 December 2022

As at 31 December 2023
(b) Depreciation/Amortisation

32.5

As at 1 January 2022-

365,669

444,859

1,331,048

87,937

1,298,299-

Charge for the year (Note 13)-

50,55456,063

198,822899

127,309-433,647

On disposals

-

(134)

(32,628)(188,923)-(51,168)-(272,853)

Transfers/adjustments

-

(6)

146

8,712

3,588

5,100

-

17,540As at 31 December 2022-

416,083

468,440

1,349,659

92,424

1,379,540-

3,706,146

Charge for the year (Note 13)-

56,866

51,936

201,714450

109,871-

420,837

On disposals

-

(98)

(4,678)(30,061)(2,328)(143,183)-(180,348)

Transfers/adjustments

-

-

-

(7,110)(3,679)(5,525)-(16,314)

As at 31 December 2023-

472,851515,698

1,514,202

86,8671,340,703-

3,930,321

Net book value as at 31 December 2023

1,024,000

1,743,704

90,385649,036328

269,272

40,372

3,817,097

Net book value as at 31 December 2022

1,024,000

1,701,655

124,230

694,298

1,579

277,842

84,3903,907,994

Cost of Fully Depreciated Property, Plant & Equipment and Intangible Assets
The initial cost of fully depreciated property, plant & equipment and intangible assets which are still in use are as follows:
BANK

224

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Freehold buildings
Leasehold building
Motor vehicles
Office equipment and furniture
Computer equipment

44,619351,304
66,519854,424
773,583

32,149307,017
66,519764,607
712,753

44,619351,304
67,5491,010,680
840,152

32,149749,528
67,549914,440
769,608

Computer software
Total

853,119
2,943,568

749,528
2,632,573

964,985
3,279,289

406,499
2,939,773

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

32.6

Information on Freehold Land and Buildings of the Bank - Extent and Locations
As required by Rule No.7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange.
Location

No ofbuildings

ExtentBuildings

Revalued
land

Revaluedbuildings

Total
revaluedamountNet Book
Value before
Revaluation

Revaluation
Gains/ (Losses)
Recognisedon Land(Perches)(Square)

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,000,000

383,000

1,383,000

1,369,580

13,420

Head Office No. 103A, Dharmapala
Mawatha, Colombo 07

1

60

41,143

Head Office No. 40, Nawam
Mawatha, Colombo 02

1

1.43

95,343

Total

24,000766,000

790,000

752,937

37,063

1,024,000

1,149,000

2,173,000

2,122,517

50,483

Title restriction on property, plant and equipment
There were no restrictions on the title of the property, plant and equipment of the Group as at the reporting date (2022 - Nil).

Property, plant and equipment pledged as security for liabilities
There were no items of property, plant and equipment of the Group that have been pledged as securities for liabilities as at the reporting date (2022 -Nil).

Borrowing costs
There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year 2023 (2022 - Nil).

33.

RIGHT OF USE ASSETSACCOUNTING POLICY

Basis of Recognition
The Group applies Sri Lanka AccountingStandard SLFRS 16 “Leases” in accounting
for all lease hold rights except for short termleases, which are held for use in the provisionof services.

Lease Liability
At the commencement date of the lease, theGroup recognises lease liabilities, measured
at present value of lease payments to bemade over the lease term. The Group applied
modified retrospective approach in accordancewith SLFRS 16 when accounting for right-of-use
assets and operating lease liabilities.

Basis of Measurement
The Group recognises right-of-use assets
at the date of commencement of the lease,which is the present value of lease payments
to be made over the lease term. Rightof- use assets are measured at cost less any
accumulated amortisation and impairment
losses and adjusted for any re- measurementof lease liabilities. The cost of the right-of-use
assets includes the amount of lease liabilities
recognised, initial direct cost incurred,
and lease payments made at or before thecommencement date less any lease incentives
received. Right of use assets are amortised on astraight line basis over the term of the lease.

The interest expense on the lease liabilities
and the depreciation expense on the rightof-use assets are recognised separately in theStatement of Profit or Loss in line with therequirements of SLFRS 16-Leases.
Further the lease liabilities will be remeasured
upon the occurrence of certain events (e.g. achange in the lease term, a change in futurelease payments resulting from a change in
an index or rate used to determine thosepayments). The Group will generally recognise
the amount of the remeasurement of the leaseliability as an adjustment to the right-of-use
asset.

Significant Accounting Judgments,
Estimates and Assumptions
The Group use its judgment to determine
whether an operating lease agreement
qualifies as recognition of right-of-use
assets. In estimating the borrowing cost oflease liabilities, the Group uses the interest
rate applicable to loans given for housing
purposes, based on a similar tenor, collateraland economic environment. The present valueof operating lease commitments has been
calculated using weighted average incremental
borrowing rates at which the Group opts toborrow such assets.
There is no change in the incremental
borrowing rates use for land and vehicles as
there were no additions during the year 2023.

The incremental borrowing rates used for the year ended 31 December 2023 and 2022, are as follows:
BANK & GROUPClass of Assets
Buildings

2023

2022

%

%

9.50-25

9.50-12

Land

14

14

Vehicles15

15

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

225

33.

RIGHT OF USE ASSETS (CONTD.)
BANK

GROUP

Land and
Building

VehicleTotal

Land and
Building

VehicleTotal

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000Cost
As at 01 January 2023
Additions during the year
Transfers/adjustments
As at 31 December 2023

2,205,196
297,801(2,845)2,500,152

101,492
101,492

2,306,688
297,801(2,845)2,601,644

2,510,401
297,801(2,845)2,805,357

101,492
101,492

2,611,893
297,801(2,845)2,906,849

Depreciation/Amortisation
As at 01 January 2023
Charge for the year (Note 13)
As at 31 December 2023
Net book value as at 31 December 2023

1,049,497
305,054
1,354,551
1,145,601

86,42815,064
101,492-

1,135,925
320,118
1,456,043
1,145,601

1,202,097
343,205
1,545,302
1,260,055

86,42815,064
101,492-

1,288,525
358,269
1,646,794
1,260,055

BANK

34.

GROUP

Land and
Building

VehicleTotal

Land and
Building

VehicleTotal

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000Cost
As at 01 January 2022
Additions during the year
Transfers/adjustments
As at 31 December 2022

1,815,941
389,749(494)
2,205,196

101,492
101,492

1,917,433
389,749(494)
2,306,688

2,121,149
389,749(497)
2,510,401

101,492
101,492

2,222,641
389,749(497)
2,611,893

Depreciation/Amortisation
As at 01 January 2022
Charge for the year (Note 13)
As at 31 December 2022
Net book value as at 31 December 2022

758,006
291,491
1,049,497
1,155,699

64,82021,60886,42815,064

822,826
313,099
1,135,925
1,170,763

872,436
329,661
1,202,097
1,308,304

64,82021,60886,42815,064

937,256
351,269
1,288,525
1,323,368

INTANGIBLE ASSETSACCOUNTING POLICY
Intangible assets of the Group include thevalue of computer software and software
under development.

Basis of Recognition
An intangible asset is recognised only when its
cost can be measured reliably and it is probablethat the expected future economic benefits
that are attributable to it will flow to theGroup. Intangible assets acquired separately
are measured on initial recognition at cost.
Following the initial recognition, intangible
assets are carried at cost less any accumulated
amortisation and any accumulated impairment
losses. Subsequent expenditure on intangible
assets is capitalised only when it increases
the future economic benefits embodied in
the specific asset to which it relate. All otherexpenditure is expensed as incurred.

Computer Software and Software underDevelopmenty

Its intention to complete and its ability touse or sell the asset.

Software acquired by the Group is measured
at cost less accumulated amortisation andany accumulated impairment losses. Software
under development mainly includes the cost
incurred for the core banking upgrade.

y

The asset will generate future economic
benefits.

y

The availability of resources to complete
the asset.

yThe ability to measure reliably the
expenditure during development.

yThe ability to use the intangible asset
generated.

Derecognition
Intangible assets are derecognised on
disposal or when no future economic
benefits are expected. Any gain or loss arisingon derecognition of an intangible asset ismeasured as the difference between the net
disposal proceeds and the carrying amount of
the asset and is included in the Statement ofProfit or Loss in the year in which the asset isderecognised.

Research and Development Costs
Research costs are expensed as incurred.
Development costs on an individual project
are recognised as an intangible asset when theGroup can demonstrate:

226

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Following initial recognition of thedevelopment expenditure as an asset, theasset is carried at cost less any accumulated
amortisation and accumulated impairment
losses.
As at the reporting date, the Group did nothave development costs that were capitalised
as an internally-generated intangible asset.

ACCOUNTING POLICY

Accounting Judgements, Estimates andAssumptions
Useful Life Time of Intangible Assets
The Group reviews the residual values, useful
lives and methods of depreciation of intangible
assets at each reporting date. Management
exercises judgement in the estimation of thesevalues, rates, methods and hence those aresubject to uncertainty.

Assessment for Impairment
Irrespective of whether there is any indicationof impairment, the Bank assesses an intangible
asset with an indefinite useful life or an
intangible asset not yet available for use
for impairment annually by comparing its
carrying amount with its recoverable amounts.
However, if such an intangible asset was
initially recognised during the current annual
period, that intangible asset shall be tested

for impairment before the end of the current
annual period and recognised in the Statementof Profit or Loss if there is any impairment
allowance.		

BANK

Computer Software [Note 34.1]
Software Under Development [Note 34.2]
Total

34.1

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,869,547

552,380

1,884,370

561,272

13,9001,251,941

13,9001,251,941

1,883,447

1,804,321

1,898,270

1,813,213

Computer Software
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

As at 01 January

1,819,448

1,499,397

1,944,439

1,619,189

Additions during the year

1,590,383

324,161

1,599,426

326,074

Disposals during the year

(150)

(975)

(150)

(975)

Transfers/adjustments(2,160)(3,135)(2,236)151

3,407,521

1,819,448

3,541,479

1,944,439

As at 01 January

1,267,068

1,132,256

1,383,167

1,238,877

Charge for the year (Note 13)

271,056

135,787

275,353

141,118

Disposals during the year

(150)

(975)

(150)

(975)

Transfers/adjustments--(1,261)

4,147

As at 31 December

1,537,974

1,267,068

1,657,109

1,383,167

Net book value as at 31 December (a)1,869,547

552,380

1,884,370

561,272

Cost

As at 31 December
Depreciation/Amortisation

Additions during the year includes the consultancy fees paid to Ernst & Young LLP for the core banking project, amounting to LKR 59 Mn (2022 - LKR 72 Mn).

34.2

Software Under Development
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,251,941

836,799

1,251,941

836,799

38,450429,495

38,450506,626(1,276,491)(14,353)(1,276,491)(91,484)

13,9001,251,941

13,9001,251,941

1,883,447

1,804,321

1,898,270

1,813,213

Cost
As at 01 January
Additions during the year
Transfer to computer software during the year
As at 31 December (b)Net book value of total intangible assets (a) + (b)Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

227

35.

OTHER ASSETSACCOUNTING POLICYThe Group classifies other assets as ‘otherfinancial assets’ and ‘other non-financial assets’.
Other assets mainly comprise of deposits
and prepayments, unamortised staff costs
and sundry receivables. Deposits are carriedat historical cost less impairment allowance.

Prepayments are amortised during the period
in which they are utilised and are carried athistorical cost less impairment allowance.
As all staff loans granted at below market
interest rates are recognised at fair value, thedifference between the fair value and theamount disbursed was treated as a Day 1
difference. The Day 1 difference is classified as‘unamortised staff cost’ and is amortised overthe loan period by using the Effective Interest
Rate (EIR). The staff loans are subsequently
measured at amortised costs.

Other financial assets and other non-financial assets included under other assets are summarised below:
BANK

35.1

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Other financial assets

1,427,296

1,963,077

1,965,544

2,424,812

Other non-financial assets (Note 35.1)

3,416,887

4,472,251

3,598,283

4,612,859

Total

4,844,183

6,435,328

5,563,827

7,037,671

Other Non-Financial Assets
BANK

35.2

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sundry receivables

1,282,857

2,711,610

1,295,306

2,774,666

Deposits and prepayments

739,245

432,543

873,111497,511

Unamortised staff cost (Note 35.2)

1,394,785

1,328,098

1,429,866

1,340,682

Total

3,416,887

4,472,251

3,598,283

4,612,859

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

As at 01 January

1,328,098

1,275,233

1,340,682

1,289,352

Add: Adjustment for new grants and settlements

281,165

204,331

320,129

209,091

Unamortised Staff Cost
BANK

36.

GROUP

Charged to personnel expenses(214,478)(151,466)(230,945)(157,761)

As at 31 December

1,394,785

1,328,098

1,429,866

1,340,682

DUE TO BANKSACCOUNTING POLICY
Due to banks, include call money borrowings and credit balances in Nostro accounts. Subsequent to initial recognition, these are measured at theiramortised cost using the Effective Interest Rate (EIR) method. Interest paid/payable on these dues are recognised in the Statement of Profit or Loss
under ‘Interest Expenses’.

BANK

228

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Borrowing from local banks

7,123,403

13,056,364

7,123,403

13,056,364

Borrowing from foreign banks

555,792

7,195,293

555,792

7,242,480

Total

7,679,195

20,251,657

7,679,195

20,298,844

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

36.1

Due to Banks - By Currency
BANK

Local currency
Foreign currency
Total

37.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

7,123,403
555,792
7,679,195

9,721,801
10,529,856
20,251,657

7,123,403
555,792
7,679,195

9,721,801
10,577,043
20,298,844

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

615,643,999
15,632,569
24,636,539
655,913,107

672,314,023
130,541
32,372,265
704,816,829

615,232,470
15,632,569
24,636,539
655,501,578

671,713,337
130,541
32,372,265
704,216,143

FINANCIAL LIABILITIES AT AMORTISED COSTBANK

Due to depositors (Note 37.1)
Due to debt securities holders (Note 37.2)
Due to other borrowers (Note 37.3)
Total

37.1

GROUP

Due to Depositors
ACCOUNTING POLICY
Due to depositors include non-interest bearing deposits, savings deposits, term deposits, margins and other deposits. Subsequent to initialrecognition, deposits are measured at their amortised cost using the Effective Interest Rate (EIR) method. Interest paid/payable on deposits arerecognised in the Statement of Profit or Loss under ‘Interest Expenses’.

37.1 (a) Due to depositors - by product
BANK

Savings deposits
Time deposits
Demand deposits
Margin deposits
Other deposits
Total

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

95,292,997
475,907,790
42,074,697
1,787,476
581,039
615,643,999

100,382,052
529,230,558
41,324,347
934,169
442,897672,314,023

95,167,612
475,626,572
42,069,771
1,787,476
581,039615,232,470

100,353,168
528,672,078
41,311,025
934,169
442,897
671,713,337

37.1 (b) Due to depositors - by deposit composition
BANK
2023

GROUP
2022

2023

2022

LKR ’000%

LKR ’000%

LKR ’000%

LKR ’000%

Local currency deposits
Savings deposits
Time deposits
Demand deposits
Margin deposits
Other deposits
Sub total

67,889,639
335,388,665
33,683,062
1,704,276
201,691
438,867,333

11
55
5
71

63,027,142
374,560,470
31,435,221
908,369
129,154
470,060,356

9
56
5
70

67,771,213
335,143,112
33,678,136
1,704,276
201,691
438,498,428

11
55
5
71

63,006,056
374,223,346
31,421,899
908,369
129,154469,688,824

9
56
5
70

Foreign currency deposits
Savings deposits
Time deposits
Demand deposits
Margin deposits
Other deposits
Sub total
Total

27,403,358
140,519,125
8,391,635
83,200379,348
176,776,666
615,643,999

4
23
2
29
100

37,354,910
154,670,088
9,889,126
25,800313,743
202,253,667
672,314,023

6
23
1
30
100

27,396,400
140,483,459
8,391,635
83,200379,348
176,734,042
615,232,470

4
23
2
29
100

37,347,112
154,448,732
9,889,126
25,800313,743
202,024,513
671,713,337

6
23
1
30
100

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

229

37.1 (c) Due to depositors - by currency
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Sri Lanka Rupee

438,867,335

470,060,356

438,498,430

469,688,823

United States Dollar

153,218,088

177,218,962

153,175,464

176,989,809

Australian Dollar

7,746,506

9,692,108

7,746,506

9,692,108

Great Britain Pound

8,539,778

7,828,817

8,539,778

7,828,817

Euro

5,419,961

4,829,249

5,419,961

4,829,249

Other currencies

1,852,331

2,684,531

1,852,331

2,684,531

615,643,999

672,314,023

615,232,470

671,713,337

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

10,338,442

3,612,003

10,338,442

3,612,003

Total

37.1 (d) Due to depositors - by institutions/customers
BANK

Deposits from banks

GROUP

Deposits from finance companies

8,480,366

11,978,135

8,480,366

11,978,135

Deposits from other customers

596,825,191

656,723,885

596,413,662

656,123,199

Total

615,643,999

672,314,023

615,232,470

671,713,337

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Western Province

527,193,408

578,428,470

526,781,879

577,827,784

Central Province

19,197,166

21,232,755

19,197,166

21,232,755

North-Western Province

16,998,953

17,985,702

16,998,953

17,985,702

Southern Province

15,073,287

16,858,113

15,073,287

16,858,113

Sabaragamuwa Province

10,216,677

10,630,948

10,216,677

10,630,948

Northern Province

14,566,199

13,435,462

14,566,199

13,435,462

Eastern Province

4,751,970

5,724,165

4,751,970

5,724,165

North-Central Province

3,744,157

4,030,224

3,744,157

4,030,224

Uva Province

3,902,182

3,988,184

3,902,182

3,988,184

615,643,999

672,314,023

615,232,470

671,713,337

37.1 (e) Due to depositors - by province
BANK

Total

37.2

GROUP

Due to Debt Securities Holders
ACCOUNTING POLICY
Due to Debt Securities Holders consists of securities sold under repurchase agreements. The Group sells financial assets and simultaneously enter
into an agreement to repurchase the asset (or similar asset) at a fixed price at a future date. Such an arrangement is accounted for as a financial liability
and the underlying asset continues to be recognised in the Financial Statements of the Group, as the Group retain substantially all risks and rewardsof ownership. Subsequent to initial recognition, these are measured at their amortised cost using the Effective Interest Rate (EIR) method with thecorresponding interest paid/payable being recognised in the Statement of Profit or Loss, under ‘Interest Expenses’.

BANK

230

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Securities sold under repurchase agreements

15,632,569

130,541

15,632,569

130,541

Total

15,632,569

130,541

15,632,569

130,541

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

37.3

Due to Other Borrowers
ACCOUNTING POLICY
Due to other borrowers represents the funds borrowed by the Group for long-term and short-term liquidity funding requirements and include
borrowings from concessionary credit lines, institutional borrowings and funds received from the Central Bank of Sri Lanka including the funds received
under the Saubagya COVID-19 Renaissance facilities. Subsequent to initial recognition, these are measured at their amortised cost using the Effective
Interest Rate (EIR) method. Interest paid/payable on “Due to Other Borrowers” are recognised in the Statement of Profit or Loss, under ‘Interest Expenses’.

BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Concessionary credit lines

7,508,062

7,651,466

7,508,062

7,651,466

Saubagya COVID-19 borrowings

336,879

2,052,792

336,879

2,052,792

Refinance borrowings

2,755,457

3,213,582

2,755,457

3,213,582-

502,893-502,893

14,036,141

18,951,532

14,036,141

18,951,532

24,636,539

32,372,265

24,636,539

32,372,265

Institutional borrowings - Local
			- Foreign

Total

37.4

GROUP

2023

Maturity Analysis of Due to Debt Securities Holders and Due to Other Borrowers - Based on the Contractual Maturity
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Payable within 12 Months
Concessionary credit lines

877,490

960,784

877,490

960,784

Saubagya COVID-19 borrowings

336,879

2,044,984

336,879

2,044,984

Refinance borrowings

644,464

524,158

644,464

524,158-

502,893-502,893

14,036,141

18,951,532

14,036,141

18,951,532

Institutional borrowings - Local
			- Foreign

Securities sold under repurchase agreements

15,632,569

130,541

15,632,569

130,541

Sub total

31,527,543

23,114,892

31,527,543

23,114,892

6,630,572

6,690,682

6,630,572

6,690,682

-

7,808

-

7,808

2,110,993

2,689,424

2,110,993

2,689,424

Payable after 12 Months
Concessionary credit lines
Saubagya COVID-19 borrowings
Refinance borrowings

38.

Sub total

8,741,565

9,387,914

8,741,565

9,387,914

Total (Note 37.2 & Note 37.3)

40,269,108

32,502,806

40,269,108

32,502,806

DEBT SECURITIES ISSUEDACCOUNTING POLICY
Debt securities issued includes the funds borrowed by the Group for long-term and short-term funding requirements by way of quoted debentures.
Subsequent to initial recognition, these are measured at their amortised cost using the Effective Interest Rate (EIR) method. Interest paid/payable ondebt securities issued are recognised in the Statement of Profit or Loss. The direct costs attributable to these term debts are amortised over the termof the debt and are offset in the presentation of debt securities issued, in the Statement of Financial Position.

BANK & GROUP
2023

2022

LKR ’000

LKR ’000

As at 01 January

27,979,631

27,960,731

Additions during the year

5,000,000-

Redemptions(3,637,980)-

47,22418,90029,388,875

27,979,631

Net effect on amortised interest payable
As at 31 December (Note 38.1)

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

231

38.1

Debenture
Interest
PayableFrequency

39.

Issued Date

Maturity DateBANK & GROUP

Effective
AnnualYield %

2023

2022

LKR ’000

LKR ’000

Fixed Rate Debenture Issuance - December 2013
Type C - 13.90% - (120 Months)
AnnuallyType D - 14.00% - (144 Months)
Annually
Total (a)19-Dec-2013
19-Dec-2013

19-Dec-2023
19-Dec-2025

13.17
13.26

3,584,911
3,584,911

3,634,951
3,582,653
7,217,604

Fixed Rate Debenture Issuance - March 2019
Type A - 13.50% - (60 Months)
Type B - 13.95% - (60 Months)
Total (b)30-Mar-2019
30-Mar-2019

30-Mar-2024
30-Mar-2024

13.16
13.15

1,284,278
4,765,170
6,049,448

1,283,027
4,760,731
6,043,758

Fixed Rate Debenture Issuance - September 2020
9.50% - (60 Months)
Annually
Total (c)24-Sep-2020

24-Sep-2025

9.16

6,650,716
6,650,716

6,645,899
6,645,899

Fixed Rate Debenture Issuance - November 2021
Type A - 11.90% - (60 Months)
Semi-annually
Type B - 12.00% - (84 Months)
Semi-annually
Total (d)23-Nov-2021
23-Nov-2021

23-Nov-2026
23-Nov-2028

11.66
11.73

7,960,520
117,0818,077,601

7,955,337
117,033
8,072,370

Fixed Rate Debenture Issuance - December 2023
Type A - 15.00% - (60 Months)
AnnuallyType B - 14.22% - (60 Months)
Quarterly
Total (e)12-Dec-2023
12-Dec-2023

11-Dec-2028
11-Dec-2028

14.05
14.05

3,351,932
1,674,267
5,026,199-

Debt securities issued (a)+(b)+(c)+(d)+(e)29,388,875

27,979,631

The contractual maturity of the debt securities
issued are given below:
Due within one year
Due after one year
Total

6,354,630
23,034,245
29,388,875

4,386,729
23,592,902
27,979,631

Semi-annually
Annually

CURRENT TAX (RECEIVABLES)/LIABILITIESACCOUNTING POLICY
The accounting policy on current tax (receivables)/liabilities for the Group is included in Note 17 on page 196.

BANK
As at 31 December

39.1

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

7,265,070
7,265,070

6,470,353
6,470,353

7,430,773(43,102)7,387,671

6,635,188(43,488)6,591,700

6,470,353
4,080,574(913,704)(2,372,153)
7,265,070

2,407,243
5,868,752(222,838)(1,582,804)
6,470,353

6,591,700
4,337,945(867,626)(2,674,348)
7,387,671

2,558,274
6,074,946(216,621)(1,824,899)
6,591,700

Movement in Net Current Tax Liabilities
As at 01 January
Current tax based on profit for the year
Under/(over) provision in respect of previous years
Payment of tax
As at 31 December

40.

2022

Summary of Net Current Tax Liabilities
Current tax liabilities
Current tax receivables
Net current tax liability

39.2

GROUP

2023

DEFERRED TAX (ASSETS)/LIABILITIESACCOUNTING POLICY
The accounting policy on deferred tax (assets)/liabilities for the Group is included in Note 17 on page 196.			

232

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

.

40.1

Summary of Net Deferred Tax (Assets)/Liabilities
BANK
As at 31 December

Recognised under assets
Recognised under liabilities
Net deffered tax assets (Note 40.3 and 40.4)

40.2

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000(9,648,118)(9,648,118)(9,004,747)(9,004,747)(9,717,805)
921,189(8,796,616)(9,048,896)
873,280(8,175,616)

Movement in Net Deferred Tax (Assets)/Liabilities
BANK
2023

As at 01 January
Amount originating/(reversing) toStatement of Profit or Loss
(Note 17.3)
Amount originating/(reversing) toOther Comprehensive Income
As at 31 December

GROUP
2022

2023

2022

TemporarydifferenceTaxeffectTemporarydifferenceTaxeffectTemporarydifferenceTaxeffectTemporarydifferenceTaxeffect

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000(30,015,822)(9,004,747)(14,238,813)(3,417,315)(27,252,050)(8,175,616)(11,974,974)(2,873,994)(3,970,937)(1,191,280)(23,030,122)(7,721,972)(3,914,300)(1,174,290)(22,629,189)(7,465,282)

1,826,366(32,160,393)

547,909(9,648,118)

7,253,113(30,015,822)

2,134,540(9,004,747)

1,844,300(29,322,050)

553,290(8,796,616)

7,352,113(27,252,050)

2,163,660(8,175,616)

The deferred tax assets/liabilities of the Group as at 31 December 2023 were computed using the income tax rate of 30% (2022-30%).
Deferred tax effect on Statement of Profit or Loss and Other Comprehensive Income for the previous year includes the impact of tax rate change on
deferred tax assets/liabilities as at 31 December 2022 amounting to a tax reversal of LKR 2,195 Mn and a tax charge of LKR 394 Mn recorded to the Statementof Profit or Loss and Other Comprehensive Income of the Bank respectively. The reversal recorded to the Statement of Profit or Loss and charge recorded to
the Other Comprehensive Income of the Group was LKR 2,052 Mn and LKR 405 Mn respectively.

40.3

Reconciliation of Net Deferred Tax (Assets)/Liabilities
BANK
Statement of Financial Position

Deferred tax liabilities
Accelerated depreciation for tax purposes
Revaluation gains on freehold land and buildings
Finance leases
Gains on fair value adjustment of financial
assets measured at fair value through othercomprehensive income
Cash flow hedge reserve
Total
Deferred tax assets
Defined benefit plans
Losses on fair value adjustment of financial
assets measured at fair value through othercomprehensive income
Operating leases
Impairment allowances
On loans and receivables to other customers
On other financial assets (Note 40.3 (a))
Total
Deferred tax effect on Statement of Profit or Loss andOther Comprehensive Income for the year
Net deferred tax (assets)/liabilities as at 31
December (Note 40.1)

Notes to the Financial Statements

Statement of Profit or Loss

Other Comprehensive Income

2023

2022

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

102,621643,475
138,093

56,976628,329
282,729

45,645(144,636)

21,597(59,119)

15,145-

185,581-

1,688,561
358,0362,930,786

110,656
1,315,571
2,394,261(98,991)(37,522)

1,577,905(957,535)
635,515

110,656
1,315,571
1,611,808

389,973274,801(27,565)(56,195)(87,606)(42,044)

78,86875,180(3,688)(13,278)-

564,776-

5,029,573
7,080,490
12,578,904

4,992,404
6,056,623
11,399,008(37,169)(1,023,867)(1,092,289)(2,297,892)(5,317,085)(7,684,450)(87,606)

522,732--(1,191,280)(7,721,972)

547,909

2,134,540(9,648,118)(9,004,747)

-

-

-

-

Annual Report 2023

233

National Development Bank PLC

40.3 (a) As at 31 December 2023, the Bank has judgementally estimated a deferred tax asset on the impairment allowance of financial assets amounting to LKR 7,080
Mn of which LKR 7,037 Mn was recognised on the impairment allowance on investments in SLISBs.

40.4

Reconciliation of Net Deferred Tax (Assets)/Liabilities
GROUP
Statement of Financial
Position

Deferred tax liabilities
Accelerated depreciation for tax purposes
Revaluation gains on freehold land and buildings
Revaluation gains on investment property
Finance leases
Gains on fair value adjustment of financial
assets measured at fair value through othercomprehensive income
Cash flow hedge reserve
Unrealised forex gain
Total
Deferred tax assets
Defined benefit plans
Losses on other operations
Losses on fair value adjustment of financial
assets measured at fair value through othercomprehensive income
Operating leases
Impairment allowances
On loans and receivables to other customers
On other financial assets
Total
Deferred tax effect on Statement of Profit or Loss
and Other Comprehensive Income for the year
Net deferred tax (assets)/liabilities as at 31
December (Note 40.1)

41.

Other Comprehensive
Income

2023

2022

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

113,498
736,012756,818
138,093

73,628708,252
693,351
282,729

39,87063,467(144,636)

27,799179,054(59,119)

27,760-217,679-

1,735,281
358,036
39,546
3,877,284

171,746
1,315,571
39,546
3,284,823(14,383)(55,682)

55,22839,546
242,508

1,577,918(957,535)
648,143

116,518
1,315,571
1,649,768

429,567
15,125303,052-(31,662)(15,125)(60,862)-(94,853)-(45,022)-

105,001

104,335(666)(27,292)-

558,914-

5,029,573
7,094,634
12,673,900

4,992,404
6,060,648
11,460,439(37,169)(1,033,986)(1,118,608)(2,297,892)(5,321,744)(7,707,790)(94,853)

513,892--(1,174,290)(7,465,282)

553,290

2,163,660(8,796,616)(8,175,616)

-

-

-

-

RETIREMENT BENEFIT OBLIGATIONSACCOUNTING POLICY
Retirement benefit obligations include theprovisions made for retirement gratuity and thepension fund.

Retirement Gratuity
In compliance with the Gratuity Act, No.12 of
1983, provisions are made on behalf of theemployees from the first year of service for
employees who joined the Bank on or after
1999, as they are not in pensionable serviceof the Bank and for employees of the groupcompanies. The costs of retirement gratuities
are determined by a qualified Actuary using
the projected unit credit method. Actuarial
gains and losses are recognised as income or
expense in the Statement of Comprehensive
Income, during the financial year in which it
aroses.

234

Statement of Profit
or Loss

National Development Bank PLC

Pension Fund

Basis of Measurement

The Bank operates an approved employee noncontributory pension fund for the paymentof pensions to members of its permanent
staff, who qualify for such payments whenretiring. Employees who joined after 1999,
are not covered under the said pension
scheme. These employees are entitled toretirement gratuity. Up to 31 December 2002,
annual contributions to the pension fund waspayable by the Bank, based on a percentage
of gross salaries, as stipulated in the pension
deed. However, following the formulationof a revised pension deed, which has been
approved by the Department of Inland
Revenue, the contributions in subsequent years
are determined on the basis of an actuarial
valuation carried out each year.

The cost of the defined benefit plans(retirement gratuity and the pension fund) is
determined using an actuarial valuation. The
actuarial valuation involves making various
assumptions, which may differ from actual
developments in the future. These include
the determination of discount rates, expected
rates of return on assets, future salary increases,
mortality rates and future pension increases.
Due to the long-term nature of these plans,such estimates are subject to significant
uncertainties. All assumptions are reviewed ateach reporting date. The assumptions used toarrive at the value of defined benefit obligation
is given in Note 41.1 (b) and 41.2 (d).

Annual Report 2023

Notes to the Financial Statements

ACCOUNTING POLICYIn determining the appropriate discount rate, the Management considers the interest rates of Sri Lanka Government Bonds with extrapolated
maturities, corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables.
Estimated future salary increases are based on expected future inflation rates and the policy on salary revisions of the Group.

41.1

Provision for Retirement Gratuity
BANK
As at 31 December

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

916,007735,666

1,019,294

829,873

Statement of Profit or Loss [Note 41.1 (a)]258,344

177,685

283,632

197,725

Other Comprehensive Income [Note 41.1 (a)]292,019

103,862

316,174

113,788

Contribution made for retirement gratuity

550,363281,547

599,806

311,513

Benefits paid by the plan

(166,461)(101,206)(179,726)(122,092)

As at 31 December

1,299,909

916,007

1,439,374

1,019,294

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Current service cost

93,46388,964

101,876

98,646

Interest cost

164,881

88,721

181,756

99,079Amount recognised in the Statement of Profit or Loss

258,344

177,685

283,632

197,725

Liability experience loss/(gain)

20,653

141,30225,198141,302271,366(37,440)

288,909(27,514)

-

-

2,067

-

292,019

103,862

316,174

113,788

As at 01 January
Provision made during the year

41.1 (a) Provision for Retirement Gratuity
BANK
As at 31 December

GROUP

Liability loss/(gain) due to changes in;
Financial assumptions
Demographic assumptions
Amount recognised in Other Comprehensive Income [Note 41.2 (g)]41.1 (b) Assumptions and the Sensitivity of the Assumptions used for the Provision of Retirement Gratuity - Bank
The actuarial valuations of the retirement gratuity liability were carried out as at 31 December 2023 and 31 December 2022 by a professional Actuary,
Messers. Acturial and Management Consultants (Pvt) Ltd.
The valuation method used by the Actuary to value the liability is the ‘Projected Unit Credit Actuarial Cost Method’, recommended by LKAS 19 - ‘Employee
Benefits’.
Assumptions and the sensitivity of the assumptions used for the Gratuity plan
Type of assumption

Criteria

Description

Demographic

Mortality

UP 1984 Mortality Table

Retirement age

Normal retirement age

Rate of discountThe discount rate of 13% p.a. (2022 - 18% p.a.) has been used to discount future liabilities

Salary increases

Estimated long term salary increment of 12% p.a. (2022 - 15% p.a.) has been used in respect of theactive employees

Financial

The above assumptions except salary increment rate have been used by the group companies, in arriving at the provision for retirement gratuity.
The group companies used the salary increment rate of 8% - 12% p.a (2022 - 15% p.a).

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

235

41.1 (b) Assumptions and the Sensitivity of the Assumptions used for the Provision of Retirement Gratuity - Bank (Contd.)
Sensitivity of Assumptions used in the Actuarial Valuation
Reasonably possible changes at the reporting date to one of the significant actuarial assumptions, holding other assumptions constant, would haveaffected the provision for retirement gratuity and Other Comprehensive Income by the amounts shown below.
BANK
2023

2022

Increase/(Decrease) in
Discount Rate

Increase/(Decrease) in
SalaryIncrement
Rate

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Gratuity
Increase/(Decrease)in Liability

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Gratuity
Increase/(Decrease)in Liability%%

LKR Mn

LKR Mn

LKR Mn

LKR Mn1

113.58(113.58)72.71(72.71)(1)(131.99)131.99(83.33)83.33

1(133.81)133.81(86.73)

86.73

(1)

116.97(116.97)76.64(76.64)

GROUP
2023

2022

Increase/(Decrease) in
Discount Rate

Increase/(Decrease) in
SalaryIncrement
Rate

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Gratuity
Increase/(Decrease)in Liability

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Gratuity
Increase/(Decrease)in Liability%%

LKR Mn

LKR Mn

LKR Mn

LKR Mn1

122.33(122.33)80.05(80.05)(1)(141.92)

141.92(91.74)91.74

1(144.17)144.17(95.60)

95.60

(1)

126.24(126.24)84.48(84.48)41.1 (c) The expected benefit payout in the future years for retirement gratuity
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Within next 12 months

67,84348,49992,96852,621

Between 2 and 5 years

235,895

190,368

280,632

234,098

Beyond 5 years

996,171

677,140

1,065,774

732,575

The expected benefits are estimated, based on the same assumptions used to measure the retirement benefit obligation of the Bank at the end of the year
and include benefits attributable to estimated future employee service.
The average duration of the defined benefit obligation is 10.6 years (2022 -10 years).

41.2

Pension FundThe amount recognised in the Statement of Financial Position is as follows:
BANK & GROUP

Present value of the funded obligation as at 31 December [Note 41.2 (b)]2022

LKR ’000

LKR ’000

970,979

656,258

Fair value of plan assets as at 31 December [Note 41.2 (c)](1,359,817)(1,240,690)

Retirement Benefit (Asset)/Liability*(388,838)(584,432)*The over payment is recognised as prepaid expenses in Other Assets.

236

2023

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

41.2 (a) Contribution made to the pension fund
BANK & GROUP

Current service cost

2023

2022

LKR ’000

LKR ’000

11,416

14,512Net Interest on defined benefit obligation(105,198)(47,443)

Amount recognised in the Statement of Profit or Loss

(93,782)(32,931)

Assets loss/(gain) from plan assets

4,857

10,744

Actuarial (gain)/loss due to experience adjustments

39,113(9,068)245,406(173,632)

Actuarial (gain)/loss due to changes in;
Financial assumptions
Demographic assumptions
Amount recognised in the Other Comprehensive Income [Note 41.2 (g)]--289,376(171,956)

41.2 (b) Defined benefit obligation reconciliation
BANK & GROUP
2023

2022

LKR ’000

LKR ’000

As at 01 January656,258

790,708

Current service cost

11,416

14,512

Interest cost

118,127

98,839Actual benefits paid from the plan

(99,341)(65,101)

Actuarial (gain)/loss due to changes in assumptions

245,406(173,632)

Actuarial (gain)/loss due to experience adjustments

39,113(9,068)As at 31 December

970,979

656,258

41.2 (c) Fair value of plan assets reconciliation
BANK & GROUP
2023

2022

LKR ’000

LKR ’000

As at 01 January

1,240,690

1,170,253

Expected return on plan assets

223,325

146,282

Actual employer contributions--

Actual benefit paid from the plan

(99,341)(65,101)

Actuarial (loss)/gain from plan assets(4,857)(10,744)

1,359,817

1,240,690

As at 31 December

41.2 (d) Assumptions and the sensitivity of the assumptions used for the pension fund
The actuarial valuations of the Pension Fund were carried out by a professional Actuary, Messers. Acturial and Management Consultants (Pvt) Ltd as at 31
December 2023 and 2022.
The valuation method used by the Actuary to value the Fund is the ‘Projected Unit Credit Actuarial Cost Method’, recommended by LKAS 19 - ‘Employee
Benefits’.
Assumptions and the sensitivity of the assumptions used for the Pension FundType of assumption

Criteria

Description

Demographic

Mortality

UP 1984 Mortality Table

Retirement age

Normal retirement age

Rate of discountThe discount rate of 13% p.a. (2022 - 18% p.a.) has been used to discount future liabilities

Salary increases

Estimated long term salary increment of 12% p.a. (2022 - 15% p.a.) has been used

Financial

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

237

41.2 (d) Assumptions and the sensitivity of the assumptions used for the pension fund (Contd.)
Sensitivity of assumptions used in the actuarial valuation
Reasonably possible changes at the reporting date to one of the significant actuarial assumptions, holding other assumptions constant, would haveaffected the pension liability and Other Comprehensive Income by the amounts shown below:
BANK & GROUP
2023

2022

Increase/(Decrease) in
Discount Rate

Increase/(Decrease) in
Salary Increment
Rate

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Obligation
Increase/(Decrease)in Liability

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Obligation
Increase/(Decrease)in Liability%%

LKR Mn

LKR Mn

LKR Mn

LKR Mn1

68.96(68.96)40.17(40.17)(-1)(78.13)78.13(44.70)44.70

1(27.41)

27.41(19.74)

19.74

(-1)

25.96

(25.96)

18.66(18.66)BANK & GROUP
2023
Increase/ (Decrease) inLife expectancy

2022

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Obligation
Increase/(Decrease)in Liability

Sensitivity Effect on the
Other Comprehensive Income
Increase/(Decrease)in Comprehensive Income
for the Year

Sensitivity Effect on Provision
for Retirement Obligation
Increase/(Decrease)in Liability

LKR Mn

LKR Mn

LKR Mn

LKR Mn+1 Year(11.34)

11.34(8.59)

8.59- 1 Year

11.86(11.86)

8.91(8.91)

41.2 (e) Fair value of total plan assets consists of the following
BANK
2023

2022

LKR ’000

LKR ’000

Investments in Sri Lanka Government Securities

709,692

632,108

Investments in time deposits

638,248

573,558

Others11,87735,024

Total

1,359,817

1,240,690

41.2 (f) The expected benefit payout from the pension fund in future years
BANK
2023

2022

LKR ’000

LKR ’000

Within next 12 months

72,07659,591

Between 2 and 5 years

217,943

165,791

Beyond 5 years

680,960

430,876

The expected benefits are based on the same assumptions used to measure the Bank’s retirement benefit obligation at the end of the year and include
benefits attributable to estimated future employee service.
The average duration of the defined benefit obligation is 8.5 years as at 31 December 2023 (2022 7.6 years).					.

238National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

41.2 (g) The total amount recognised in Other Comprehensive Income relating to retirement benefit obligations
BANK
As at 31 December

42.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Retirement Gratuity [Note 41.1 (a)]292,019

103,862

316,174

113,788

Pension Fund [Note 41.2 (a)]289,376(171,956)

289,376(171,956)

Total

581,395(68,094)605,550(58,168)

OTHER LIABILITIESOther liabilities include other financial liabilities and other non-financial liabilities. Other non-financial liabilities include fees, expenses and amounts payablefor deposit insurance, dividend payable and other provisions. These liabilities are recorded at amounts expected to be payable at the reporting date.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Dividends on ordinary shares are recognised as a liability and deducted from equity, when they are approved by the Board of Directors. Other financial
liabilities and other non-financial liabilities included under other liabilities are summarised below:
BANK

42.1

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Other financial liabilities (Note 42.1)

2,391,221

2,958,157

2,592,786

3,273,911

Other non-financial liabilities (Note 42.2)

5,720,545

5,747,507

6,015,423

5,909,204

Total

8,111,766

8,705,664

8,608,209

9,183,115

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,053,026

1,600,092

1,053,026

1,609,576

78,65599,001

78,65599,001
1,496,130

Other Financial Liabilities
BANK

Unpresented cheques/pay orders
Unpresented cheques - Dividend Payable (Note 42.1.1)
Lease liabilities (Note 42.1.2)

GROUP

1,257,024

1,246,341

1,458,589

Others2,516

12,723

2,516

69,204

Total

2,391,221

2,958,157

2,592,786

3,273,911

42.1.1 Unpresented cheques - dividend payable
BANK & GROUP
2023

2022

LKR ’000

LKR ’000

Balance as at 01 January
Cash dividend declared for the prior year
Reversal of dividends declared in prior years [Note 42.1.1 (a)]99,001

91,823-357,124(20,156)(4,215)

Dividend cheques realised(190)(345,731)

Balance as at 31 December

78,65599,00142.1.1 (a) Reversal of dividends declared in prior years
Reversal of dividends declared in previous years represents unclaimed dividends which are written back to equity after six years.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

239

42.1.2 Lease liabilities
Set out below are the carrying amount of lease liabilities recognised on adoption of SLFRS 16 - Leases.
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Balance as at 01 January

1,246,341

1,207,930

1,496,130

1,490,757

Additions259,842

305,892

259,842

305,892

Accretion of interest

186,677

153,287

214,057

185,448

Payments(435,836)(420,768)(511,440)(485,967)

Balance as at 31 December

1,257,024

1,246,341

1,458,589

1,496,130

42.1.2 (a) Undiscounted cash flow
The following table illustrates the maturity analysis of the lease liability of the Bank on the basis of undiscounted cash flows.
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Less than 1 year

430,515364,517506,119429,716

1 to 5 years

1,270,472

1,207,387

1,512,405

1,524,924

More than 5 years

184,011

196,016

184,011

513,553

Total

1,884,998

1,767,920

2,202,535

2,468,193

42.1.2 (b) Sensitivity analysis of lease liabilities
BANK

GROUP
2023

Asset Class

Increase/ (Decrease)in Interest Rate

Building
Land
VehiclesSensitivity Effect on
Sensitivity Effect on
the Profit or Loss the Financial Position
Increase/(Decrease)
Increase/(Decrease)in Lease Liabilities
for the Year

Sensitivity Effect on
Sensitivity Effect on
the Profit or Loss the Financial Position
Increase/(Decrease)
Increase/(Decrease)in Lease Liabilities
for the Year%

LKR Mn

LKR Mn

LKR Mn

LKR Mn1(8.31)(27.10)(10.15)(30.09)

(1)

8.73

28.11

10.51

31.04

1

-

(0.02)-(0.02)

(1)

-

0.03

-

0.03

1

(0.09)-(0.09)

-

(1)

0.09

-

0.09

-

BANK

GROUP
2022

Asset Class

Increase/ (Decrease)in Interest Rate

Building
Land
Vehicles240

National Development Bank PLC

Sensitivity Effect on
Sensitivity Effect on
the Profit or Loss the Financial Position
Increase/(Decrease)
Increase/(Decrease)in Lease Liabilities
for the Year

Sensitivity Effect on
Sensitivity Effect on
the Profit or Loss the Financial Position
Increase/(Decrease)
Increase/(Decrease)in Lease Liabilities
for the Year%

LKR Mn

LKR Mn

LKR Mn

LKR Mn1(8.55)(28.61)(10.58)(33.45)

(1)

9.02

29.74

10.95

34.45

1

-

-

-

-

(1)

-

-

-

-

1

(0.31)(0.09)(0.31)(0.09)

(1)

0.31

0.09

0.31

0.09

Annual Report 2023

Notes to the Financial Statements

42.2

Other Non-Financial Liabilities
BANK

43.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Accrued expenses

1,267,945

706,850

1,283,857

822,792

Provision for deposit insurance

187,212163,194

187,212163,194

Impairment allowance for commitments and contingencies

1,660,688

1,368,885

1,660,688

1,368,885

Other liabilities

2,604,700

3,508,578

2,883,666

3,554,333

Total

5,720,545

5,747,507

6,015,423

5,909,204

STATED CAPITALBANK & GROUP
2023

43.1

2023

2022

2022

Number of
Shares

LKR ’000

Number of
Shares

LKR ’000

Issued and fully paid

380,094,722

19,870,665

357,123,647

18,263,609

Shares issued due to scrip dividends (Note 43.1)

19,369,640

867,566

22,971,075

1,607,056

Total

399,464,362

20,738,231

380,094,722

19,870,665

Scrip Issue
On 19 April 2023, the Board of Directors approved and declared a final scrip Dividend of LKR 2.50 per share for the financial year ended 31 December 2022.
Accordingly, 19,369,640 ordinary voting shares have been listed as scrip dividends on 18th May 2023. As a result, the stated capital of the Bank increased to
LKR 20.74 Bn (31 December 2022 - LKR 19.87 Bn).

44.

STATUTORY RESERVE FUND
The Statutory Reserve Fund is maintained as per the requirements under Section 20 (1) of the Banking Act No. 30 of 1988. Accordingly, the fund is built up
by allocating a sum equivalent to not less than 5% of the profit after tax, but before declaring any dividend or any profits that are transferred to elsewhere
until the reserve is equal to 50% of the Bank’s stated capital and thereafter a further sum equivalent to 2% of such profit until the amount of the said reserve
fund is equal to the stated capital of the Bank.
The balance in the Statutory Reserve Fund will be used only for the purposes specified in the Section 20 (2) of the Banking Act No. 30 of 1988.
BANK & GROUP

As at 01 January

2023

2022

LKR ’000

LKR ’000

2,746,479

2,571,479

Transferred from retained earnings (Note 45)

300,000

175,000

As at 31 December

3,046,479

2,746,479

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

241

45.

RETAINED EARNINGS
BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

37,381,043

39,134,382

41,116,154

42,730,952-(2,456,403)-(2,554,396)

Total comprehensive income for the year

4,876,538

2,838,029

5,193,094

3,074,563

Transferred to the statutory reserve fund (Note 44)(300,000)(175,000)(300,000)(175,000)

Dividends paid to equity holders(950,237)(1,964,180)(950,237)(1,964,180)

As at 01 January
Surcharge Tax

Reversal of dividends paid in prior years
As at 31 December

46.

GROUP

2023

20,156

4,215

20,156

4,215

41,027,500

37,381,043

45,079,167

41,116,154

OTHER RESERVESBANKCurrent Year 2023

GROUP

Opening
Balance

Movement/
Transfers

Closing
Balance

Opening
Balance

Movement/
Transfers

Closing
Balance

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Revaluation reserve (Note 46.1)

1,466,265

35,3381,501,603

1,682,940

64,771

1,747,711

Fair value through other comprehensive income
reserve [Note 46.2](1,042,735)

3,996,904

2,954,169(1,025,487)

4,005,397

2,979,910

44,479-44,47944,479-44,479Cash flow hedge reserve

3,069,667(2,234,251)

835,416

3,069,667(2,234,251)

835,416

Total

3,537,676

1,797,991

5,335,667

3,771,599

1,835,917

5,607,516

Prior Year 2022

Opening
Balance

Movement/
Transfers

Closing
Balance

Opening
Balance

Movement/
Transfers

Closing
Balance

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Revaluation reserve (Note 46.1)

1,402,195

64,0701,466,265

1,583,831

99,1091,682,940

Fair value through other comprehensive income
reserve [Note 46.2](2,483,938)

1,441,203(1,042,735)(2,467,181)

1,441,694(1,025,487)

Share based payment reserve (Note 46.3)

BANK

Share based payment reserve (Note 46.3)

44,479-44,47944,479-44,479-3,069,667

3,069,667-

3,069,667

3,069,667(1,037,264)

4,574,940

3,537,676(838,871)

4,610,470

3,771,599

Cash flow hedge reserve
Total

242

National Development Bank PLC

GROUP

Annual Report 2023

Notes to the Financial Statements

46.1

Revaluation Reserve
Revaluation reserve represents the fair value changes of freehold land and buildings net of deferred tax effect on revaluation surplus as at the date ofrevaluation.
BANK
2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,466,265

1,402,195

1,682,940

1,583,831

Revaluation of freehold land and building

50,483249,651

92,531

316,789

Deferred tax effect including the effect of rate change on the opening balance onrevaluation gains/(losses)(15,145)(185,581)(27,760)(217,680)

As at 01 January

Net impact during the year
As at 31 December

46.2

GROUP

2023

35,33864,07064,771

99,1091,501,603

1,466,265

1,747,711

1,682,940

Fair Value through Other Comprehensive Income Reserve
The fair value through Other Comprehensive Income reserve comprises the cumulative net change in the fair value of financial assets measured at fair value
through Other Comprehensive Income until they are derecognised or impaired.
BANK
2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000(1,042,735)(2,483,938)(1,025,487)(2,467,181)-

2,052,026-

2,052,026

Net change in fair value during the year in debt instruments

5,259,686

368,854

5,268,192

369,345

Sub Total

5,259,686

2,420,880

5,268,192

2,421,371

Net change in fair value during the year in equity instruments

315,123(304,245)

315,123(304,245)

As at 01 January
Reclassification of debt instruments at FVOCI to amortised cost

46.3

GROUP

Deferred tax effect including the effect of rate change on the opening balance of fairvalue through other comprehensive income reserve(1,577,905)(675,432)(1,577,918)(675,432)

Net impact during the year

3,996,904

1,441,203

4,005,397

1,441,694

As at 31 December

2,954,169(1,042,735)

2,979,910(1,025,487)

Share Based Payment Reserve
Employee Share Option Scheme (ESOS)An Employee Share Option Scheme (ESOS 2016) was approved by the shareholders of the Bank at an Extraordinary General Meeting (EGM) held in March
2016 in order to, enable the management staff in the rank of Senior Manager and above of the Bank and the respective Chief Executive Officers of NDB
Capital Holdings Limited, NDB Wealth Management Limited, NDB Investment Bank Limited and NDB Securities (Pvt) Limited to take part in the voting
ordinary share capital of the Bank, subject to certain limits, terms and conditions.
As per the ESOS 2016, the Bank will offer share options relating to voting shares to the eligible employees up to a maximum of 5% of the total number ofshares issued by the Bank. The shares under the said scheme shall be issued during a period of five years from the year 2017 (performance year 2016) subject
to the performance criteria set out in the Circular to Shareholders dated 01 March 2016, and each year the share options will be limited to 1.25% of the total
number of shares then issued by the Bank. The details of the currently applicable scheme (Tranche 5) is as given below.
Although the scheme commenced in the year 2017, the Bank did not meet the ‘Qualifying Performance Criteria’ set out in the Circular to Shareholders dated
01 March 2016 for the performance years 2016, 2017 and 2019.

ESOS tranch 3 (performance year 2018)
The Bank was able to meet the performance criteria for the performance year 2018 and the approved management staff are eligible to exercise their shareoptions during the period from 01 July 2020 to 30 June 2023. However, as no share options were exercised by any eligible staff up to 30 June 2023, ESOS
tranch 3 was expired as at 30 June 2023.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

243

46.3

Share Based Payment Reserve (Contd.)
ESOS tranch 5 (performance year 2020)
In additions to the Tranch 3, the Bank was able to achieve the performance criteria under Tranche 5 for the performance year 2020 and the approved
management staff are eligible to exercise their share options during the period from 01 July 2022 to 30 June 2025 as per the ESOS.
The details of the Tranche 5 is as given below.
Tranche

Period of Performance Evaluation

Option grant date

Vesting Period (From -To)

Exercise Period (From -To)

5

2020

01 July 2021

01 July 2021 - 30 June 2022

01 July 2022 - 30 June 2025

However, no share options were exercised by any eligible staff up to 31 December 2023.
The Group recognised a Share Based Payment Reserve for the value of the share options under Trache 5 based on a valuation carried out by an independent
Valuer as required by SLFRS 2, “Share-based Payment”using the Binomial Valuation Model. The inputs used in measurement of fair value of the share option
were : Exercise price of the share options, Market price of a share, Risk-free rate, Exercise period, Volatility of the share price. The share based payment reserve
was LKR 44.5 Mn and corresponding charge of the same is represented in the Statement of Profit or Loss under Note 12-Personnel Expenses in year 2021.
However, no adjustment was made to the fair value of the share option since the amount was not material to the financial statements as at 31 December 2023.
It is further confirmed that the Board of Directors has declared that the entity or any of its subsidiaries has not directly or indirectly provided funds for the ESOS.
No any new share Option scheme was granted for the management staff during the year 2023.

46.4

Cash Flow Hedge Reserve
BANK

As at 01 January
Additions during the year
Deferred tax effect on gains/(losses)
As at 31 December

47.

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

3,069,667(3,191,786)
957,535
835,416

4,385,238(1,315,571)
3,069,667

3,069,667(3,191,786)
957,535
835,416

4,385,238(1,315,571)
3,069,667

NON-CONTROLLING INTERESTSACCOUNTING POLICY
Non-controlling interests represent the portion of profit or loss and net assets of subsidiaries not owned directly or indirectly by the Bank. Any losses
applicable to the non-controlling interests are allocated against the interests of the non-controlling interests even if it is a deficit balance. Acquisitionsof non-controlling interests are accounted for using the parent entity extension method, whereby the difference between the consideration and thefair value of the share of net assets acquired is recognised as equity. Therefore no goodwill is recognised as a result of such transactions.

GROUP

Balance as at 01 January
Surcharge Tax
Profit for the year
Other comprehensive income, net of tax
Dividends paid to equity holders
Balance as at 31 December

48.

2023

2022

LKR ’000

LKR ’000

1,391,259
98,774(11,820)(53,283)
1,424,930

1,339,373(21,780)
67,06747,377(40,778)
1,391,259

CONTINGENT LIABILITIES AND COMMITMENTS
ACCOUNTING POLICY
All discernible risks are accounted for in determining the amount of all known liabilities. Commitments and contingencies represent possible
obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is
not probable or cannot be reliably measured, as defined in the Sri Lanka Accounting Standard - LKAS 37 on ‘Provisions, Contingent Liabilities andContingent Assets’.
To meet the financial needs of customers, the Group enter into various irrevocable commitments and contingent liabilities. These consist of thefinancial guarantees, letters of credit and forward foreign exchange contracts and other undrawn commitments to lend. The letters of credit andguarantees commit the Group to make payments on behalf of customers in the event of a specific act, generally related to import or export of goods.
The guarantees and standby letters of credit carry a similar credit risk of that loans/contingent liabilities and are not recognised in the Statement of
Financial Position but are disclosed unless they are remote.

244

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

48.1

Business Commitments and contingencies
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Guarantees

42,963,031

47,386,645

42,850,919

47,240,694

Performance Bonds

14,024,918

25,810,093

14,024,918

25,810,093

Documentary Credits

9,283,417

7,745,122

9,282,715

7,745,122

Other Contingencies [Note 48 .1 (a)]49,121,387

34,128,635

49,121,387

34,128,635

Undrawn commitments

162,572,666

178,539,261

162,847,107

179,452,163

Total

277,965,419

293,609,756

278,127,046

294,376,707

Contingencies

Commitments

Less: Impairment allowance [Note 48 .1 (b)]Net of impairment

1,660,687

1,368,885

1,660,687

1,368,885

276,304,732

292,240,871

276,466,359

293,007,822

The maturity analysis of the commitments and contingencies is disclosed in Note 56.4.(f)48.1 (a) Other contingencies
BANK & GROUP
2023

2022

LKR ’000

LKR ’000
27,739,854

Forward Exchange Contracts

42,607,440

Acceptances

6,513,947

6,388,781

Total

49,121,387

34,128,635

48.1 (b) Impairment allowance for commitments and contingencies
BANK & GROUP
Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Balance as at 01 January 2023

1,124,091

187,019

57,775

1,368,885

Charges/(reversals) during the year

278,635

44,253(31,086)

291,802

Balance as at 31 December 2023

1,402,726

231,272

26,6891,660,687

Balance as at 01 January 2022

1,478,048

288,492

262,9712,029,511

Charges/(reversals) during the year

(353,957)(101,473)(205,196)(660,626)

Balance as at 31 December 2022

1,124,091

187,019

57,775

1,368,885

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

245

48.1 (c) Analysis of commitments and contingencies (before impairment allowance)
BANK

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Guarantees

33,719,455

34,757,932

33,607,343

34,611,981

Performance Bonds

10,458,016

13,688,432

10,458,016

13,688,432

Documentary Credits

389,683

203,745

388,981203,745

Forward Exchange Contracts

7,071,544

8,353,450

7,071,544

8,353,450

Acceptances

211,343-

211,343-

Undrawn commitments

161,390,908

177,198,954

161,665,349

178,111,856

Sub Total

213,240,949

234,202,513

213,402,576

234,969,464

Guarantees

9,243,575

12,628,713

9,243,575

12,628,713

Performance Bonds

3,566,902

12,121,661

3,566,902

12,121,661

Documentary Credits

8,893,734

7,541,377

8,893,734

7,541,377

Forward Exchange Contracts

27,042,536

9,255,284

27,042,536

9,255,284

Currency Swap Agreement

8,493,360

10,131,120

8,493,360

10,131,120

Acceptances

6,302,605

6,388,781

6,302,605

6,388,781

Undrawn commitments

1,181,758

1,340,307

1,181,758

1,340,307

Sub Total

64,724,470

59,407,243

64,724,470

59,407,243

Total

277,965,419

293,609,756

278,127,046

294,376,707

Domestic Currency

Foreign Currency

48.2

Capital Commitments
The Bank has a capital commitments totalling approximately LKR 50 Mn over the next 12 months in relation to the capital expenditure of the bank and it
was LKR 400 Mn in previous year in relation to the upgrade of the Core Banking system.

48.3

Litigation Against the Bank
In the normal course of business, the bank is a party to various types of litigation, including litigation with borrowers who are in default in terms of theirfacility agreements. Based on the assessment carried out, the Bank is of the view that the legal cases filed against the Bank will not have a material impact
on the reported financial results or the future operations of the Bank.

48.4

Tax Assessments Against the Bank and Group Companies
The following tax assessments are outstanding, against which the Bank and Group companies have duly appealed.
1.

The VAT on financial services assessments received by the Bank for the years 2012 and 2013 amounting to LKR 302.6 Mn, which were determined by theCommissioner General of Inland Revenue and the Tax Appeals Commission as payable. The stated cases against the determination of the Tax Appeals
Commission were forwarded to the Court of Appeal for their opinion.					.

2.

The assessment on income tax for the year of assessment 2019/2020 received by the Bank amounting to LKR 605 Mn is pending determination from theCommissioner General of Inland Revenue.

3.

The assessment on VAT on financial services received by NDB Capital Holdings Limited for the year 2013 amounting to LKR 109 Mn was determinedby the Commissioner General of Inland Revenue and the Tax Appeals Commission as payable. The stated case against the determination of the Tax
Appeals Commission will be forwarded to the Court of Appeal for their opinion.

4.

The assessments on VAT on financial services received by NDB Capital Holdings Limited for the year 2012 amounting to LKR 74.7 Mn, which was
determined by the Commissioner General of Inland Revenue as payable has been forwarded to the Tax Appeals Commission for their determination.
Further the assessment on VAT on financial services for the year 2018 received by the Company amounting to LKR 79.5 Mn is pending determination by
the Commissioner General of Inland Revenue.
The Company has taken up the position that the Company does not carry on the business of provision of loans, as charged in the assessments/
determinations.						The Group is of the view that the above assessments will not have any material adverse impact on the Financial Statements.				
		

246

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

49.

NET ASSETS VALUE PER ORDINARY SHARE
BANK

GROUP

2023

2022

2023

2022

70,147,877

63,535,863

74,471,393

67,504,898

399,464,362

380,094,722

399,464,362

380,094,722

175.60167.16186.43177.60

Amount used as the Numerator:
Total equity attributable to equity holders of the Bank (LKR ’000)
Number of Ordinary Shares used as the Denominator:
Total number of shares
Net Assets value per share (LKR)

50.

MATURITY ANALYSIS
An analysis of the assets and liabilities, based on the remaining period as at the date of the Statement of Financial Position to the respective contractual
maturity dates, are as follows:
BANK
As at 31 December 2023

Within 12
MonthsAfter 12MonthsTotal

LKR ’000

LKR ’000

LKR ’000

28,100,515-

28,100,515

Balances with the Central Bank of Sri Lanka

6,543,157

497,2647,040,421

Placements with banks

33,743,602-

33,743,602

AssetsCash and cash equivalents

Derivative financial instruments

3,083,815-

3,083,815

Financial assets recognised through profit or loss - measured at fair value

24,021,340-

24,021,340

Financial assets at amortised cost - loans and receivables to other customers

290,214,417

162,446,044

452,660,461

Financial assets at amortised cost - debt and other instruments

60,664,538

65,007,832

125,672,370

Financial assets measured at fair value through other comprehensive income

83,805,398-

83,805,398

Investments in subsidiary companies-

1,108,772

1,108,772

Property, plant & equipment-

3,141,117

3,141,117

Right of use assets

33,665

1,111,936

1,145,601

Intangible assets-

1,883,447

1,883,447

Deferred tax assets-

9,648,118

9,648,118

Other assets

4,844,183-

4,844,183

Total assets

535,054,630

244,844,530

779,899,160

7,679,195-

7,679,195

93,361-

93,361

Due to depositors

572,161,180

43,482,819

615,643,999

Due to debt securities holders

15,628,569

4,000

15,632,569

Due to other borrowers

17,260,742

7,375,797

24,636,539

Debt securities issued

6,049,328

23,339,547

29,388,875

Current tax liabilities

3,557,410

3,707,660

7,265,070

67,843

1,232,066

1,299,909

Liabilities
Due to banks
Derivative financial instruments
Financial Liabilities at amortised cost

Retirement benefit obligations
Other liabilities

6,657,283

1,454,483

8,111,766

Total liabilities

629,154,911

80,596,372

709,751,283

Maturity GAP(94,100,281)

164,248,158

70,147,877

The Bank classified LKR 12.8 Bn of its other borrowed funds included under due to other borrowers, within 12 months in the maturity analysis as there were
few financial covenants that were not met due to the economic conditions that prevailed with the emergence of the prolonged economic crisis during
the year. The Bank has intimated the reasons for the covenant breaches to the lenders which are not entirely within the control of the Banking operations
and is mainly due to subdued economic conditions prevailed during the year and the debt restructuring process. It is expected that the waivers would beprocessed by the lenders in due course, considering the current economic environment.						.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

247

50.

MATURITY ANALYSIS (CONTD.)BANK
As at 31 December 2022

Within 12
MonthsAfter 12MonthsTotal

LKR ’000

LKR ’000

LKR ’000

AssetsCash and cash equivalents

34,849,521-

34,849,521

Balances with the Central Bank of Sri Lanka

17,271,993

915,554

18,187,547

Placements with banks

4,108,989-

4,108,989

Derivative financial instruments

7,909,252-

7,909,252

Financial assets recognised through profit or loss - measured at fair value

19,318,483-

19,318,483

Financial assets at amortised cost - loans and receivables to other customers

345,247,610

200,625,417

545,873,027

Financial assets at amortised cost - debt and other instruments

87,353,044

47,694,842

135,047,886

Financial assets measured at fair value through other comprehensive income

44,685,230-

44,685,230

Investments in subsidiary companies-

1,115,794

1,115,794

Property, plant & equipment-

3,261,362

3,261,362

Right of use assets

33,665

1,137,098

1,170,763

Intangible assets-

1,804,321

1,804,321

Deferred tax assets-

9,004,747

9,004,747

Other assets

6,435,328-

6,435,328

Total assets

567,213,115

265,559,135

832,772,250

20,251,657-

20,251,657

96,246-

96,246

638,470,006

33,844,017

672,314,023

130,541-

130,541

31,726,688

645,577

32,372,265

Debt securities issued

4,386,729

23,592,902

27,979,631

Current tax liabilities

1,792,967

4,677,386

6,470,353

Liabilities
Due to banks
Derivative financial instruments
Financial Liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers

Retirement benefit obligations
Other liabilities

42,407

873,600

916,0077,699,533

1,006,131

8,705,664

Total liabilities

704,596,774

64,639,613

769,236,387

Maturity GAP(137,383,659)

200,919,522

63,535,863

The Bank classified LKR 17.9 Bn of its other borrowed funds included under due to other borrowers, within 12 months in the maturity analysis as there were
few financial covenants that were not met due to the economic conditions that prevailed with the emergence of the prolonged economic crisis during theyear. The Bank has intimated the reasons for the covenant breaches to the lenders which are not entirely within the control of the Banking operations and ismainly due to subdued economic conditions that prevailed in 2022.

248

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

			
GROUP
As at 31 December 2023

Within 12
MonthsAfter 12MonthsTotal

LKR ’000

LKR ’000

LKR ’000

AssetsCash and cash equivalents

28,580,676-

28,580,676

Balances with the Central Bank of Sri Lanka

6,543,157

497,2647,040,421

Placements with banks

33,743,602-

33,743,602

Derivative financial instruments

3,083,815-

3,083,815

Financial assets recognised through profit or loss- measured at fair value

26,040,046-

26,040,046

Financial assets at amortised cost - loans and receivables to other customers

290,233,475

162,506,453

452,739,928

Financial assets at amortised cost - debt and other instruments

60,664,538

65,007,832

125,672,370

Financial assets measured at fair value through other comprehensive income

84,645,423-

84,645,423

Investment property-

3,112,440

3,112,440

Property, plant & equipment-

3,817,097

3,817,097

Right of use assets

33,6651,226,390

1,260,055

Intangible assets-

1,898,270

1,898,270

Current tax receivables
Deferred tax assets

43,102-

43,102-

9,717,805

9,717,805

Other assets

5,563,827-

5,563,827

Total assets

539,175,326

247,783,551

786,958,877

7,679,195-

7,679,195

93,361-

93,361

Due to depositors

571,749,650

43,482,820

615,232,470

Due to debt securities holders

15,628,569

4,000

15,632,569

Due to other borrowers

17,260,742

7,375,797

24,636,539

Debt securities issued

6,049,328

23,339,547

29,388,875

Current tax liabilities

3,681,236

3,749,537

7,430,773

Deferred tax liabilities-

921,189

921,189
1,439,374

Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost

Retirement benefit obligations

25,125

1,414,249

Other liabilities

6,911,793

1,696,416

8,608,209

Total liabilities

629,078,999

81,983,555

711,062,554

Maturity GAP(89,903,673)

165,799,996

75,896,323

The Bank classified LKR 12.8 Bn of its other borrowed funds included under due to other borrowers, within 12 months in the maturity analysis as there were
few financial covenants that were not met due to the economic conditions that prevailed with the emergence of the prolonged economic crisis during
the year. The Bank has intimated the reasons for the covenant breaches to the lenders which are not entirely within the control of the Banking operations
and is mainly due to subdued economic conditions prevailed during the year and the debt restructuring process. It is expected that the waivers would beprocessed by the lenders in due course, considering the current economic environment.

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

249

50.

MATURITY ANALYSIS (CONTD.)
GROUP
As at 31 December 2022

Within 12
MonthsAfter 12MonthsTotal

LKR ’000

LKR ’000

LKR ’000

AssetsCash and cash equivalents

35,727,665-

35,727,665

Balances with the Central Bank of Sri Lanka

17,271,993

915,554

18,187,547

Placements with banks

4,108,989-

4,108,989

Derivative financial instruments

7,909,252-

7,909,252

Financial assets recognised through profit or loss- measured at fair value

20,788,523-

20,788,523

Financial assets at amortised cost - loans and receivables to other customers

345,262,478

200,657,346

545,919,824

Financial assets at amortised cost - debt and other instruments

87,353,044

47,694,842

135,047,886

Financial assets measured at fair value through other comprehensive income

45,454,490-

45,454,490

Investment property-

2,879,091

2,879,091

Property, plant & equipment-

3,907,994

3,907,994

Right of use assets

33,665

1,289,703

1,323,368

Intangible assets-

1,813,213

1,813,213

43,488-43,488-9,048,896

9,048,896

Other assets

7,037,671-

7,037,671

Total assets

570,991,258

268,206,639

839,197,897

20,298,844-

20,298,844

96,246-

96,246

637,869,320

33,844,017

671,713,337

130,541-

130,541

Current tax receivables
Deferred tax assets

Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost
Due to depositors
Due to debt securities holders

31,726,688

645,577

32,372,265

Debt securities issued

Due to other borrowers

4,386,729

23,592,902

27,979,631

Current tax liabilities

5,866,492

768,696

6,635,188

Deferred tax liabilities-

873,280

873,280

48,499970,795

1,019,294

Retirement benefit obligations
Other liabilities

7,976,079

1,207,036

9,183,115

Total liabilities

708,399,438

61,902,303

770,301,741

Maturity GAP(137,408,180)

206,304,336

68,896,156

The Bank classified LKR 17.9 Bn of its other borrowed funds included under due to other borrowers, within 12 months in the maturity analysis as there were
few financial covenants that were not met due to the economic conditions that prevailed with the emergence of the prolonged economic crisis during theyear. The Bank has intimated the reasons for the covenant breaches to the lenders which are not entirely within the control of the Banking operations and ismainly due to subdued economic conditions that prevailed in 2022.

51.

SEGMENTAL ANALYSIS - GROUPACCOUNTING POLICY
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by
the Senior Management to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial
information is available.
For management purposes, the Group has identified four operating segments based on products and services, as follows:BankingCapital Markets

Property Investment

OthersIncome taxes are managed on a Group basis and are not allocated to operating segments. Interest income is reported net, as management primarily
relies on net interest income as a performance measure, not the gross interest income and interest expense. Transfer prices between operating
segments are on an arm’s length basis in a manner similar to transactions with third parties. No revenue from transactions with a single externalcustomer or counterparty amounted to 10% or more of the Bank’s total revenue in 2023 or 2022.

250

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

251

51.

1,745,982

4,057,348(2,969,017)

Net gain/(loss) from financial investments atfair value through Profit or Loss

Net gains/(losses) from derecognition offinancial assets measured at fair value
through other comprehensive income

Other operating income

51,685,142(26,760,237)(1,986,130)

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Segmental cash flows

779,856,014
709,314,127

Segment assets

10,151,286

Segment liabilities

Other information

Profit for the year-

Income tax expense/(reversal)

Taxes on financial services

10,151,286(122,126,235)

Total segment expenses

Segment results(100,004,709)

Segment expenses(984,510)(21,137,016)

Impairment (charge)/reversal

Depreciation and Amortisation expenses

132,277,521-

Total Revenue

Inter-segment revenue

132,277,521

2,905,753

Net gains/(losses) from trading

Total revenue from external customers

7,164,891(3,693,880)(68,722,453)

89,669,078

768,617,780

832,553,967

1,844,895--

1,844,895(107,750,745)(77,627,573)(846,634)(29,276,538)

109,595,640-

109,595,640

6,118,106

15,127(389,767)(340,346)

6,274,698

97,917,822

LKR ’000

LKR ’000

119,372,564

2022

Banking
2023

Net fee and commission income

Interest income

Revenue

For the year ended 31 December

SEGMENTAL ANALYSIS - GROUP (CONTD.)			

89,813(729,932)

298,557

791,037

3,399,131

379,804--

379,804(1,256,721)(1,194,658)(62,063)-1,636,525

75,377

1,561,148(19,736)

50,984

201,304-

1,061,062

267,534

LKR ’000

2023

2022

56,761

465,442(58,138)

799,755

3,117,485

389,499--

389,499(1,026,853)(956,801)(70,052)-

1,416,352

121,397

1,294,955

274,681-

49,379-758,631212,264

LKR ’000

Capital Markets(97,310)(28,541)

115,995

926,653

3,593,518

421,216--

421,216(71,170)(63,964)(7,206)-492,387

100,720391,666

211,552---

180,114-

LKR ’000

2023(97,310)(66,771)

184,930

860,852

3,334,898

432,576--432,576(18,035)(10,235)(7,800)-450,611

92,737357,874

168,269---

189,605-

LKR ’000

2022

Property Investment

Others(45,787)-(1,320)30,737110,215(48,227)--(48,227)(114,387)(113,707)

(680)

-

66,161-

66,161----

66,161-

LKR ’000

2023

-

-

39,77923,354

191,547

4,969

-

-

4,969

(83,939)(82,391)(1,548)-88,908-88,908----88,908-

LKR ’000

2022(2,039,413)(27,518,169)

52,098,374

711,062,554

786,958,877

5,858,210

2,749,840

2,296,029

10,904,079(123,568,515)(101,377,040)(1,054,459)(21,137,016)

134,472,594

176,097

134,296,497(2,777,201)

4,108,332

1,947,286

2,905,753

8,472,228

119,640,098

LKR ’000

2022(3,734,429)(68,323,782)

89,835,649

770,301,741

839,197,897

3,075,804

1,203,092(1,606,957)

2,671,939(108,879,572)(78,677,000)(926,034)(29,276,538)

111,551,511

214,134

111,337,377

6,561,056

15,127(340,388)(340,346)

7,311,842

98,130,086

LKR ’000

Consolidated
2023

52.

RELATED PARTY DISCLOSURES

52.1

Parent and Ultimate Controlling Party
The Bank does not have an identifiable Parent of its own.

52.2

Terms and Conditions
The Bank carries out transactions with Key Management Personnel and their related concerns and other related entities in the ordinary course of its businesson an arms length basis at commercial rates as per the Sri Lanka Accounting Standard LKAS 24 - ‘Related Party Disclosures’ except, loans that the key
management have availed under the loan schemes which are uniformly applicable to all the staff.
There are no preferential treatments given by the Group to related parties during the year.

52.3

Key Management Personnel (KMP) of the GroupKMP of the Bank
Related parties include Key Management Personnel defined as persons having authority and responsibility for planning, directing and controlling theactivities of the Bank. Key Management Personnel include the members of the Board of Directors of the Bank (including Executive and Non-Executive),Deputy Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer.

KMP of the Group
The Bank is the ultimate parent of the subsidiaries listed out on page 219. The KMP of the Bank has the authority and responsibility for planning directing
and controlling the activities of the Group directly or indirectly. Accordingly, the Board of Directors of the Bank (including the Executive and Non-Executive),
Deputy Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer represent the KMP of the Group.

52.3 (a) Compensation to KMP
BANK

Short-term employment benefits

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

127,066

136,245

130,739

139,418

Post-employment benefits

21,212

11,11921,212

11,119Total

148,278

147,364

151,951

150,537

The amounts disclosed above are the amounts recognised as expenses during the reporting period relating to KMP. In addition to the remuneration, theBank has also provided non cash benefits to eligible KMP in line with the approved benefit plans of the Bank.

52.3 (b) KMP and their close family members had the following related party transactions during the year
Limit
For the year ended 31 December

Outstanding Balance

Average Balance

2023

2022

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Items in the Statement of Financial Position - Bank
AssetsFinancial assets at amortised cost - loans andreceivables to other customers

89,36350,39052,84020,64356,30830,751

Total

89,36350,39052,84020,64356,30830,751

275,579

Liabilities
Financial liabilities at amortised cost252

Due to depositors--

362,848

299,736

315,543

Due to debt securities holders

-

-

5000

-

5,000

5,859

Total

-

-

367,848

299,736

320,543

281,438

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

During the year
2023

2022

LKR ’000

LKR ’000

Items in the Statement of Profit or Loss excluding compensation to KMP - BankInterest income

6,109

3,870

Interest expenses

53,202

31,683

Fee and commission income

551

261

Impairment charges/ (reversals)*

596

(202)

2023

2022

Investments in ordinary shares as at 31 December (Number of shares)

208,91191,815

Scrip dividends paid during the year (Number of shares)

10,128

5,547

-

86

*Impairment charges/ (reversals) does not include any specific impairment.						Share investments in the Bank and dividends paid to the KMPs and their close family members are given below.

Cash dividends paid during the year (LKR ‘000)

52.3 (c) Transactions involving entities which are controlled/ jointly controlled by the KMP and their close family members
Limit
For the year ended 31 December

Outstanding Balance

Average Balance

2023

2022

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Items in the Statement of Financial Position - Bank
AssetsFinancial assets at amortised cost - loans andreceivables to other customers-

100,000-

102,436

14,311

1,386,201

Total

-

100,000-

102,436

14,311

1,386,201

Liabilities
Financial liabilities at amortised cost - Due to depositors--

4,668,816

3,900,327

4,195,642

1,399,445

Total

-

-

4,668,816

3,900,327

4,195,642

1,399,445

Commitment & Contingencies
Guarantees

400,000

-

-

-

-

235

Total

400,000

-

-

-

-

235

Annual Report 2023

253

Notes to the Financial Statements

National Development Bank PLC

52.3 (c) Transactions involving entities which are controlled/ jointly controlled by the KMP and their close family members (Contd.)
During the year
2023

2022

LKR ’000

LKR ’000Interest income

2,197

137,910

Interest expenses

469,213211,073

8,069

4,080

-

(924)

Items in the Statement of Profit or Loss - Bank

Fee and commission income
Impairment charges/ (reversals)**Impairment charges/ (reversals) does not include any specific impairment.

Share investments in the Bank and dividends paid to the entities which are controlled/ jointly controlled by the KMP and their close family members are
given below.

52.4

2023

2022

Investments in ordinary shares as at 31 December (Number of shares)-

86

Scrip dividends paid during the year (Number of shares)--

Cash dividends paid during the year (LKR ‘000)--

Transactions with the Government of Sri Lanka and its Related Entities
The Group enter into transactions, arrangements and agreements with the Government of Sri Lanka and its related entities.

52.4 (a) The transactions entered with the Government of Sri Lanka and its related entities on a collective basis is as follows
Outstanding Balance

Average Balance

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial assets at amortised cost - loans and receivables to other customers

30,222,557

28,944,395

28,107,541

27,370,670

Financial assets at amortised cost - debt and other instruments

4,764,546

4,759,248

4,759,453

4,550,375

6,225

6,224

6,224

6,224

34,993,328

33,709,867

32,873,218

31,927,269

Items in the Statement of Financial Position - Bank
AssetsFinancial assets measured at fair value through other comprehensive income
Total
Liabilities
Financial liabilities at amortised cost

703,900

2,568,819

1,158,027

7,550,560

Due to debt securities holders

Due to depositors

12,000,000-

17,371,714

2,248,203

Due to other borrowers

10,600,399

12,917,841

11,998,053

16,091,841

Debt securities issued

6,632,940

7,748,940

7,348,190

7,705,925

29,937,239

23,235,600

37,875,984

33,596,529

Forward exchange contracts

2,197,542

8,337,323

2,197,438

10,508,517

Other contingencies

643,941

18,503640,31233,864

Total
Contingent liabilities and commitments

254

Undrawn commitments

10,029,437

9,910,456

9,346,511

9,576,370

Total

12,870,920

18,266,282

12,184,261

20,118,751

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

During the year
2023

2022

LKR ’000

LKR ’000Interest income

7,731,684

3,501,152

Interest expenses

2,213,456

4,212,725

Fee and commission income

5,702

16,810Net gains/(losses) from trading

26,825283

Other operating income

27,81737,188Items in the Statement of Profit or Loss - Bank

Impairment charges/(reversals)*
Scrip dividends paid during the year (Number of shares)
Cash dividends paid during the year (LKR ‘000)(76,051)

82,9846,232,177

7,393,903-

114,951*Impairment charges/ (reversals) does not include any specific impairment.

52.4 (b) Further transactions detailed below, relating to the ordinary course of business, are entered into with the Government of Sri Lanka andits related entities;yStatutory balances with the Central Bank of Sri Lanka						yInvestments in Treasury bills, Treasury bonds, Sovereign Bonds and money market placements. Sovereign Bonds are recorded net of impairment
provisions						

yPayment of statutory rates, taxes and deposit insurance premium						

yPayment for utilities mainly comprising of telephone, electricity and water						

yPayment for employment retirement benefits - ETF						

yCurrency SWAP arrangement with the Central Bank of Sri Lanka (Note 24.1)

52.4 (c) Individually significant transactions
The Bank uses an internal assessment methodology in order to identify significant transactions with the Government of Sri Lanka and Government related
entities in accordance with the disclosure requirements of LKAS 24. Accordingly, there are no individually significant transactions that require disclosure
during the year.

52.5

Transactions with Related Entities

52.5 (a) The transactions entered by the Bank with its Subsidiaries
Limit

Outstanding Balance

Average Balance

2023

2022

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

350,000

Items in the Statement of Financial Position - Bank
AssetsFinancial assets at amortised cost - loans andreceivables to other customers

350,000

6,306

4,433

13,022

79,363

Other assets-

14,391

12,61538,088173,881

Investments in subsidiary companies-

1,108,772

1,115,794

1,115,324

1,125,796

Liabilities
Financial liabilities at amortised cost - Due to depositors-

416,897

613,070

488,463

964,903

Due to debt securities holders

-

-

-

8,516

-

Other liabilities

-

4,000

-

333

-

300,000

112,814145,951

153,079

145,951

Contingent liabilities and commitments
Guarantees and LCs

Notes to the Financial Statements

300,000

National Development Bank PLC

Annual Report 2023

255

52.5 (a) The transactions entered by the Bank with its Subsidiaries (Contd.)
During the year
2023

2022

LKR ’000

LKR ’000Interest income

1,462

11,328Interest expenses

65,127

94,252

Fee and commission income

25,2895,643

Items in the Statement of Profit or Loss in relation to transactions with subsidiaries of the Bank

Impairment charges

5,530

13,777

Other expenses

48,119103,017

Other operating income

48,482306,838

Investments in subsidiary companies are stated after deducting impairment allowances amounting to LKR 102.8 Mn and LKR 95.8 Mn as at 31 December
2023 and 31 December 2022 respectively.					Refer Note 29 and note 30 for details of subsidiary and associate companies.					52.5 (b) The contribution made by the Bank and the employees, for EPF, is managed as a separate fund by the Bank.
The Bank had the under-mentioned financial dealings during the year with the NDB Provident Fund.
2023

2022

LKR ’000

LKR ’000Financial liabilities at amortised cost Due to depositors

145,322

95,782

Interest expenses paid

17,85650,815Contribution by the Bank

825,641

760,49352.5 (c) NDB Wealth Management Limited, a subsidiary of the Bank, had the under mentioned financial dealings with the NDB Provident Fund.

Portfolio under management

2023

2022

LKR ’000

LKR ’000

2,360,566

2,195,271

52.5 (d) The Bank had the under-mentioned financial dealings with the NDB Pension Fund during the year.
2023

2022

LKR ’000

LKR ’000Financial liabilities at amortised cost Due to depositors

565,000

540,265Interest expenses

113,92258,364--Contribution by the Bank

53.

EVENTS OCCURRING AFTER THE DATE OF THE STATEMENT OF FINANCIAL POSITION
Events after the reporting period are those events, favourable and unfavourable, that occur between the reporting date and the date when the Financial
Statements are authorised for issue.
No circumstances have arisen since the reporting date which would require adjustments or disclosure in the Financial Statements.

54.

COMPARATIVE INFORMATION						No changes have been made to the information/balances published in the Annual Report for the year 2022 which have been given as comparatives in the
Annual Report for the year 2023.

256

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

55.

FAIR VALUE OF FINANCIAL INSTRUMENTS AND NON FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
The following is a description of how fair values are determined for financial instruments and non-financial instruments which are recorded at fairvalue using valuation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing such
instruments.					Significant Accounting Judgments, Estimates and Assumptions
Where the fair values of financial assets and financial liabilities recorded in the Statement of Financial Position cannot be derived from an active market,
they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived fromobservable market data where possible, but if this is not available, judgment is required to establish fair values.

FINANCIAL INSTRUMENTS
Derivative Financial Instruments										Derivative products are foreign exchange contracts and foreign exchange options which are valued using market observable inputs.

Financial Assets Recognised through Profit or Loss - Measured at Fair Value
The quoted equity securities are valued using the market prices published by the Colombo Stock Exchange. Sri Lanka Government Securities arevalued based on the market rates published by the money brokers. Investment in private equity funds are measured at fair value based on the change
in the net asset value of the funds and is recognised through the Statement of Profit or Loss. Unit trust investments are valued at unit prices available
in the market.

Financial Assets Measured at Fair Value through Other Comprehensive Income
Financial assets measured at fair value through other comprehensive income, consist of quoted debentures, non-quoted ordinary shares, quoted
ordinary shares and Sri Lanka Government Securities. The quoted equity securities are valued using the market prices published by the Colombo Stock
Exchange. The Sri Lanka Government Securities are valued based on the market rates published by the money brokers as at the reporting date andquoted debentures and non-quoted ordinary shares are valued using Internal valuation techniques.					NON-FINANCIAL INSTRUMENTS						Property, Plant & Equipment/ Investment Property
Valuation Model						The fair value of the freehold land and buildings presented in the Financial Statements are provided by an independent valuer based on the valuations
carried out at the reporting date.						Freehold land - valuations performed by the valuer are based on the market approach (direct comparison method), for similar properties in the same
location and conditions (Note 32).
Freehold buildings - valuations are performed by an independent valuer based on the cost approach (current replacement cost - Note 32).
Investment Property - valuations are performed based on the income approach using the current market rent by an independent valuer to value theInvestment Property (Income approach - Note 31).

Valuation Framework
Fair values of financial instruments and non-financial instruments are determined according to the following hierarchy:
Level 1 - quoted market price (unadjusted): financial instruments with quoted prices in active markets
Level 2 - valuation techniques using observable inputs: financial instruments with quoted prices for similar instruments in active markets or quoted
prices for identical or similar instruments in inactive markets are valued using models where all significant inputs are observable.
Level 3 - valuation techniques with significant unobservable inputs: This category includes all instruments valued using valuation techniques where
one or more significant inputs are unobservable.
The free hold land and buildings of the Group are valued every three years or more frequently if the fair values are substantially different from theircarrying amounts to ensure that the carrying amounts do not differ from fair values at the reporting date.
Also a letter of confirmation is obtained from the Independent Professional Valuer annually except the year in which full valuation is carried out by theGroup, to ensure that the fair values of the freehold land and buildings, does not significantly vary from their carrying amounts, at the reporting date.
					

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023257

55 (a) Determination of fair value of financial instruments and non financial instruments by hierarchy
The following table shows the analysis of financial instruments and non financial instruments recorded at fair value in the Statement of Financial Position by
the level of the fair value hierarchy in accordance with disclosure requirements as per LKAS 13, Fair Value Measurements.
BANK
Fair Value Measurement Using
31 December 2023

Quoted Prices
in Active
Markets

Significant
Unobservable
Inputs

Total

Level 1

Level 2

Level 3Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Derivative Financial Instruments
Forward foreign exchange contracts
Currency SWAP

24
24

-

344,343
2,739,472-

344,343
2,739,472

Financial Assets Recognised Through Profit or Loss - Measured at
Fair Value
Investment in unit trusts
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds

25
25
25

20,057,131
3,964,209--

20,057,131
3,964,209

28
28
28
28

43,772,475
38,890,209
1,136,489
107,820,513

3,083,815

16,56916,56943,772,475
38,890,209
1,136,489
16,569110,920,897

32.1
32.1

-

-

1,024,000
1,149,000
2,173,000

1,024,000
1,149,000
2,173,000

24-

93,361
93,361-

93,361
93,361

Financial Assets measured at Fair Value Through Other
Comprehensive Income
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds
Quoted ordinary shares
Non quoted ordinary shares
Total Financial Assets
Non-Financial Assets
Freehold land
Freehold buildings
Total Non-Financial Assets
Financial Liabilities
Derivative Financial Instruments
Forward foreign exchange contracts
Total Financial Liabilities

258

Significant
Observable
InputsNational Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

BANK
Fair Value Measurement Using
31 December 2022

Quoted Prices
in Active
Markets
Note

Significant
Observable
Inputs

Total

Significant
Unobservable
InputsLevel 1

Level 2

Level 3

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Derivative Financial Instruments
Forward foreign exchange contracts

24-

209,134-

209,134

Currency SWAP

24-

7,700,118-

7,700,118

Financial Assets Recognised Through Profit or Loss - Measured at
Fair Value
Investment in unit trusts

25

-

-

-

-

Sri Lanka Government Securities - treasury bills

25

17,527,665--

17,527,665

Sri Lanka Government Securities - treasury bonds

25

1,790,818--

1,790,818

Financial Assets measured at Fair Value Through Other
Comprehensive Income
Sri Lanka Government Securities - treasury bills

28

25,651,529--

25,651,529

Sri Lanka Government Securities - treasury bonds

28

18,248,043--

18,248,043

Quoted ordinary shares

28

779,434--

779,434

Non quoted ordinary shares

28

-

-

16,56916,56963,997,489

7,909,252

16,56971,923,309

Total Financial Assets
Non-Financial Assets
Freehold land

32.1

-

-

1,024,000

1,024,000

Freehold buildings

32.1

-

-

1,149,000

1,149,000--

2,173,000

2,173,000

Total Non-Financial Assets
Financial Liabilities
Derivative Financial Instruments
Forward foreign exchange contracts

24-

96,246-

96,246

Total Financial Liabilities--

96,246-

96,246

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023259

55 (a) Determination of fair value of financial instruments and non financial instruments by hierarchy (Contd.)
GROUP
Fair Value Measurement Using
31 December 2023

Quoted Prices
in Active
Markets

Significant
Unobservable
Inputs

Total

Level 1

Level 2

Level 3Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Derivative Financial Instruments
Forward foreign exchange contracts
Currency SWAP

24
24

-

344,343
2,739,472-

344,343
2,739,472

Financial Assets Recognised Through Profit or Loss - Measured at
Fair Value
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds
Quoted ordinary shares
Investment in private equity fundNon-quoted ordinary shares
Investment in unit trusts

25
25
25
25
25
25

20,057,131
3,964,209
430,552
701,718
126,200
760,236--

20,057,131
3,964,209
430,552
701,718
126,200
760,236

Financial Assets measured at Fair Value Through Other
Comprehensive Income
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds
Quoted ordinary shares
Non quoted ordinary shares
Quoted debentures

28
28
28
28
28

44,143,876
39,264,956
1,136,489-

93,877

16,569-44,143,876
39,264,956
1,136,489
16,56993,877

110,585,367

3,177,692

16,569113,779,628

32.1
32.1
31

-

-

1,024,000
1,743,703
3,112,440
5,880,143

1,024,000
1,743,703
3,112,440
5,880,143

24-

93,361
93,361-

93,361
93,361

Total Financial Assets
Non-Financial Assets
Freehold land
Freehold buildings
Investment property
Total Non-Financial Assets
Financial Liabilities
Derivative Financial Instruments
Forward foreign exchange contracts
Total Financial Liabilities

260

Significant
Observable
InputsNational Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

GROUP
Fair Value Measurement Using
31 December 2022

Quoted Prices
in Active
Markets

Total

Significant
Unobservable
InputsSignificant
Observable
InputsLevel 1

Level 2

Level 3Note

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Derivative Financial Instruments
Forward foreign exchange contracts
Currency SWAP

24
24

-

209,134
7,700,118-

209,134
7,700,118

Financial Assets Recognised Through Profit or Loss - Measured
at Fair Value
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds
Quoted ordinary shares
Investment in private equity fundNon-quoted ordinary shares
Investment in unit trusts

25
25
25
25
25
25

17,527,665
1,790,818
242,957
351,215-

749,668
126,200-

17,527,665
1,790,818
242,957
749,668
126,200
351,215

28
28
28
28
28

26,354,221
18,248,043
779,434
65,294,353

66,568
7,975,819

16,568892,436

26,354,221
18,248,043
779,434
16,56866,56874,162,609

32.1
32.1
31

-

-

1,024,000
1,701,655
2,879,091
5,604,746

1,024,000
1,701,655
2,879,091
5,604,746

24-

96,246
96,246-

96,246
96,246

Financial Assets measured at Fair Value Through Other
Comprehensive Income
Sri Lanka Government Securities - treasury bills
Sri Lanka Government Securities - treasury bonds
Quoted ordinary shares
Non quoted ordinary shares
Quoted debentures
Total Financial Assets
Non-Financial Assets
Freehold land
Freehold buildings
Investment property
Total Non-Financial Assets
Financial Liabilities
Derivative Financial Instruments
Forward foreign exchange contracts
Total Financial Liabilities

55 (b) Movements in level 3 financial instruments and non-financial instruments measured at fair value
The level of the fair value hierarchy of financial instruments and non-financial instruments is determined at the beginning of each reporting period. The
following table shows the reconciliation of the opening and closing amounts of Level 3 financial instruments and non-financial instruments which arerecorded at fair value.
BANK
Included in

As at 01
January 2023

Additions/
Disposals during
the year

Total gains/(losses)and charges
recorded inStatement ofProfit or Loss

Total gains/(losses)recordedin Other
Comprehensive
Income

As at 31
December
2023

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

1,024,000
1,149,000(50,483)-

50,483

1,024,000
1,149,000

Non-Financial Assets
Freehold land [Note 32.1]

Property, plant & equipment

Freehold buildings [Note 32.1]

Property, plant & equipment

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

261

55 (b) Movements in level 3 financial instruments and non-financial instruments measured at fair value (Contd.)
GROUP
Included in

Financial Assets
Non-quoted ordinary shares[Note 25]
Private equity fund
[Note 25]

Financial assets measured
at Fair Value through Other
Comprehensive Income
Financial assets recognised
through Statement of Profit or
Loss measured at fair value

Non-Financial Assets
Freehold land [Note 32.1]
Property, plant & equipment
Freehold buildings [Note 32.1] Property, plant & equipment
Investment property (Note 31) Investment property

As at 01
January 2023

Additions/
Disposals during
the year

Total gains/(losses)and charges
recorded inStatement ofProfit or Loss

Total gains/(losses)recordedin Other
Comprehensive
Income

As at 31
December
2023

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

126,200---

126,200

749,668-(47,950)-

701,718

1,024,000
1,701,655
2,879,091(8,435)
21,797

211,552

50,483-

1,024,000
1,743,703
3,112,440

As at 01
January 2022

Additions/
Disposals during
the year

Total gains/(losses)and charges
recorded inStatement ofProfit or Loss

Total gains/(losses)recordedin Other
Comprehensive
Income

As at 31
December2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

919,305
1,034,694(30,651)-

104,695
144,957

1,024,000
1,149,000

BANK
Included in

Non-Financial Assets
Freehold land [Note 32.1]

Property, plant & equipment

Freehold buildings [Note 32.1]

Property, plant & equipment

GROUP
Included in

Financial Assets
Non-quoted ordinary shares[Note 25]
Private equity fund
[Note 25]

Financial assets measured
at Fair Value through Other
Comprehensive Income
Financial assets recognised
through Statement of Profit or
Loss measured at fair value

Non-Financial Assets
Freehold land [Note 32.1]
Property, plant & equipment
Freehold buildings [Note 32.1] Property, plant & equipment
Investment property (Note 31) Investment property

262

National Development Bank PLC

Annual Report 2023

As at 01
January 2022

Additions/
Disposals during
the year

Total gains/(losses)and charges
recorded inStatement ofProfit or Loss

Total gains/(losses)recordedin Other
Comprehensive
Income

As at 31
December2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

126,200---

126,200

847,239(256,001)

158,430-

749,668

919,305
1,520,213
2,528,228

36,486
182,594

168,269

104,695
144,956-

1,024,000
1,701,655
2,879,091

Notes to the Financial Statements55 (c) Unobservable inputs used in measuring the fair value of financial and non financial instruments
The tables below sets out information about significant unobservable inputs used as at 31 December 2023 and as at 31 December 2022 in measuring
financial and non-financial instruments categorised as Level 2 and Level 3 in the fair value hierarchy:

As at 31 December 2023
Financial Assets/Liabilities
BANK
Type of Instrument

Fair Values as at
31 December 2023
LKR MnValuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Derivative Financial Instruments
Derivative financial assets Forward Exchange Contracts

344

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Positive impact to thefair value

Derivative financial assets Currency SWAP

2,739

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Negative impact to thefair value

93

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Positive impact to thefair value

Valuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Derivative financial liabilities Forward Exchange Contracts

Non Financial Assets
BANK
Type of Instrument

Fair Values as at
31 December 2023
LKR MnNawam Mawatha
Land

24

Direct comparison
methodPer perch value

Per perch - LKR 16.5 Mn

Positive impact to thefair value

Building

766

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 20,000 per square
feet and discountfactor- 0.43

Positive impact to thefair value from bothfactors

Land

1,000

Direct comparison
methodPer perch value

Per perch - LKR 17.5 Mn

Positive impact to thefair value

Building

383

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 17,500 per square
feet and discountfactor- 0.55

Positive impact to thefair value from bothfactors

Valuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Forecasted cash flow
valuation method
Forecasted cash flow
valuation method
Forecasted cash flow
valuation method

Forward Exchange
Rate
Forward Exchange
Rate
Forward Exchange
Rate

One year market
premium USD/LKR
One year market
premium USD/LKR
One year market
premium USD/LKR

Positive impact to thefair value
Negative impact tothe fair value
Positive impact to thefair value

701

Net Assets Basis

Net Assets Value ofthe Fund-Positive impact to thefair value

94

Forecasted cash flow
valuation method

Average yields of thedebt market

Yields applicable forthe bonds with sametenurePositive impact to thefair value

Dharmapala Mawatha

Financial Assets/Liabilities
GROUP
Type of Instrument

Fair Values as at
31 December 2023
LKR MnDerivative Financial Instruments

Derivative financial assets Forward Exchange Contracts
Derivative financial assets Currency SWAP
Derivative financial liabilities Forward Exchange Contracts
Financial Assets Recognised
Through Profit or Loss Measured at Fair Value
Private equity fundFinancial Assets measured at
Fair Value Through Other
Comprehensive Income
Quoted debentures

Notes to the Financial Statements

344
2,739
93

National Development Bank PLC

Annual Report 2023

263

55 (c) Unobservable inputs used in measuring the fair value of financial and non financial instruments (Contd.)
Non Financial Assets
GROUP
Type of Instrument

Fair Values as at
31 December 2023
LKR MnValuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Nawam Mawatha
Land

24

Direct comparison
methodPer perch value

Per perch - LKR 16.5 Mn

Positive impact to thefair value

Building

766

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 20,000 per square
feet and discountfactor- 0.43

Positive impact to thefair value from bothfactors

Land

1,000

Direct comparison
methodPer perch value

Per perch - LKR 17.5 Mn

Positive impact to thefair value

Building

383

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 17,500 per square
feet and discountfactor- 0.55

Positive impact to thefair value from bothfactors

Income Approach

Rent per square feet

Average Rate of LKR
265 per square feet

Positive impact to thefair value

Valuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

209

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Positive impact to thefair value

7,700

Forecasted cash flow
valuation method

Forward Exchange
Rate

One year market
premium USD/LKR

Negative impact tothe fair value

96

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Positive impact to thefair value

Valuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Dharmapala Mawatha

Nawam Mawatha
Investment property

3,708(Including the fairvalue of owneroccupied portion of
LKR 596 Mn)

As at 31 December 2022
Financial Assets/Liabilities
BANK
Type of Instrument

Fair Values as at
31 December 2022
LKR MnDerivative Financial Instruments
Derivative financial assets Forward Exchange Contracts
Derivative financial assets Derivative financial liabilities Forward Exchange Contracts

Non Financial Assets
BANK
Type of Instrument

Fair Values as at
31 December 2022
LKR MnNawam Mawatha
Land

24

Direct comparison
methodPer perch value

Per perch - LKR 16.5 Mn

Positive impact to thefair value

Building

766

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 20,000 per square
feet and discountfactor- 0.43

Positive impact to thefair value from bothfactors

Land

1,000

Direct comparison
methodPer perch value

Per perch - LKR 17.5 Mn

Positive impact to thefair value

Building

383

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 17,500 per square
feet and discountfactor- 0.55

Positive impact to thefair value from bothfactors

Dharmapala Mawatha

264

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Financial Assets/Liabilities
GROUP
Type of Instrument

Fair Values as at
31 December 2022
LKR MnValuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Derivative Financial Instruments
Derivative financial assets Forward Exchange Contracts

209

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Negative impact to thefair value

Derivative financial assets Currency SWAP

7,700

Forecasted cash flow
valuation method

Forward Exchange
Rate

One year market
premium USD/LKR

Negative impact tothe fair value

Derivative financial liabilities Forward Exchange Contracts

96

Forecasted cash flow
valuation method

Forward Exchange Rate

One year market
premium USD/LKR

Negative impact to thefair value

750

Net Assets Basis

Net Assets Value of theFund-

Positive impact to thefair value

67

Forecasted cash flow
valuation method

Average yields of thedebt market

Yields applicable forthe bonds with sametenureNegative impact to thefair value

Valuation
TechniqueSignificant
Unobservable Inputs

Range of Estimates(Weighted Average) for
Unobservable Inputs

Fair Value Measurement
Sensitivity to
Unobservable Inputs

Financial Assets Recognised
Through Profit or Loss Measured at Fair Value
Private equity fundFinancial Assets measured at
Fair Value Through Other
Comprehensive Income
Quoted debentures

Non Financial Assets
GROUP
Type of Instrument

Fair Values as at
31 December 2022
LKR MnNawam Mawatha
Land

24

Direct comparison
methodPer perch value

Per perch - LKR 16.5 Mn

Positive impact to thefair value

Building

766

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 20,000 per square
feet and discountfactor- 0.43

Positive impact to thefair value from bothfactors

Land

1,000

Direct comparison
methodPer perch value

Per perch - LKR 17.5 Mn

Positive impact to thefair value

Building

383

Current replacement
cost

Replacement cost/depreciation factor rate

LKR 17,500 per square
feet and discountfactor- 0.55

Positive impact to thefair value from bothfactors

Income Approach

Rent per square feet

Average Rate of LKR
245 per square feet

Positive impact to thefair value

Dharmapala Mawatha

Nawam Mawatha
Investment property

Notes to the Financial Statements

3,430(Including the fairvalue of owneroccupied portion of
LKR 551 Mn)

National Development Bank PLC

Annual Report 2023

265

55 (d) Fair value of the financial assets and financial liabilities that are not carried at fair value in the financial statements
Set out below is a comparison, by class, of the carrying amounts and fair values of the financial assets and financial liabilities that are not carried at fair value
in the Statement of Financial Position. The table does not include the fair values of non-financial assets and non-financial liabilities.
BANK
2023
Fair ValueClassification

2022

Carrying
AmountFair
Value

Carrying
AmountFair
Value

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Cash and cash equivalents

Note 55 (e)28,100,515

28,100,515

34,849,521

34,849,521

Balances with the Central Bank of Sri Lanka

Note 55 (e)7,040,421

7,040,421

18,187,547

18,187,547

Placements with banks

Note 55 (e)33,743,602

33,743,602

4,108,989

4,108,989

Financial assets at amortised cost -loans and receivables to othercustomers

Level 2452,660,461

429,554,660

545,873,027

534,200,332

Financial assets at amortised cost - debt and other instruments

Level 2

125,672,370

116,690,858

135,047,886

121,732,926

Other financial assets

Note 55 (e)1,427,296

1,427,296

1,963,077

1,963,077

648,644,665

616,557,352

740,030,047

715,042,392

7,679,195

7,679,195

20,251,657

20,251,657
667,553,388

Total Financial Assets
Financial Liabilities
Due to banks

Note 55 (e)Financial liabilities at amortised cost
- due to depositors

Level 2615,643,999

622,877,578

672,314,023- due to debt securities holders

Note 55 (e)15,632,569

15,632,569

130,541

130,541- due to other borrowers

Note 55 (e)24,636,539

24,636,539

32,372,265

32,372,265

Debt securities issued

Level 2

29,388,875

30,519,168

27,979,631

28,363,550

Other financial liabilities

Note 55 (e)2,391,221

2,391,221

2,958,157

2,958,157

695,372,398

703,736,270

756,006,274

751,629,558

Total Financial Liabilities

GROUP
2023
Fair ValueClassification

2022

Carrying
AmountFair
Value

Carrying
AmountFair
Value

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Cash and cash equivalents

Note 55 (e)28,580,676

28,580,676

35,727,665

35,727,665

Balances with the Central Bank of Sri Lanka

Note 55 (e)7,040,421

7,040,421

18,187,547

18,187,547

Placements with banks

Note 55 (e)33,743,602

33,743,602

4,108,989

4,108,989

Financial assets at amortised cost - loans and receivables to othercustomers

Level 2452,739,928

429,627,888

545,919,824

534,245,423

Financial assets at amortised cost - debt and other instruments

Level 2

125,672,370

116,690,858

135,047,886

121,732,926

Other financial assets

Note 55 (e)1,965,544

1,965,544

2,424,812

2,424,812

649,742,541

617,648,989

741,416,723

716,427,362

7,679,195

7,679,195

20,298,844

20,298,844
666,959,698

Total Financial Assets
Financial Liabilities
Due to banks

Note 55 (e)Financial liabilities at amortised cost
- due to depositors

Level 2615,232,470

622,469,137

671,713,337- due to debt securities holders

Note 55 (e)15,632,569

15,632,569

130,541

130,541- due to other borrowers

Note 55 (e)24,636,539

24,636,539

32,372,265

32,372,265

Debt securities issued

Level 2

29,388,875

30,519,168

27,979,631

28,363,550

Other financial liabilities

Note 55 (e)2,592,786

2,592,786

3,273,911

3,273,911

695,162,434

703,529,394

755,768,529

751,398,809

Total Financial Liabilities

266

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements55 (e) Basis of measurement for the fairvalue of financial assets and financial
liabilities not carried at fair value
Given below are the methodologies andassumptions used to determine the fairvalues for financial instruments which are
not already recorded at fair value in the
Financial Statements:

Assets for which fair value
approximates carrying value
For financial assets and financial liabilities
that have a short-term maturity (lessthan three months) it is assumed that thecarrying amounts approximate their fairvalue. This assumption is also applied todemand deposits and savings accounts
without a specific maturity.

Fixed rate financial instruments
The fair value of fixed rate financial assets
and liabilities carried at amortised cost are
estimated by comparing market interest
rates when they were first recognised withcurrent market rates for similar financial
instruments. The estimated fair value of
fixed interest-bearing deposits is basedon discounted cash flows using prevailingmoney-market interest rates for debts
with similar credit risk and maturity. For
quoted debt instruments issued, the fairvalues are determined based on quoted
market prices. For instruments issued
where quoted market prices are notavailable, a discounted cash flow model isused based on a current interest rate yield
curve appropriate for the remaining term
to maturity and credit spreads. For othervariable rate instruments, an adjustment
is also made to reflect the change in therequired credit spread since the instrument
was first recognised.

56.

RISK MANAGEMENT

56.1

Introduction
Taking risks is inherent in any bank’s
strategic plan but it is managed througha process of ongoing identification,measurement and monitoring, subject torisk limits and other controls. Bank’s risk
strategy focuses on managing principal
risks faced by the Bank while striking a fairbalance between the risk return tradeoff
and the efficient capital allocation acrossthe risk exposures.
The Bank is mainly exposed to credit risk,
liquidity risk, market risk and operationalrisk. Market risk could be further subdivided
into trading and non-trading risks. Exposure
to country risk and any risks due to changes
in environment, technology and industry
is managed through the Bank’s strategicplanning process.

Notes to the Financial Statements

56.2

Risk Management Framework
The Board of Directors has overall
responsibility for the establishment andoversight of the Bank’s Risk Management
Framework. The Board has delegatedits authority to the Integrated Risk
Management Committee (IRMC) for theoverall Risk Management approach and forapproving the Risk Management strategies
and principles. IRMC meets quarterly toreview and assess the Bank’s overall risks
and to focus on policy recommendations
and strategies in an integrated manner andthe Board of Directors are duly updated of
its activities.
The Bank’s Risk Management policies are
established to identify and analyse the risks
faced by the Bank/ Group to set appropriate
risk limits and controls and to monitor
adherence to established limits.
The Bank’s Assets and Liabilities Committee(ALCO) reviews all market and liquidity
related exposures, excesses on a monthly
basis and decisions are made to facilitate
the business requirements. These decisions
are further reviewed at IRMC and by the
Board.
The Credit and Market Risk Policy
Committee and Operational Risk
Management Committee are in
operation to formulate policies and to
focus more clearly on defined risk areas.
The membership of these committees
comprises the CEO, the Heads of Business
Units, Finance, Treasury and representativesof the Risk Management Department.
The Committees meet regularly to review
the Bank’s risk policy framework, overall
performance and the potential risks facedby specific lines of business and support
functions.			
The Bank’s Treasury is responsible formanaging the Bank’s assets and liabilities
and the overall financial structure. It is also
primarily responsible for the funding andliquidity risks of the Bank.

56.2.1 Risk measurement and reporting
Monitoring and controlling risks is primarily
performed based on limits establishedby the Bank which reflects the businessstrategy and market environment of the
Bank as well as the Bank’s risk appetite.
Information compiled is examined andprocessed in order to analyse, control
and identify risks on a timely basis. The
compiled information is presented to theCredit and Market Risk Policy Committee,
IRMC and the Board of Directors receives
a risk report once a quarter which covers
all necessary information to assess andconclude on the risks of the Bank.

56.2.2 Risk mitigation
The Bank obtains various types of collateraland establishes maximum prudential limits
as part of its overall risk management/
mitigation.

56.3

Credit Risk
Credit Risk is the risk that the Bank will
expect a loss because its customers or
counterparties fail to discharge theircontractual obligations. The Bank manages
and controls credit risk by setting limits on
the amount of risk it is willing to accept forindividual/ group counterparties and for
geographical and industry concentrations,and by monitoring exposures in relation tosuch limits.
The Bank has established a credit
quality review process to provide early
identification of possible changes in
the creditworthiness of counterparties.
Counterparty limits are established by
the use of an internally designed Credit
Risk classification system, which assigns
each counterparty a risk rating. Risk ratings
are subject to regular revision. The credit
quality review process aims to allow the
Bank to assess the potential loss as a resultof the risks to which it is exposed and takecorrective action.
Credit Risk Management verifies andmanages the credit process fromorigination to collection. The Bank has a
Credit Policy approved by the Board of
Directors. It defines theycredit culture of the Bankyspecifies prohibited lending which
the Bank under no circumstances willentertainysets acceptable risk parametersysets remedial and recovery actions

56.3.1 Credit related commitments risks
To meet the financial needs of customers,
the Bank enters into various irrevocablecommitments and contingent liabilities.
Even though these obligations may not berecognised on the statement of financial
position, they do contain credit risk and are
therefore part of the overall risk of the Bank.

56.3.2 Collateral and other credit
enhancements
The amount and type of collateral required
depends on an assessment of the credit riskof the counterparty. Guidelines are in placein the Bank’s Credit Policy Manual covering
the accessibility and valuation of each typeof collateral.

National Development Bank PLC

Annual Report 2023

267

The main types of collateral obtained are as
follow:yfor commercial lending - mortgages
over immovable and movable fixed
assets, inventory, trade receivables,
corporate and personal guaranteesyfor retail lending - mortgage overresidential property, vehicles, gold
stocks, personal guarantees

56.3.3. Impairment assessment
At each reporting date, a loss allowanceor Expected Credit Loss (ECL) will berecognised based on either 12-month ECLs
or lifetime ECLs, depending on whether or
not there has been a significant increase incredit risk on the financial instrument sinceinitial recognition. The changes in the loss
allowance balance are recognised in profit
or loss as an impairment gain or loss.

y

As a part of a qualitative assessment of
whether a customer is in default, the Bank
also considers a variety of instances that
may indicate unlikeliness to pay. When such
events occur, the Bank carefully considers
whether the event should result in treating
the customer as defaulted and therefore
assessed as Stage 3 for ECL calculations orwhether Stage 2 is appropriate. Such events(among others) include:268

yContractual payments of a customer
are more than 30 days past due, but
not in NPL/ defaultyWhen reasonable and supportable
forecasts of future economic
conditions directly affect theperformance of a customer/ group of
customers, portfolios or instruments
and the company has failed to takeadequate mitigating factors to
overcome negative factors

National Development Bank PLC

56.3.3.2. PD estimation process
Probability of Default (PD) is the estimateof the likelihood of default over a given
time horizon. A default may only happen
at a time horizon if the facility has not beenpreviously derecognised and is still in theportfolio.

When there is a significant change in
the geographical locations or natural
catastrophes that directly impact theperformance of a customer/ group of
customers or an instrument

12 Months PDyWhen the value of collateral issignificantly reduced and/ or
realisability of collateral is doubtful(20% reduction from original LTV
approved)

The 12 month PD is applied for the“Current” and “1-30 days” buckets since
there is no significant deterioration in Credit
Risk.

y

When a customer is subject tolitigation, that significantly affects theperformance of the credit facilityyFrequent changes in the senior
management of an institutionalcustomery

Delay in the commencement ofbusiness operations/ projects by morethan two years from the originallyagreed dateyModification of terms resulting inconcessions, including extensions,deferment of payments, waiver ofcovenants etc.

The lifetime PD is applied for the 31-60
days and 61-90 days buckets since there is asignificant deterioration in credit risk.

y

A fall of 50% or more in the turnover
and/ or profit before tax of thecustomer when compared to theprevious year

Ageing Bucket

Probability of Default

31 – 60 Days

Lifetime PD

61 – 90 Days

Lifetime PDy56.3.3.1. Definition of default and cure
The Bank considers a financial instrument
defaulted and therefore Stage 3 (creditimpaired) for ECL calculations in all cases
when contractual payments of a customer
are past due for more than 90 days (thenumber of days past due shall be calculated
starting from the contractual due date of
the payment) or has remained in excess ofthe sanctioned limit for more than 90 days,
and any other credit facilities classified asStage 3 under SLFRS 9 (facilities classified as
Non performing based on potential risk andimpaired assets at origination). The Bank
considers treasury and interbank balances
defaulted and takes immediate action
when the required intraday payments
are not settled by the close of business as
outlined in the individual agreements.

When the risk rating of a customer oran instrument has been downgradedto B+ by an external credit rating
agency and/ or when there is a two
notch downgrade in the banks internalrating systemyErosion in net-worth by more than 25%
when compared to the previous yearyThe borrower continuously use theloan proceeds for a purpose otherthan the purpose specified in the loan
agreementyAvailability of any other indicators thatsuggest a significant increase in Credit
Risk

It is the Bank’s policy to consider a financial
instrument as ‘cured’ and therefore
reclassified out of a higher stage to a lower
stage (e.g. from stage 3 to stage 2) otherthan normal movement of a contract basedon the change of DPD on an exceptional
basis:yyCredit facilities in Stage 3 other thanrestructured credit facilities in Stage
3 and rescheduled credit facilities are
upgraded if due payments are fully
settled by the customer
Rescheduled and restructured
contracts are upgraded only uponsatisfactory performance during therelevant monitoring period where
customer complies with the applicableterms of repayment.

Annual Report 2023

Notes to the Financial Statements

This is the estimated probability of default
occurring within the next 12 months.

Ageing Bucket

Probability of Default

Current

12 Months PD

1- 30 Days

12 Months PD

Lifetime PD
This is the estimated probability of default
occurring over the remaining life of thefinancial instrument.

The PD for the above 90 days category is
100% since there is objective evidence ofimpairment as the default has occurred.
Ageing Bucket

Probability of Default

Above 90 Days

100% PD

56.3.3.3 Exposure at default
The Exposure At Default (EAD) represents
the gross carrying amount of the financial
instruments subject to the impairment
calculation, addressing both the client’s
ability to increase its exposure while
approaching default and potential early
repayments too. EAD for credit cards andother revolving facilities is set out in
Note 11.
To measure ECLs on revolving facilities,
such as credit cards, it will be necessary toestimate several components that make up
the EADy

The contracts which have exceeded 90
days past duey

The Credit Utilisation Rate or Credit
Conversion Factor

These components are estimated basedon past experience, for sections of theportfolio that are segmented so that they
have similar credit characteristics.

Stage 1y56.3.3.4. Loss given default
Loss Given Default (LGD) is the magnitudeof likely loss on exposure, and is expressed
as a percentage of exposure. These LGD
rates take into account the expected EAD
in comparison to the amount expected tobe recovered or realised from any collateral
held.
The Bank segments its retail lending
products into smaller homogeneous
portfolios, based on key characteristics
that are relevant to the estimation of future
cash flows. The applied data is based on
historically collected loss data and involves
a wider set of transaction characteristics(e.g. product type, wider range of collateraltypes) as well as borrower characteristics.
For each year, closed contracts which havecrossed above 90 days at least once in their
lifetime are considered. LGD will factor in
all cash flows subsequent to the point ofdefault until the full settlement of the loan.
Virtually closed contracts are also added
to this data set. Virtually closed contracts
are active loans which have been long
outstanding. A contract is determined to
be virtually closed at the point the Bank
determines that the cash flows have driedup.

56.3.4.5. Significant increase in credit risk
The Bank continuously monitors all
assets subject to Expected Credit Losses(ECL). In order to determine whether an
instrument or a portfolio of instruments
is subject to 12m ECL or LTECL, the Bank
assesses whether there has been asignificant increase in credit risk since initialrecognition.
The Bank also applies a secondary
qualitative method for triggering asignificant increase in credit risk for an asset,
such as moving a customer/ facility to thewatch list, or the account having been
restructured. In certain cases, the Bank may
also consider that events explained in Note
56.3.4.1 are a significant increase in credit
risk as opposed to a default.
When estimating ECLs on a collective basis
for a group of similar assets, the Bank also
applies the following in the categorisationof credit facilities/ exposures into stages forcomputation of expected credit losses.

Notes to the Financial Statements

All accounts which have not shown
any sign of deterioration sinceorigination. All accounts which havebeen identified as Low Credit Risk
(LCR) (under low credit risk expedient)shall be classified as Stage 1. The
Bank computes ECLs based on thedelinquency method where all facilities
which are less than or equal to 30 days
past due are considered under Stage 1.
12 months ECL shall be calculated forstage 1 facilities.

Stage 2y

All accounts which have shown asignificant deterioration in credit
quality since origination. Lifetime losses
are computed for all accounts classified
as Stage 2. The Bank computes ECLs
based on the delinquency method
where all facilities which are more than
30 days past due upto 90 days past due
are considered under Stage 2.

A collective assessment is performed for
exposures as follows:yExposures that have not been
individually assessed i.e. falling below
the individually significant thresholdyExposures that have been assessed for
Objective Evidence of Incurred Lossand indicators of increase in Credit
Risk and were found to have no such
evidence/ indicatorsyExposures that have been individuallyassessed and were found not to be
impaired on an individual basis basedon the cash flow estimation

The Bank groups these exposures in tohomogeneous portfolios to the extent
possible so as to ensure that data points areavailable for meaningful calculations.

Stage 3y

All impaired assets (purchased
impaired and originally credit impaired
assets). Lifetime losses are computed
for all accounts classified as Stage 3.
The Bank computes ECLs based on thedelinquency method.

56.3.4.6. Grouping financial assets measured ona collective basis
As explained in Note 11 dependent on thefactors below, the Bank calculates ECLs
either on a collective or an individual basis.
An individual impairment assessment
is performed for exposures over the
Individually Significant Threshold of LKR 200
Mn based on amortised cost amount for
Corporate clients (Wholesale Banking andProject Finance) and LKR 50 Mn for others
for which there is objective evidence of
expected loss based on the current statusof the customer, i.e. based on whether
customer is performing, non performing,
restructured, rescheduled or watch-listed.
Exposures that are assessed for individual
impairment and for which an impairment
provision has been recognised are notincluded in the collective assessment of
impairment. If it is determined that no
objective evidence of expected loss exists
for an individually assessed exposure, orassessed for objective evidence and there is
no requirement for individual impairment,
whether significant or not, this is included
in a group of exposures with similar credit
risk characteristics that are collectively
assessed for impairment under the relevant
bucket.

National Development Bank PLC

Annual Report 2023

269

270

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

10%
15%
75%

Best Case

Base Case

Worst Case

GDP Growth (%)

10
10
80

Base Case

Worst Case

Unemployment (%)

Exchange Rate
(USD:LKR)Interest Rate(AWPLR) (%)

Inflation (YoY)(CCPI) (%)

2023

10
80

Base Case

Worst Case80

Worst Case
10

10

Base CaseBest Case

1080

Worst CaseBest Case10

Base Case80

Worst Case
10

10

Base CaseBest Case

10

Best Case

Assigned
Probabilities(%)

Best Case

Key Drivers

GDP Growth (%)

75%

Worst Case

ECL
Scenarios

15%

Base Case75%

Worst Case
10%

15%

Base CaseBest Case

10%

75%

Worst CaseBest Case

15%

Base Case75%

Worst Case
10%

15%

Base CaseBest Case

10%

Best Case

31 December 22

Unemployment (%)

Exchange Rate
(USD:LKR)Interest Rate(AWPLR) (%)

Inflation (YoY)(CCPI) (%)

2024
Assigned
Probabilities(%)

ECL
Scenarios

Key Drivers

31 December 23

5.36

5.32

4.83

400.00400.00367.25

28.19

25.35

17.93

34.56

34.56

14.57

(3.96)

1.62

3.54

Value

5.01%

4.97%

4.86%

359.38344.79339.0713.99%

12.87%

11.40%

5.15%

4.35%

3.37%

1.44%

1.64%

2.41%

Value

2024

40

40

20

40

40

20

40

40

20

40

40

20

40

40

20

Assigned
Probabilities
(%)

70%

20%

10%

70%

20%

10%

70%

20%

10%

70%

20%

10%

70%

20%

10%

Assigned
Probabilities
(%)

2025

5.38

5.31

4.74

400.00400.00371.37

28.19

22.17

13.00

40.49

27.10

6.13

(3.24)

2.74

3.76

Value

5.03%

4.97%

4.83%

395.28363.84351.8714.87%

12.73%

10.59%

5.85%

4.26%

2.89%

1.39%

1.99%

2.92%

Value

2025

35

45

20

35

45

20

35

45

20

35

45

20

35

45

20

Assigned
Probabilities
(%)

60%

30%

10%

60%

30%

10%

60%

30%

10%

60%

30%

10%

60%

30%

10%

Assigned
Probabilities
(%)

2026

5.40

5.31

4.65

400.00400.00375.54

28.19

19.55

9.40

47.43

22.21

5.37

(2.57)

3.12

3.99

Value

5.04%

4.96%

4.79%

434.77383.93365.1415.80%

12.61%

9.84%

6.64%

4.20%

2.48%

1.33%

2.25%

3.11%

Value

2026

25

50

25

25

50

25

25

50

25

25

50

25

25

50

25

Assigned
Probabilities
(%)

50%

40%

10%

50%

40%

10%

50%

40%

10%

50%

40%

10%

50%

40%

10%

Assigned
Probabilities
(%)

2027

5.43

5.31

4.63

400.00400.00379.76

28.19

18.08

7.07

55.57

21.09

5.11

(2.45)

3.18

4.20

Value

5.06%

4.96%

4.77%

478.20405.14378.92

16.79%

12.67%

9.26%

7.54%

4.28%

2.18%

1.27%

2.36%

3.26%

Value

2027

25

50

25

25

50

25

25

50

25

25

50

25

25

50

25

Assigned
Probabilities
(%)

40%

40%

20%

40%

40%

20%

40%

40%

20%

40%

40%

20%

40%

40%

20%

Assigned
Probabilities
(%)

2028

8.82%

8.56%

4.51%

1.98%

1.21%

2.39%

3.38%

Value

5.46

5.31

4.68

400.00400.00379.76

28.19

16.96

5.53

57.20

20.57

4.59

(2.33)

3.21

4.41

Value

5.09%

4.97%

4.77%

500.00427.52393.2217.85%

12.90%The tables show the values of the key forward looking economic variables/ assumptions used in each of the economic scenarios for the ECL calculations.

2028

25

50

25

25

50

25

25

50

25

25

50

25

25

50

25

Assigned
Probabilities
(%)

40%

40%

20%

40%

40%

20%

40%

40%

20%

40%

40%

20%

40%

40%

20%

Assigned
Probabilities
(%)

2029

5.46

5.31

4.68

400.00400.00388.35

28.19

16.96

5.53

57.20

20.57

4.59

(2.33)

3.21

4.41

Value

5.09%

4.97%

4.77%

500.00451.13408.0617.85%

12.90%

8.82%

8.56%

4.51%

1.98%

1.21%

2.39%

3.38%

Value

2029

25

50

25

25

50

25

25

50

25

25

50

25

25

50

25

Assigned
Probabilities
(%)

40%

30%

30%

40%

30%

30%

40%

30%

30%

40%

30%

30%

40%

30%

30%

Assigned
Probabilities
(%)

2030

5.46

5.31

4.68

400.00400.00392.71

28.19

16.96

5.53

57.20

20.57

4.59

(2.33)

3.21

4.41

Value

5.09%

4.97%

4.77%

500.00476.05423.46

8.56%

12.90%

8.82%

8.56%

4.51%

1.98%

1.21%

2.39%

3.38%

Value

The Bank obtains the data used from Central Bank of Sri Lanka/ Department of Census & Statistics and International Monetary Fund (IMF). The following tables set out the key drivers of expected loss and theassumptions used for the Bank’s base case estimate, ECLs based on the base case, plus the effect of the use of multiple economic scenarios (best case and worst case) as at 31 December 2023 and 31 December 2022.

56.3.4.7 Analysis of inputs to the ECL model under multiple economic scenarios

56.3.4.8 Analysis of net exposure on credit risk and impairment
The table below shows the credit quality by class of assets for all financial assets exposed to credit risk, based on the Bank’s classification of assets.
BANK
31 December 2023

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000
28,100,515

Cash and cash equivalents

28,100,515--

Balances with the Central Bank of Sri Lanka

7,040,421--

7,040,421

Placements with banks

33,743,602--

33,743,602

Derivative Financial Instruments

3,083,815--

3,083,815

Financial assets recognised through profit or loss - measured at fair value

24,021,340--

24,021,340

Financial assets at amortised cost - loans and receivables to other customers

306,866,330

97,228,082

48,566,049

452,660,461

Financial assets at amortised cost - debt and other instruments

100,126,663

25,545,707-

125,672,370

Financial assets measured at fair value through other comprehensive income

83,805,398--

83,805,398

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

BANK
31 December 2022
Cash and cash equivalents

34,849,521--

34,849,521

Balances with the Central Bank of Sri Lanka

18,187,547--

18,187,547

Placements with banks

4,108,989--

4,108,989

Derivative Financial Instruments

7,909,252--

7,909,252

Financial assets recognised through profit or loss - measured at fair value

19,318,483--

19,318,483

Financial assets at amortised cost - loans and receivables to other customers

332,871,893

172,498,796

40,502,338

545,873,027

Financial assets at amortised cost - debt and other instruments

78,993,552

56,054,334-

135,047,886

Financial assets measured at fair value through other comprehensive income

44,685,230--

44,685,230

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000---

28,580,676

GROUP
31 December 2023
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka

-

-

-

7,040,421

Placements with banks

-

-

-

33,743,602

Derivative financial instruments

-

-

-

3,083,815

Financial assets recognised through profit or loss - measured at fair value

-

-

-

26,040,046

Financial assets at amortised cost - loans and receivables to other customers

306,967,834

97,228,082

48,544,012

452,739,928

Financial assets at amortised cost - debt and other instruments

100,126,663

25,545,707-

125,672,370

-

-

-

84,645,423

Stage 1

Stage 2

Stage 3Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Cash and cash equivalents

35,727,665--

35,727,665
18,187,547

Financial assets measured at fair value through other comprehensive income

GROUP
31 December 2022

Balances with the Central Bank of Sri Lanka

18,187,547--

Placements with banks

4,108,989--

4,108,989

Derivative financial instruments

7,909,252--

7,909,252

Financial assets recognised through profit or loss - measured at fair value

20,788,523--

20,788,523

Financial assets at amortised cost - loans and receivables to other customers

332,918,690

172,498,796

40,502,338

545,919,824

Financial assets at amortised cost - debt and other instruments

78,993,552

56,054,334-

135,047,886

Financial assets measured at fair value through other comprehensive income

45,454,490--

45,454,490

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

271

272

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

-

-

-

-

Placements with banks

Derivative financial instruments

Financial assets recognised throughprofit or loss- measured at fair
value

-

-

Financial assets at amortised cost debt and other instruments

Financial assets measured atfair value through Other
comprehensive income--

84,611,492

19,819-395,787

19,831,909

64,363,977

-

-

-

-

-

LKR ’000--

31,827,330--

115,003

7,026,861

24,685,466

-

-

-

-

-

LKR ’000--

4,336,051--

38,119775,130

3,522,802

-

-

-

-

-

LKR ’000

Tourism Transportation& Storage

The above industries include lending to overseas entities amounting to LKR 33.3 Bn.

25,827,059

7,216

-

Net loans and receivables to othercustomers- Others- Residential Mortgages

393,399- Small Business Lending- Consumer Lending

14,986,635

10,439,809- Corporate Lending

Financial assets at amortised cost- loans and receivables to othercustomers-

Balances with the Central Bank of
Sri Lanka

LKR ’000

Agriculture, Manufacturing
Forestry &Fishing

Cash and cash equivalents

31 December 2023

56.3.4.9.1 Industry analysis--

21,312,480--

373,369

4,456,272

16,482,839

-

-

-

-

-

LKR ’000

Construction-

1,500,000

58,036,796

1,319

-

73,8092,164,398

55,797,270

-

-

-

-

-

LKR ’000

Infrastructure
Development--

63,977,489

2,931

-

749,623

28,662,002

34,562,933

-

-

-

-

-

LKR ’000WholesaleandRetail Trade

BANK

-

-

1,413,748

3-

49,194

307,739

1,056,812

-

-

-

-

-

LKR ’000

Information
Technology
andCommunication
Services

The following table shows the risk concentration by industry for the components of the Statement of Financial Position.

The Bank’s concentrations of risk are managed by customer/ counterparty and industry sector.

56.3.4.9 Analysis of risk concentration

83,805,398

124,172,370

32,937,545--

470,668

2,301,285

30,165,592

24,021,340

3,083,815

33,743,602

7,040,421

28,100,515

LKR ’000Financial
Services--

16,156,919--

394,974

1,794,651

13,967,294

-

-

-

-

-

LKR ’000--

10,668

-

-

-

541

10,127

-

-

-

-

-

LKR ’000

Professional,
Arts,
Scientific & Entertainment
Technical& Recreation
Activities--

1,072,374--

94,159414,243

563,972

-

-

-

-

-

LKR ’000

Education--

522,282--

31,130416,676

74,476

-

-

-

-

-

LKR ’000

Health Care,
Social Services& Support
Services--

110,618,228

2,695,459

16,696,735

79,119,947

11,128,744

977,343

-

-

-

-

-

LKR ’000

Consumption

83,805,398

125,672,370

452,660,461

2,726,748

16,696,735

82,299,180

89,720,260

261,217,538

24,021,340

3,083,815

33,743,602

7,040,421

28,100,515

LKR ’000

Total

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

273

-

-

-

-

Placements with banks

Derivative financial instruments

Financial assets recognised throughprofit or loss- measured at fairvalue

1,218,722- Consumer Lending-

Financial assets measured atfair value through Other
comprehensive income--

107,524,049

13,474-

1,173,548

25,293,016

81,044,011

-

-

-

-

-

LKR ’000--

39,234,598--

420,892

12,816,389

25,997,317

-

-

-

-

-

LKR ’000--

6,663,071--

59,295

1,068,873

5,534,903

-

-

-

-

-

LKR ’000

Tourism Transportation& Storage

The above industries include lending to overseas entities amounting to LKR 42.7 Bn.

-

32,501,320

7,168

Financial assets at amortised cost debt and other instruments

Net loans and receivables to othercustomers- Others-

13,650,790- Small Business Lending- Residential Mortgages

17,624,640- Corporate Lending

Financial assets at amortised cost- loans and receivables to othercustomers-

Balances with the Central Bank of
Sri Lanka

LKR ’000

Cash and cash equivalents

31 December 2022

Agriculture, Manufacturing
Forestry &Fishing--

26,603,149

268-

621,352

6,725,831

19,255,698

-

-

-

-

-

LKR ’000

Construction-

1,500,000

68,939,399

1,312

-

317,369

3,254,222

65,366,496

-

-

-

-

-

LKR ’000

Infrastructure
Development--

81,588,482

3,786

-

4,738,005

29,821,410

47,025,281

-

-

-

-

-

LKR ’000WholesaleandRetail Trade

BANK

-

-

1,034,899--

93,179223,965

717,755

-

-

-

-

-

LKR ’000

Information
Technology
andCommunication
Services

44,685,230

133,547,886

54,426,450--

953,323

2,270,390

51,202,737

19,318,483

7,909,252

4,108,989

18,187,547

34,849,521

LKR ’000Financial
Services--

12,402,837--

1,856,867

2,672,985

7,872,985

-

-

-

-

-

LKR ’000

-

-

-

-

-

-

-

-

-

-

-

-

-

LKR ’000

Professional,
Arts,
Scientific & Entertainment
Technical& Recreation
Activities--

1,444,620--

349,418

984,242

110,960

-

-

-

-

-

LKR ’000

Education--

980,701--

97,869729,386

153,446

-

-

-

-

-

LKR ’000

Health Care,
Social Services& Support
Services--

112,529,452

2,271,941

18,419,780

82,217,151

8,389,439

1,231,141

-

-

-

-

-

LKR ’000

Consumption

44,685,230

135,047,886

545,873,027

2,297,949

18,419,780

94,116,991

107,900,937

323,137,370

19,318,483

7,909,252

4,108,989

18,187,547

34,849,521

LKR ’000

Total

274

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements--

Placements with banks

Derivative financial instruments

19,819-395,787

19,831,909

64,363,977

62,311----

LKR ’000--

115,003

7,026,861

24,685,466

23,302----

LKR ’000-Financial assets measured atfair value through Other
comprehensive income

-

-

-

The above industries include lending to overseas entities amounting to LKR 33.3 Bn.

-

-

-

373,369

4,456,272

16,482,839

-

-

-

-

-

LKR ’000

Construction

1,319

-

73,8092,164,398

55,797,270

86,202----

LKR ’000

Infrastructure
Development

2,931

-

749,623

28,662,002

34,562,933

-

-

-

-

-

LKR ’000WholesaleandRetail Trade

-

-

-

1,500,000
33,837-

4,336,051 21,312,480 58,036,796 63,977,489--

38,119775,130

3,522,802

-

-

-

-

-

LKR ’000

Tourism Transportation& Storage

25,827,059 84,611,492 31,827,330

7,216

-

393,399

10,439,809

14,986,635

Financial assets at amortised cost debt and other instruments

Net loans and receivables to othercustomers- Others- Residential Mortgages- Consumer Lending- Small Business Lending- Corporate Lending

Financial assets at amortised cost- loans and receivables to othercustomers

1,587

-

Financial assets recognised throughprofit or loss- measured at fair
value

-

Balances with the Central Bank of
Sri Lanka

LKR ’000

Cash and cash equivalents

31 December 2023

Agriculture, Manufacturing
Forestry &Fishing

56.3.4.9.1 Industry analysis (Contd.)
GROUP

-

-

470,668

2,301,285

30,165,592

25,804,306

3,083,815

33,743,602

7,040,421

28,580,676

LKR ’000Financial
Services--

394,974

1,794,651

13,967,294

22,338----

LKR ’000--

84,611,586

124,172,370

-

-

-

-

10,668

-

-

-

541

10,127

-

-

-

-

-

LKR ’000

Professional,
Arts,
Scientific & Entertainment
Technical& Recreation
Activities

1,413,748 32,937,545 16,156,919

3-

49,194

307,739

1,056,812

40,000----

LKR ’000

Information
Technology
andCommunication
Services--

1,072,374--

94,159414,243

563,972

-

-

-

-

-

LKR ’000

Education

2,774,925

16,696,735

79,119,947

11,128,744

977,343

-

-

-

-

-

LKR ’000

Consumption

2,806,214

16,696,735

82,299,181

89,720,260

261,217,538

26,040,046

3,083,815

33,743,602

7,040,421

28,580,676

LKR ’000

Total

-

-

-

-

84,645,423

125,672,370

522,282 110,697,694 452,739,928--

31,130416,676

74,476

-

-

-

-

-

LKR ’000

Health Care,
Social Services& Support
Services

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

275

-

-

Placements with banks

Derivative financial instruments

1,218,722- Consumer Lending--

Financial assets at amortised cost debt and other instruments

Financial assets measured atfair value through Other
comprehensive income--

107,524,049

13,474-

1,173,548

25,293,016

81,044,011

28,277----

LKR ’000--

39,234,598--

420,892

12,816,389

25,997,317

16,501----

LKR ’000--

6,663,071--

59,295

1,068,873

5,534,903

-

-

-

-

-

LKR ’000

Tourism Transportation& Storage

The above industries include lending to overseas entities amounting to LKR 42.7 Bn.

32,501,320

7,168

Net loans and receivables to othercustomers- Others-

13,650,790- Small Business Lending- Residential Mortgages

17,624,640- Corporate Lending

Financial assets at amortised cost- loans and receivables to othercustomers

1,627

-

Financial assets recognised throughprofit or loss- measured at fair
value

-

Balances with the Central Bank of
Sri Lanka

LKR ’000

Cash and cash equivalents

31 December 2022

Agriculture, Manufacturing
Forestry &Fishing--

26,603,149

268-

621,352

6,725,831

19,255,698

-

-

-

-

-

LKR ’000

Construction-

1,500,000

68,939,399

1,312

-

317,369

3,254,222

65,366,496

86,201----

LKR ’000

56,933-81,588,482

3,786

-

4,738,005

29,821,410

47,025,281

-

-

-

-

-

LKR ’000

Infrastructure Wholesale andDevelopment
Retail Trade

GROUP

-

-

1,034,899--

93,179223,965

717,755

40,000----

LKR ’000

Information
Technology
andCommunication
Services

45,397,557

133,547,886

54,426,450--

953,323

2,270,390

51,202,737

20,615,918

7,909,252

4,108,989

18,187,547

35,727,665

LKR ’000Financial
Services--

12,402,837--

1,856,867

2,672,985

7,872,985

-

-

-

-

-

LKR ’000

-

-

-

-

-

-

-

-

-

-

-

-

-

LKR ’000

Professional,
Arts,
Scientific & Entertainment
Technical& Recreation
Activities--

1,444,620--

349,418

984,242

110,960

-

-

-

-

-

LKR ’000

Education--

980,701--

97,869729,386

153,446

-

-

-

-

-

LKR ’000

Health Care,
Social Services& Support
Services--

112,576,249

2,318,738

18,419,780

82,217,151

8,389,439

1,231,141

-

-

-

-

-

LKR ’000

Consumption

45,454,490

135,047,886

545,919,824

2,344,746

18,419,780

94,116,991

107,900,937

323,137,370

20,788,523

7,909,252

4,108,989

18,187,547

35,727,665

LKR ’000

Total

276

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements-

1,427,296
710,051,791

Total Financial Assets

503,150,230
135,047,886
44,685,230
1,963,077
744,018,022

Financial assets at amortised cost - loans and receivables to other customers

Financial assets at amortised cost - debt and other instruments

Financial assets measured at fair value through other comprehensive income

Other financial assets

Total Financial Assets

19,318,483

Financial assets recognised through profit or loss - measured at fair value

7,576,341

-

-

-

-

-

-

-

4,108,989
7,909,252-

Placements with banks

7,576,341

9,647,328
18,187,547

Cash and cash equivalents

Balances with the Central Bank of Sri Lanka

Derivative financial instruments

LKR ’000Europe4,272,752

-

-

-

-

-

LKR ’000

31 December 2022

83,805,398

Financial assets measured at fair value through other comprehensive income

Other financial assets

Sri Lanka

419,384,652
125,672,370

Financial assets at amortised cost - loans and receivables to other customers

Financial assets at amortised cost - debt and other instruments

3,083,815
24,021,340

33,743,602

Placements with banks

Derivative financial instruments-

7,040,421

Financial assets recognised through profit or loss - measured at fair value

4,272,752

11,872,897

Cash and cash equivalents

Balances with the Central Bank of Sri Lanka-

LKR ’000Europe

LKR ’000

31 December 2023

Sri Lanka

5,220,673

-

-

-

-

-

-

-

-

5,220,673

LKR ’000

America

10,676,211

-

-

-

48,308----

10,627,903

LKR ’000

America

39,471,521

-

-

-

32,203,882

-

-

-

-

7,267,639

LKR ’000

Asia

BANK

24,712,277

-

-

-

24,119,009

-

-

-

-

593,268

LKR ’000

Asia

BANK

3,195,461---

3,168,635

-

-

-

-

26,826

LKR ’000

Middle East

3,451,498---

3,439,323

-

-

-

-

12,175

LKR ’000

Middle East

5,110,715

-

-

-

-

-

-

-

-

5,110,715

LKR ’000Australia- New
Zealand721,520

-

-

-

-

-

-

-

-

721,520

LKR ’000Australia- New
Zealand7,350,280---

7,350,280

-

-

-

-

-

LKR ’000

Africa5,669,169---

5,669,169

-

-

-

-

-

LKR ’000

Africa811,943,012

1,963,077

44,685,230

135,047,886

545,873,027

19,318,483

7,909,252

4,108,989

18,187,547

34,849,521

LKR ’000

Total

759,555,218

1,427,296

83,805,398

125,672,370

452,660,461

24,021,340

3,083,815

33,743,602

7,040,421

28,100,515

LKR ’000

Total

Country risk is the risk that an occurrence within a country could have an adverse effect on the Bank directly by impairing the value of the Bank or indirectly through an obligor’s ability to meet its obligations to
the Bank. Generally these occurrences relate but are not limited to: sovereign events such as defaults or restructuring, political events such as contested elections, restrictions on currency movements, non-market
currency convertibility, regional conflicts, economic contagion from other events such as sovereign default issues or regional turmoil, banking and currency crisis, and natural disasters.		

56.3.4.10 Country risk					Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

277-

7,040,421
33,743,602

Placements with banks-

4,272,752

Europe125,672,370
84,645,423
1,965,544
714,008,398

Sri Lanka

Financial assets at amortised cost - debt and other instruments

Financial assets measured at fair value through other comprehensive income

Other financial assets

Total Financial Assets

4,108,989

Placements with banks-

135,047,886
45,454,490
2,424,812
747,643,998

Financial assets at amortised cost - debt and other instruments

Financial assets measured at fair value through other comprehensive income

Other financial assets

Total Financial Assets

7,576,341---

20,788,523
503,197,027

Financial assets recognised through profit or loss - measured at fair value

Financial assets at amortised cost - loans and receivables to other customers-

7,909,252

Derivative financial instruments-

7,576,341

10,525,472
18,187,547

Cash and cash equivalents

LKR ’000--

LKR ’000

Balances with the Central Bank of Sri Lanka

31 December 2022-

419,464,119

Financial assets at amortised cost - loans and receivables to other customers-

3,083,815
26,040,046

Derivative financial instruments

Financial assets recognised through profit or loss - measured at fair value-

4,272,752

12,353,058

Cash and cash equivalents

Balances with the Central Bank of Sri Lanka

Europe
LKR ’000

Sri Lanka
LKR ’000

31 December 2023

56.3.4.10 Country risk (Contd.)

5,220,673

-

-

-

-

-

-

-

-

5,220,673

LKR ’000

America

10,676,211

-

-

-

48,308----

10,627,903

LKR ’000

America

GROUP

39,471,521

-

-

-

32,203,882

-

-

-

-

7,267,639

LKR ’000

Asia

GROUP

24,712,277

-

-

-

24,119,009

-

-

-

-

593,268

LKR ’000

Asia

3,195,461---

3,168,635

-

-

-

-

26,826

LKR ’000

Middle East

3,451,498---

3,439,323

-

-

-

-

12,175

LKR ’000

Middle East

5,110,715

-

-

-

-

-

-

-

-

5,110,715

LKR ’000Australia- New
Zealand721,520

-

-

-

-

-

-

-

-

721,520

LKR ’000Australia- New
Zealand7,350,280---

7,350,280

-

-

-

-

-

LKR ’000

Africa5,669,169---

5,669,169

-

-

-

-

-

LKR ’000

Africa815,568,988

2,424,812

45,454,490

135,047,886

545,919,824

20,788,523

7,909,252

4,108,989

18,187,547

35,727,665

LKR ’000

Total

763,511,825

1,965,544

84,645,423

125,672,370

452,739,928

26,040,046

3,083,815

33,743,602

7,040,421

28,580,676

LKR ’000

Total

56.3.4.11 Collateral and other credit enhancements
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering theacceptability and valuation of each type of collateral.
The main types of collateral obtained are as follows:y

For securities lending and reverse repurchase transactions, cash or securitiesy

For corporate and small business lending, charges over real estate properties, inventory and trade receivables and, in special circumstances,
government guaranteesy

For retail lending, mortgages over residential properties

The Bank also obtains guarantees from parent companies for loans to their subsidiaries. Management monitors the market value of collateral and will
request additional collateral in accordance with the underlying agreement.
In its normal course of business, the Bank does not physically repossess properties or other assets in its retail portfolio, but engages external agents torecover funds, generally at auctions, to settle outstanding debt. Any surplus funds are returned to the customers/ obligors. As a result of this practice, theresidential properties under legal repossession processes are not recorded in the Statement of Financial Position and not treated as non-current assets held
for sale.
The Bank’s Collateral policy is covered in the Bank’s Credit Policy Manual and is reviewed annually. There have been no significant changes to the collateralpolicy.
For its derivative portfolio, the Bank also makes use of master netting agreements and other arrangements not eligible for netting under LKAS 32 Financial
Instruments: Presentation with its counterparties. Such arrangements provide for single net settlement of all financial instruments covered by theagreements in the event of default on any one contract. Although, these master netting arrangements do not normally result in an offset of balance-sheet
assets and liabilities (as the conditions for offsetting under LKAS 32 may not apply), they, nevertheless, reduce the Bank’s exposure to credit risk, as shown in
the table on page 281.
Although master netting arrangements may significantly reduce credit risk, it should be noted that the credit risk is eliminated only to the extent ofamounts due to the same counterparty.
The tables on the following pages from 279 to 280 show the maximum exposure to credit risk by class of financial asset. They also show the total fair valueof collateral, any surplus collateral (the extent to which the fair value of collateral held is greater than the exposure to which it relates), and the net exposure
to credit risk.					

278National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

279

Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss- measured at fair value
Financial assets at amortised cost - loans and receivables to other customers- Corporate Lending- Small Business Lending- Consumer Lending- Residential Mortgages- Others
Net loans and receivables to other customers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive income

31 December 2022

Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss- measured at fair value
Financial assets at amortised cost - loans and receivables to other customers- Corporate Lending- Small Business Lending- Consumer Lending- Residential Mortgages- Others
Net loans and receivables to other customers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive income

Financial Assets

31 December 2023

Type of collateral or credit enhancement

56.3.4.11 Collateral and other credit enhancements (Contd.)

323,137,370
107,900,937
94,116,991
18,419,780
2,297,949
545,873,027
135,047,886
44,685,230

34,849,521
18,187,547
4,108,989
7,909,252
19,318,483

LKR ’000

35,626,004
26,688,048
37,421,058
99,735,110--

LKR ’000Cash

24,653,111
22,880,607
34,428,260
168,637
82,130,615-

261,217,538
89,720,260
82,299,181
16,696,735
2,726,748
452,660,461
125,672,370
83,805,398

Maximum
exposure tocredit risk-

LKR ’000

Cash

28,100,515
7,040,421
33,743,602
3,083,815
24,021,340

LKR ’000

Maximum
exposure tocredit risk

8,264,300
318,293
92,1798,674,771--

LKR ’000

Securities

7,077,800
120,000
34,1707,231,970--

LKR ’000

Securities

BANK

BANK

117,324,327
103,508,752
51,556,596
30,285,671
52,330302,727,676--

LKR ’000

Property

141,967,341
32,369,810
1,585,97841,08515,000175,979,214--

LKR ’000

Other(323,039,066)(174,845,450)(74,628,931)(20,583,467)(63,646)(593,160,560)-

211,101,075
81,622,967
8,908,404
200
301,632,646--

LKR ’000

3rd party/
Government
guarantees

116,327,340
120,019,683
38,212,567
19,219,104
129,876
293,908,571--

LKR ’000

Property

161,504,549
38,913,769
10,063,395
15,000210,496,712--

LKR ’000Other-

LKR ’000

SurplusCollateral(323,115,442)(181,836,063)(65,532,503)(95,774)(570,579,782)--

LKR ’000

SurplusCollateral

Fair value of collateral and credit enhancements held

207,361,284
87,152,505
7,806,772
87,28528,770302,436,616--

LKR ’000

3rd party/
Government
guarantees

Fair value of collateral and credit enhancements held

209,707,826
85,726,696
29,165,100
19,219,104
49,302
343,868,028--

LKR ’000

Total
Collateral

175,344,798
71,186,224
20,782,845
9,999,210
32,454
277,345,531--

LKR ’000

Total
Collateral

113,429,544
22,174,240
64,951,892
2,248,647
202,804,323
135,047,886
44,685,230

34,849,521
18,187,547
4,108,989
7,909,252
19,318,483

LKR ’000

Net
Exposure

85,872,740
18,534,036
61,516,336
6,697,525
2,694,294
175,314,931
125,672,370
83,805,398

28,100,515
7,040,421
33,743,602
3,083,815
24,021,340

LKR ’000

Net
Exposure

16,971,678
10,691,124
4,969,858
799,324
255,952
33,687,937
20,503,290
10,344-

LKR ’000

AssociatedECLs

21,739,472
12,345,981
5,289,741
1,072,672
2,960,058
43,407,922
25,791,482
10,344-

LKR ’000

Associated
ECLs

280

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements
Cash

Maximum
exposure tocredit risk

35,727,665
18,187,547
4,108,989
7,909,252
20,788,523
323,137,370
107,900,937
94,116,991
18,419,780
2,344,746
545,919,824
135,047,886
45,454,490- Corporate Lending- Small Business Lending- Consumer Lending- Residential Mortgages- Others
Net loans and receivables to other customers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive income

35,626,004
26,688,048
37,421,058
99,735,110--

LKR ’000

24,653,111
22,880,607
34,428,260
168,637
82,130,615-

261,217,538
89,720,260
82,299,181
16,696,735
2,806,215
452,739,928
125,672,370
84,645,423

LKR ’000-

LKR ’000

Cash

28,580,676
7,040,421
33,743,602
3,083,815
26,040,046

LKR ’000

Maximum
exposure tocredit risk

Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss- measured at fair value
Financial assets at amortised cost - loans and receivables to other customers

31 December 2022

Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative financial instruments
Financial assets recognised through profit or loss- measured at fair value
Financial assets at amortised cost - loans and receivables to other customers- Corporate Lending- Small Business Lending- Consumer Lending- Residential Mortgages- Others
Net loans and receivables to other customers
Financial assets at amortised cost - debt and other instruments
Financial assets measured at fair value through other comprehensive income

Financial Assets

31 December 2023

Type of collateral or credit enhancement

56.3.4.11 Collateral and other credit enhancements (Contd.)

8,264,300
318,293
92,1798,674,771--

LKR ’000

Securities

7,077,800
120,000
34,1707,231,970--

LKR ’000

Securities

GROUP

-

LKR ’000

Other

141,967,341
32,369,810
1,585,97841,08515,000175,979,214
-

GROUP

117,324,327
103,508,752
51,556,596
30,285,671
52,330302,727,676--

LKR ’000

Property(323,039,066)(174,845,450)(74,628,931)(20,583,467)(63,646)(593,160,560)-

211,101,075
81,622,967
8,908,404
200
301,632,646--

LKR ’000

3rd party/
Government
guarantees

116,327,340
120,019,683
38,212,567
19,219,104
129,876
293,908,571--

LKR ’000

Property

161,504,549
38,913,769
10,063,395
15,000210,496,713--

LKR ’000Other-

LKR ’000

SurplusCollateral(323,115,442)(181,836,063)(65,532,503)(95,774)(570,579,783)--

LKR ’000

SurplusCollateral

Fair value of collateral and credit enhancements held

207,361,284
87,152,505
7,806,772
87,28528,770302,436,616--

LKR ’000

3rd party/
Government
guarantees

Fair value of collateral and credit enhancements held

209,707,826
85,726,696
29,165,100
19,219,104
49,302
343,868,028--

LKR ’000

Total
Collateral

175,344,798
71,186,224
20,782,845
9,999,210
32,454
277,345,531--

LKR ’000

Total
Collateral

113,429,544
22,174,240
64,951,892
2,295,444
202,851,120
135,047,886
45,454,490

35,727,665
18,187,547
4,108,989
7,909,252
20,788,523

LKR ’000

Net
Exposure

85,872,740
18,534,036
61,516,336
6,697,525
2,773,761
175,394,398
125,672,370
84,645,423

28,580,676
7,040,421
33,743,602
3,083,815
26,040,046

LKR ’000

Net
Exposure

16,971,678
10,691,124
4,969,858
799,324
255,952
33,687,937
20,503,290
10,344-

LKR ’000

AssociatedECLs

21,739,472
12,345,981
5,289,741
1,072,672
2,960,058
43,407,922
25,791,482
10,344-

LKR ’000

AssociatedECLs

56.3.4.12 Commitments and contingencies
The table below shows maximum credit risk exposure of the Group on commitments and contingencies.
The maximum exposure to credit risk relating to financial commitments and contingencies is the maximum amount the Group has to pay if thecommitments and contingencies are called upon.
BANK

Guarantees and bonds
Shipping guarantees
Advance documents endorsed
Letters of credit
Acceptances
Undrawn overdrafts and credit cards
Commitments
Forward exchange contracts
Total

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

45,929,326
8,543,508
2,515,114
9,283,417
6,513,947
47,073,246
115,499,420
42,607,441
277,965,419

65,946,916
5,180,578
2,069,245
7,745,121
6,388,780
41,241,837
137,297,425
27,739,854
293,609,756

45,817,214
8,543,508
2,515,114
9,282,715
6,513,947
46,541,747
116,305,360
42,607,441
278,127,046

65,800,964
5,180,578
2,069,245
7,745,121
6,388,780
41,241,837
138,210,327
27,739,855
294,376,707

56.3.4.13 Offsetting of financial assets & liabilities
Financial assets and financial liabilities are offset and the net amount is presented in the Statement of Financial Position when the Group have a right to set
off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets & liabilities that are not subject to offsetting
Amounts that do not qualify for offsetting in the Statements of Financial Position include netting arrangements that only permit outstanding transactions
with the same counterparty to be offset in an event of default or occurrence of the predetermined events. Such netting arrangements include repurchaseagreements and other similar secured lending and borrowing arrangements.
The amount of the financial collateral received or pledged subject to netting arrangements but not qualified for offsetting are disclosed below.
2023

2022

Gross
Amounts

AmountSubject to
Netting but
do not qualify
for Offsetting

Net
AmountGross
Amounts

AmountSubject to
Netting but
do not qualify
for Offsetting

Net
Amount

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000Financial Assets
Financial assets at amortised cost- loans and receivables to other customers

108,044,080

82,130,615

25,913,466

141,388,469

99,735,010

41,653,459

Financial Liabilities
Due to debt securities holders

15,632,569

16,851,452(1,218,883)

130,541

160,802(30,261)

56.3.4.14 Sensitivity analysis of impairment allowance
The following table depicts the sensitivity of the impairment allowance to feasible changes in various factors used in assessing the Expected Credit Losses
including PDs, LGDs and forward looking macro economic information etc.					BANK & GROUP
Sensitivity effect on impairment
allowance increase
2023

2022

Changed criteria

Changed factor

LKR ’000

LKR ’000

Property realisation timing of facilities under individual
impairment assessment

Delay by 1 year

1,098,380

1,403,646

Increase by 2%
Virtually closed points: decrease by 1 year (where require)
Increase by 1%
Worst case increase of 5%
Qualitative scores increase by 1
Increase of 5% (where applicable)

322,232
2,201,417
75,94615,806585,861
200,764

231,307
1,235,547
62,751
19,784
361,057
82,354

Loss given default (LGD)
Probability of default (PD) in each stage
Economic Factor Adjustment
Credit conversion factor (CCF)

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

281

56.4

Market Risk
Market Risk management function is attached to the Risk Management Division and operates with in a well-defined policy framework which ensures thatthe Bank operates with in the pre-defined risk appetite of the Bank through portfolio analysis, stress testing and pro-active exposure monitoring. Guided
by these policies and regulatory directions; Bank has set internal prudential limits, taking in to account the size of the statement of financial position ,structure and the business model; thereby business units optimise the risk and reward relationship without exposing the Bank to unexpected losses. The
responsibility to manage the Market Risk primarily rests with the Treasury Unit, which is responsible for ensuring that the Bank’s exposures are managed
within the Board approved risk appetite and necessary actions are taken in the event of exceptional market conditions.
Market Risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates,
foreign exchange rates, equity and commodity prices. The Bank’s Market Risk exposures are classified into trading and banking book and are managed
separately. Sensitivity and Scenario analysis of portfolios are carried out together with mark-to-market valuations and duration analysis that reflects theportfolio sensitivity to the market volatility. Further the bank analyse the Value at Risk (VaR) measurements on the forex and fixed income securities toassess any potential loss which is discussed in detail in Market Risk section under the Risk Management. Whilst the financial assets measured at fair value
through profit or loss (FVPL) are fair valued through the Statement of Profit or Loss; financial assets measured at fair value through other comprehensive
income (FVOCI) are fair valued through equity where realised capital gains/losses are recognised in the Statement of Profit or Loss.
During the year the market interest rates continue to adjust downwards and a further reduction is expected in response to the policy rate reduction in 2023.
Relaxed monetary policy led to decrease in SDF & SLF by 5.5% each against end of 2022. A notable reduction is observed in yields on government securities
during the year. The decline in yields on government securities were contributed by the announcement of the DDO, as the risk premium associated withthe uncertainties largely dissipated.
The liquidity conditions in the domestic forex market improved during last year favourable development of increased forex inflows along with subdued
demand for imports in the country. During the year ending December 2023, an appreciation of 12% against the USD was recorded. The growth in deposits
continued to surpass the growth in loans in 2023, caused the Bank to expand its Government security portfolio benefitted in easing the Net Interest Marginpressure.
The Bank closely monitored the behaviour of market sentiments and proactive re-pricing measures were adopted to mitigate any adverse impact to the
Bank’s Statement of Financial Position and were able to maintain the exposures within the risk appetite. Bank made every effort to optimally balance theneed of mitigating the Market Risk elements with the level of risk that Bank is willing to accept in achieving its organisational goals.

56.4 (a) Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates would affect future cash flows or the fair values of financial instruments. The Board
has established limits on trading and banking books of the Bank. The Bank’s policy is to monitor positions on a daily basis and hedging strategies are used
to ensure positions are maintained within the established limits.

56.4 (a) (i) Interest rate risk in the trading book
The following table demonstrates the sensitivity to a reasonably possible change in fixed income securities (Treasury Bills & Bonds), with all other variables
held constant on the Bank’s Statement of Profit or Loss in the year 2023

Sensitivity of the Financial Assets Measured at Fair Value through Profit or Loss - Sri Lanka Government Securities
Portfolio size

Increase/ Decreasein basis Points

Sensitivity of Profit
or Loss Bank
LKR ’000

Sensitivity of Profit
or Loss GroupLKR ’000

LKR ’000
31 December 2023
Financial assets measured at fair value through profit or loss

24,543,795+100/(100)(138,824)/141,296(138,824)/141,296

31 December 2022
Financial assets measured at fair value through profit or loss

21,329,524+100/(100)(76,714)/77,156(76,714)/77,156

Fair value of the financial assets measured at fair value through other comprehensive income is recognised in the other comprehensive income (OCI) until
the asset is derecognised in which case the price sensitivity does not have a direct impact to the Bank’s Statement of Profit or Loss.

Sensitivity of the Financial Assets Measured at Fair Value though Other Comprehensive Income - Sri Lanka Government Securities

282

Portfolio sizeBank
LKR ’000

Portfolio sizeGroup
LKR ’000

Increase/ Decreasein basis Points

Sensitivity on
Bank
LKR ’000

Sensitivity on
Group
LKR ’000

31 December 2023
Financial assets measured at fair value
though other comprehensive income

80,541,120

81,202,146+100/(100)(858,326)/884,159(869,732)/896,070

31 December 2022
Financial assets measured at fair value
though other comprehensive income

48,078,117

48,798,117+100/(100)(401,218)/413,866(401,730)/414,380

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

56.4 (a) (ii) Interest rate risk in the banking book
The table below analyses the Bank’s and the Group’s interest rate risk exposure on financial assets and liabilities as at 31 December 2023.
The sensitivity of the Statement of Profit or Loss is the effect of the assumed changes in interest rates on the profit or loss for a year, based on the interest
rate sensitive assets and liabilities as at 31 December 2023.
BANK

31 December 2023
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- Debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total Financial Assets
Financial Liabilities
Due to Banks
Financial Liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers
Debt securities issued
Other financial liabilities
Total Financial Liabilities
Total Interest Sensitivity Gap

On Demand

Less than 3months

3 - 12months

1-5
yearsOver 5years

Non Interest
Bearing

Carrying
Amount

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

6,725,602

27,018,000

-

-

-

28,100,515
7,040,421-

28,100,515
7,040,421
33,743,602

24,021,340

-

-

-

-

-

24,021,340

99,235,296

112,571,102

78,408,020

128,757,218

33,688,826-

452,660,461

9,324,965

28,347,337

22,992,237

40,454,555

24,553,277-

125,672,370

82,668,909
1,427,296
223,403,407

167,936,439

101,400,256

169,211,774

58,242,103

1,136,489
36,277,425

83,805,398
1,427,296
756,471,404

579,195

7,100,000

-

-

-

-

7,679,195

89,995,375
46,992
16,579,302
506,223
107,707,086
115,696,321

182,700,412
15,560,897
23,622
6,049,327
211,434,258(43,497,820)

255,022,181
20,680657,819
430,515
256,131,194(154,730,938)

40,968,102
4,000
4,398,066
23,339,547
1,270,472
69,980,187
99,231,586

2,514,716
2,977,732
184,011
5,676,459
52,565,643

44,443,212
44,443,212(8,165,787)

615,643,999
15,632,569
24,636,540
29,388,875
2,391,221
695,372,398
61,099,006

On Demand

Less than 3months

3 - 12months

1-5
yearsOver 5years

Non Interest
Bearing

Carrying
Amount

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

108,989

4,000,000---

34,849,521
18,187,547-

34,849,521
18,187,547
4,108,989

19,318,483

-

-

-

-

-

19,318,483

138,909,612

120,338,240

85,999,757

160,843,996

39,781,421-

545,873,027

7,227,664

40,480,771

39,644,609

26,782,319

20,912,524-

135,047,886

43,889,228
1,963,077
211,417,053

164,819,012

125,644,366

187,626,315

60,693,945

796,00253,833,070

44,685,230
1,963,077
804,033,760

725,657

15,026,000

4,500,000---

20,251,657

96,246,429
3,895
20,389,151
738,224
1,711,815
99,673,321
111,743,732

213,038,422
120,477
849,181
229,034,080(64,215,068)

286,483,741
6,170
3,836,390
3,637,980
240,211
300,949,886(175,305,520)

31,497,501
4,179,057
23,487,427
747,959
73,152,702
114,473,613

2,346,516
3,118,486
116,000
258,172
10,494,872
50,199,072

42,701,413
42,701,413
11,131,657

672,314,023
130,541
32,372,265
27,979,631
2,958,157
756,006,274
48,027,487

BANK

31 December 2022
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- Debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total Financial Assets
Financial Liabilities
Due to Banks
Financial Liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers
Debt securities issued
Other financial liabilities
Total Financial Liabilities
Total Interest Sensitivity Gap

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

283

56.4 (a) (ii) Interest rate risk in the banking book (Contd.)
GROUP

31 December 2023
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- Debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total Financial Assets
Financial Liabilities
Due to Banks
Financial Liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers
Debt securities issued
Other financial liabilities
Total Financial Liabilities
Total Interest Sensitivity Gap

On Demand

Less than 3months

3 - 12months

1-5
yearsOver 5years

Non Interest
Bearing

Carrying
Amount

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

6,725,602

27,018,000

-

-

-

28,580,676
7,040,421-

28,580,676
7,040,421
33,743,602

26,040,046

-

-

-

-

-

26,040,046

99,234,006

112,576,522

78,422,948

128,802,601

33,703,852-

452,739,929

9,324,965

28,347,337

22,992,237

40,454,555

24,553,277-

125,672,370

83,508,934
1,965,544
226,799,096

167,941,858

101,415,185

169,257,157

58,257,129

1,136,489
36,757,586

84,645,423
1,965,544
760,428,011

579,195

7,100,000

-

-

-

-

7,679,195

89,826,075
46,992
16,579,302
390,251
107,421,815
119,377,282

182,463,109
15,560,897
23,622
6,049,327
211,196,955(43,255,096)

255,022,181
20,680657,819
506,119
256,206,798(154,791,613)

40,968,102
4,000
4,398,066
23,339,547
1,512,405
70,222,120
99,035,036

2,514,716
2,977,732
184,011
5,676,459
52,580,669

44,438,286
44,438,286(7,680,700)

615,232,469
15,632,569
24,636,539
29,388,875
2,592,786
695,162,434
65,265,577

GROUP

31 December 2022
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- Debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total Financial Assets
Financial Liabilities
Due to Banks
Financial Liabilities at amortised cost
Due to depositors
Due to debt securities holders
Due to other borrowers
Debt securities issued
Other financial liabilities
Total Financial Liabilities
Total Interest Sensitivity Gap

284

National Development Bank PLC

On Demand

Less than 3months

3 - 12months

1-5
yearsOver 5years

Non Interest
Bearing

Carrying
Amount

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

108,989

4,000,000---

35,727,665
18,187,547-

35,727,665
18,187,547
4,108,989

20,788,523

-

-

-

-

-

20,788,523

138,908,176

120,342,845

86,011,457

160,873,138

39,784,207-

545,919,824

7,227,664

40,480,771

39,644,609

26,782,319

20,912,524-

135,047,886

44,658,488
2,424,812
214,116,652

164,823,616

125,656,066

187,655,457

60,696,731

796,00254,711,214

45,454,490
2,424,812
807,659,736

725,657

15,026,000

4,547,187---

20,298,844

95,974,513
3,895
20,389,151
738,224
1,777,780
99,467,370
114,649,283

212,709,653
120,477
849,181
228,705,311(63,881,695)

286,483,741
6,170
3,836,390
3,637,980
289,095
301,045,957(175,389,891)

31,497,501
4,179,057
23,487,427
948,864
73,353,607
114,301,850

2,346,516
3,118,486
116,000
258,172
10,494,872
50,201,859

42,701,413
42,701,413
12,009,801

671,713,338
130,541
32,372,265
27,979,631
3,273,911
755,768,530
51,891,207

Annual Report 2023

Notes to the Financial Statements

56.4 (b) Mark to market valuation
The Sri Lanka Government securities portfolio classified as financial assets recognised at fair value through profit or loss, financial assets measured at fairvalue through other comprehensive income and the foreign exchange positions are subject to mark to market valuation on a daily basis to derive theeconomic value of positions.
Mark to Market results are being monitored against the Board approved stop-loss limits on a daily basis, reviewed by ALCO on a monthly basis and at IRMC
on a quarterly basis to assess the portfolio performance and investment decisions.

56.4 (c) Foreign exchange risk
Foreign exchange risk is the risk that the value of a financial instrument denominated in foreign currency will fluctuate due to changes in exchange rates
other than the functional currency in which they are measured. Board approved limits are in place on currency positions and are monitored on a daily basisand hedging strategies are used to ensure positions are maintained within established limits.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument and if so, thenature of the item being hedged. The Bank only has hedges of highly probable future cash flows attributable to recognised asset or liability or a forecast
transaction (cash flow hedge). Refer note 24- Derivative financial instrument.
The table below indicates the currencies to which the bank had significant exposure as at 31 December 2023 and 31 December 2022 on its currency
exposures. The analysis calculates the sensitivity of each currency position to the increase in exchange rate against LKR (functional currency) with all othervariables held constant in the Statement of Profit or Loss and equity. A negative amount in the table reflects a potential net reduction in the Statement ofProfit or Loss and equity, while a positive amount reflects a net potential increase depending on the side of the currency position.
An equivalent decrease in below currencies against LKR would have resulted in an equivalent but opposite impact.
2023
Currency

2022

Spot rate
shock

Effect on
profitEffect on
equityEffect on
profitEffect on
equity%

LKR ’000

LKR ’000

LKR ’000

LKR ’000

USD

2.50

16,23816,238(33,268)(33,268)

GBP

2.50

172

172

(124)

(124)

EUR

2.50

(12,321)(12,321)(2,770)(2,770)JPY

2.50(1,541)(1,541)

(179)

(179)

AUD

2.50

(131)

(131)

(231)

(231)

With regard to the Group companies, the investment in the Emerald Fund by NDB Capital Holdings Limited would result a potential net reduction or
increase of LKR 18 Mn to a similar sensitivity depending on the movement of the future exchange rate.

56.4 (d) Price risk
Equity price risk
Equity price risk is the risk that the fair value of financial assets measured at fair value through profit or loss and financial assets measured at fairvalue through other comprehensive income, decreases as a result of changes in the level of equity indices and individual stocks. The following tabledemonstrates the sensitivity to a reasonably possible change in quoted equity indices, with all other variables held constant of the Bank’s and the Group’s
Statement of Profit or Loss.
2023
Magnitude of shock and the fall in value of equities - LKR ‘000
EntityPortfolio
value

Mild
5%

Moderate10%

Severe15%Bank1,136,487

56,824

113,649

170,473Group

1,567,039

78,352

156,704

235,0562022
Magnitude of shock and the fall in value of equities - LKR ‘000
EntityPortfolio
value

Mild
5%

Bank

779,433

Group

964,027

Notes to the Financial Statements

Moderate10%

Severe15%

38,972

77,943116,915

51,119102,239

153,358

National Development Bank PLC

Annual Report 2023

285

56.4 (d) Price risk (Contd.)
Sensitivity of the unit trust investments
The Bank and the Group could have the following sensitivity due to an adverse impact in the unit trust prices. The impact is monitored under three
scenarios mild, moderate and severe conditions.
2023
Magnitude of shock and the fall in value of units - LKR ‘000
EntityPortfolio
value

Mild
5%

Moderate10%

Severe
15%

Bank

-

-

-

-

Group

760,23138,012

76,023

114,035

2022
Magnitude of shock and the fall in value of units - LKR ‘000
EntityPortfolio
value

Mild
5%

Moderate10%

Severe
15%

Bank

-

-

-

-

Group

351,215

17,54535,091

52,63656.4 (e) Commodity price risk
The Bank did not hold a commodity trading position as at 31 December 2023, hence the Bank was insensitive for commodity price risk.

56.4 (f) Liquidity risk
Liquidity Risk is defined as the risk that the Bank would encounter difficulty in meeting its obligations associated with financial liabilities that are settled bydelivering cash or another financial asset. Liquidity Risk arises due to the Bank’s inability to meet its payment obligations when they fall due under bothnormal and stress circumstances.
The Bank has set forth policies on Liquidity Risk Management and liquidity contingency funding plan approved by the Board for effective managementof liquidity. In addition to the regulatory limits on liquidity, the Bank’s internal prudential limits framework ensures that the exposures are managed andmonitored at prudent levels. A recovery plan was developed to map the process of recovering during a liquidity crisis assessing Bank’s ability to recover
during stressed situations.
In accordance with the Bank’s risk management policy, the liquidity positions are assessed /stressed and managed under a variety of scenarios, giving
due consideration to stress factors relating to both market and Bank. This ensures the maintenance of liquidity ratios at prudential levels. The Bank is inpossession of a reciprocal liquidity contingency funding agreement signed up with an identified licenced commercial bank to deal in crisis situations.
Notwithstanding the stressed macro-economic situations prevailed in the country the Bank managed to maintain the liquidity levels at prudent levels due
to lower economic activities and the systemic implications. Bank maintained a foreign currency liquid asset ratio of 36.6% as at 31 December 2023, which is aquite comfortable level. Across the banking industry, slow credit growth caused banks to have excess liquidity situation challenging in generating optimum
returns. Bank accepted USD denominated Sri Lanka Development Bond (SLDB) maturities in LKR Bonds creating stress negative NOP which was wellmanaged within the short period of temporary enhancements given by CBSL.
Bank maintained healthy liquidity position where LCR & NSFR ratios stood well over the thresholds at 228.58% and 142.26% positions as at the year end
indicating short term & long term stability of funding sources compared to Bank’s obligations.
The table below summarises the maturity profile of the undiscounted cash flows of the financial assets and financial liabilities of the Bank and Group as at 31
December 2023 and 31 December 2022.

286

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

56.4 (f )(i) Contractual maturities of undiscounted cash flows of financial assets and liabilities
The bank managed its net funding requirements effectively with deposit rollover rates above 80% in local currency and foreign currency and overall surplus
liquidity position
BANK

31 December 2023
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Less: Restricted balance
Placements with banks
Derivative Financial Instruments
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total undiscounted financial assets
Financial Liabilities
Due to Banks
Derivative Financial Instruments
Financial Liabilities at amortised cost
due to depositors
due to debt securities holders
due to other borrowers
Debt securities issued
Other financial liabilities
Total undiscounted financial liabilities
Net undiscounted financial assets and liabilities

On
DemandTrading
Derivatives

Less than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

28,100,515
7,040,421(7,040,421)-

3,083,815

27,421,729-

6,681,780---

28,100,515
7,040,421(7,040,421)
34,103,508
3,083,815

24,021,340

-

-

-

-

-

24,021,340

97,074,602-

117,585,635

89,382,743

179,604,730

61,231,124

544,878,834

353,873-

29,976,616

28,382,781

63,797,043

36,864,797

159,375,109

83,805,398
1,427,296
234,783,024

3,083,815

174,983,980

124,447,304

243,401,773

98,095,921

83,805,398
1,427,296
878,795,815

555,792-

93,361

7,134,129
-

-

-

-

7,689,921
93,361

134,440,064
16,151,349
506,223
151,653,428
83,129,596

93,3612,990,454

191,581,230
15,609,283
421,397
6,307,311
221,053,350(46,069,370)

282,020,739
23,231
1,952,192
2,250,189
430,515
286,676,864(162,229,561)

55,409,641
5,600
6,996,625
29,593,091
1,270,472
93,275,429
150,126,344

3,405,146
3,181,805
184,0116,770,962
91,324,959

666,856,819
15,638,113
28,703,369
38,150,590
2,391,221
759,523,395
119,272,420

On
DemandTrading
Derivatives

Less than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

34,849,521
18,187,547(18,187,547)-

7,909,252

4,190,067
-

-

-

-

34,849,521
18,187,547(18,187,547)
4,190,067
7,909,252

19,318,483

-

-

-

-

-

19,318,483

134,717,216-

126,847,275

101,484,627

226,061,726

76,935,170

666,046,014

6,678,776-

43,275,405

48,374,583

48,409,520

37,023,422

183,761,706

44,685,230
1,963,077
242,212,304

7,909,252

174,312,748

149,859,210

274,471,246

113,958,592

44,685,230
1,963,077
962,723,351

98,666-

96,246

15,764,045-

5,827,361---

21,690,072
96,246

138,947,835
21,507,370
1,711,815
162,265,686
79,946,618

96,246
7,813,006

217,688,224
124,867
962,061
685,602235,224,799(60,912,051)

317,458,926
7,126
4,533,707
6,300,528
240,211334,367,859(184,508,649)

43,337,962
7,208,961
29,335,622
747,959
80,630,504
193,840,742

3,135,211
4,425,979
129,924
258,172
7,949,286
106,009,306

720,568,158
131,993
38,638,078
36,451,676
2,958,157
820,534,380
142,188,971

BANK

31 December 2022
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Less: Restricted balance
Placements with banks
Derivative Financial Instruments
Financial assets recognised through profit or loss measured at fair value
Financial assets at amortised cost - loans and receivables
to other customers
Financial assets at amortised cost - debt and other
instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total undiscounted financial assets
Financial Liabilities
Due to Banks
Derivative Financial Instruments
Financial Liabilities at amortised cost
due to depositors
due to debt securities holders
due to other borrowers
Debt securities issued
Other financial liabilities
Total undiscounted financial liabilities
Net undiscounted financial assets and liabilities

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

287

56.4 (f )(i) Contractual maturities of undiscounted cash flows of financial assets and liabilities (Contd.)
GROUP

31 December 2023
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Less: Restricted Balance
Placements with banks
Derivative Financial Instruments
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total undiscounted financial assets
Financial Liabilities
Due to Banks
Derivative Financial Instruments
Financial Liabilities at amortised cost
due to depositors
due to debt securities holders
due to other borrowers
Debt securities issued
Other financial liabilities
Total undiscounted financial liabilities
Net undiscounted financial assets and liabilities

On
DemandTrading
Derivatives

Less than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

28,580,676
7,040,421(7,040,421)-

3,083,815

27,421,729-

6,681,780---

28,580,676
7,040,421(7,040,421)
34,103,508
3,083,815

26,040,046

-

-

-

-

-

26,040,046

97,073,312-

117,591,070

89,397,797

179,652,339

61,247,870

544,962,389

353,873-

29,976,616

28,382,781

63,797,043

36,864,797

159,375,109

84,645,423
1,965,544
238,658,874

3,083,815

174,989,415

124,462,358

243,449,382

98,112,667

84,645,423
1,965,544
882,756,510

555,792-

93,361

7,134,129
-

-

-

-

7,689,921
93,361

134,265,838
16,151,349
390,251
151,363,230
87,295,644

93,3612,990,454

191,343,860
15,609,283
421,397
6,307,311
220,815,980(45,826,565)

282,020,739
23,231
1,952,192
2,250,189
506,119
286,752,469(162,290,111)

55,409,641
5,600
6,996,625
29,593,091
1,512,405
93,517,362
149,932,020

3,405,146
3,181,805
184,0116,770,962
91,341,705

666,445,224
15,638,113
28,703,369
38,150,590
2,592,786
759,313,365
123,443,146

On
DemandTrading
Derivatives

Less than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

35,727,665
18,187,547(18,187,547)-

7,909,252

4,190,067
-

-

-

-

35,727,665
18,187,547(18,187,547)
4,190,067
7,909,252

20,788,523

-

-

-

-

-

20,788,523

134,715,781-

126,851,903

101,496,497

226,093,346

76,938,191

666,095,717

6,678,776-

43,275,404

48,374,583

48,409,520

37,023,422

183,761,706

45,454,490
2,424,812
245,790,047

7,909,252

174,317,374

149,871,080

274,502,867

113,961,613

45,454,490
2,424,812
966,352,233

98,666-

96,246

15,764,045-

5,827,361---

21,690,072
96,246

138,675,918
21,507,370
1,777,780
162,059,734
83,730,313

96,246
7,813,006

217,359,242
124,867
962,061
685,602
234,895,817(60,578,443)

317,458,926
7,126
4,533,707
6,300,528
289,095
334,416,743(184,545,663)

43,337,962
7,208,961
29,335,622
948,864
80,831,410
193,671,457

3,135,211
4,425,979
129,924
258,172
7,949,285
106,012,327

719,967,259
131,993
38,638,078
36,451,675
3,273,911
820,249,234
146,102,999

GROUP

31 December 2022
Financial Assets
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Less: Restricted Balance
Placements with banks
Derivative Financial Instruments
Financial assets recognised through profit or loss
- measured at fair value
Financial assets at amortised cost- loans and receivables to other customers
Financial assets at amortised cost
- debt and other instruments
Financial assets measured at fair value through othercomprehensive income
Other financial assets
Total undiscounted financial assets
Financial Liabilities
Due to Banks
Derivative Financial Instruments
Financial Liabilities at amortised cost
due to depositors
due to debt securities holders
due to other borrowers
Debt securities issued
Other financial liabilities
Total undiscounted financial liabilities
Net undiscounted financial assets and liabilities

288

National Development Bank PLC

Annual Report 2023

Notes to the Financial Statements

56.4 (f )(ii) Contractual maturities for commitments and contingencies
The Bank’s contingencies portfolio decreased by 5% during 2023 and stood at LKR 278 Bn as at 31 December 2023.
The table below summarises the maturity profile of the commitments and contingencies for the Bank and Group as at 31 December 2023 and 31 December
2022.
BANK

31 December 2023
Undisbursed financing commitments

On
DemandLess than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

162,572,666

-

-

-

-

162,572,666

Guarantees and performance bond-

14,703,544

25,504,133

5,682,178

11,098,094

56,987,948

Documentary credits-

8,590,013

693,403--9,283,417

Forward exchange contracts-

32,121,635

2,846,965

6,778,080

860,760

42,607,439

Acceptance
Total

-

6,189,157

324,790--

6,513,947

162,572,666

61,604,349

29,369,291

12,460,258

11,958,854

277,965,418

On
DemandLess than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

BANK

31 December 2022
Undisbursed financing commitments

178,539,262

-

-

-

-

178,539,262

Guarantees and performance bond-

16,600,209

40,029,321

9,277,914

7,289,294

73,196,738

Documentary credits-

6,558,094

1,164,595

22,433-

7,745,122

Forward exchange contracts-

17,484,366

952,127

6,730,080

2,573,280

27,739,853

Acceptance
Total

-

5,724,709

664,072--

6,388,781

178,539,262

46,367,378

42,810,115

16,030,427

9,862,574

293,609,756

GROUP

31 December 2023
Undisbursed financing commitments

On
DemandLess than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

162,041,166--

805,941-

162,847,107

Guarantees and performance bond-

14,591,432

25,504,133

5,682,178

11,098,094

56,875,836

Documentary credits-

8,589,311

693,403--9,282,715

Forward exchange contracts-

32,121,635

2,846,965

6,778,080

860,760

42,607,439

Acceptance-

6,189,157

324,790--

6,513,947

162,041,166

61,491,535

29,369,291

13,266,199

11,958,854

278,127,045

On
DemandLess than 3months

3 - 12months

1-5
yearsOver 5
years

Total

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Total

GROUP

31 December 2022
Undisbursed financing commitments

179,450,161

-

-

-

-

179,450,161

Guarantees and performance bond-

16,556,260

40,029,321

9,177,914

7,289,294

73,052,789

Documentary credits-

6,558,094

1,164,595

22,433-

7,745,122

Forward exchange contracts-

17,484,366

952,127

6,730,080

2,573,280

27,739,853

Acceptance-

5,724,709

664,072--

6,388,782

179,450,161

46,323,429

42,810,115

15,930,427

9,862,574

294,376,707

Total

Notes to the Financial Statements

National Development Bank PLC

Annual Report 2023

289

56.5

Capital Management
Managing capital is a key focus area in the NDB Group’s strategic plan. All large credit proposals are evaluated with the required capital charge and lending
decisions are taken on the basis of sufficient return on capital. Even the expansion projects in terms of property expansions and software purchases areevaluated against sufficient return of capital. The Group always strives to maintain a relatively higher level of capital to support the growth in business
operations, by maintaining an effective balance between dividend distributions and retention of profits.

56.5.2 Regulatory capital - BANK
Actual2023

Required2023

Actual2022

Required2022

LKR '000

LKR '000

LKR '000

LKR '000

Common Equity Tier 1 Capital

54,699,450

32,803,377

49,187,072

36,883,497

Tier 1 Capital

54,699,450

39,832,672

49,187,072

44,787,103

Tier 2 Capital.

19,824,151

18,744,787

21,154,847

21,076,284

Total Capital

74,523,602

58,577,459

70,341,919

65,863,387

Total Risk Weighted Assets

468,619,668-

526,907,094-

Common Equity Tier 1 Capital Ratio %11.67%

7.0%

9.34%

7.0%

Tier 1 Capital Ratio %11.67%

8.5%

9.34%

8.5%

Total Capital Ratio %15.90%

12.5%

13.35%

12.5%

The detailed capital adequacy computations are given under Risk Management on pages 337 to 366.

290

National Development Bank PLC

Annual Report 2023

Notes to the Financial StatementsCompliance with Disclosure Requirements of the Central Bank of Sri Lanka
COMPLIANCE WITH THE DISCLOSURE REQUIREMENTS SPECIFIED BY THE CENTRAL BANK OF SRI LANKA FOR PREPARATION OF ANNUAL FINANCIAL STATEMENTS OF
LICENSED COMMERCIAL BANKS
1. INFORMATION ABOUT THE SIGNIFICANCE OF FINANCIAL INSTRUMENTS FOR FINANCIAL POSITION AND PERFORMANCE		
1.1

Statement of Financial Position

Reference			1.1.1Disclosures on categories of financial assets and financial liabilities

Note No 20 to the Financial Statements

1.1.2

Other disclosures(i) Special disclosures about the financial assets and financial liabilities designated to be measured atfair value through profit or loss, including disclosures about credit risk and market risk, changes infair values attributable to these risks and the methods of measurement.

Note No 55 - Fair value of financial instruments(ii) Reclassifications of financial instruments from one category to another.

Note No 28 to the Financial Statements(iii) Information about financial assets pledged as collateral and about financial or non-financial assets
held as collateral.

Note No 56.3 to the Financial
Statements(iv) Reconciliation of the impairment allowance for credit losses by class of financial assets.

Note No 21.1, 23.1, 26.6, 27.1(d) and 28.1(c) to the
Financial Statements(v) Information about derivative financial instruments.

Note No 24 to the Financial Statements(vi) Information about compound financial instruments with multiple embedded derivatives.

Not Applicable(vii)Breaches of terms of loan agreements.

Note No. 50 to the Financial Statements

1.2

Statement of Comprehensive Income

1.2.1

Disclosures on items of income, expense, gains or losses

1.2.2

Other disclosures

Note No 4 to 14 of the Financial Statements(i) Total interest income and total interest expense for those financial instruments that are notmeasured at fair value through profit or loss.

Note 5.1 and 5.2 to the Financial
Statements(ii) Fee income and expense.

Note No 6 to the Financial Statements(iii) Amount of impairment losses by class of financial assets

Note No 11 to the Financial Statements(iv) Interest income on impaired financial assets.

Note No 5.1 to the Financial Statements

1.3

Other Disclosures

1.3.1

Accounting policies for financial instruments

Accounting Policies for each type of Financial
Instrument presented in the Statement of
Financial Position is disclosed under therespective Notes.
Pages 176 to 290

1.3.2

Information on hedge accounting

Note No 24 to the Financial Statements

1.3.3

Information about the fair values of each class of financial asset and financial liability, along with:(i) Comparable carrying amounts.

Note No 55 - Fair value of financial instruments(ii) Description of how fair value was determined.

Note No 55 - Fair value of financial instruments(iii) The level of inputs used in determining fair value.

Note No 55 - Fair value of financial instruments(iv) Reconciliations of movements between levels of fair value measurement hierarchy, additional
disclosures for financial instruments which fair value is determined using level 3 inputs.

Note No 55(b) - Fair value of financial
instruments(v) Information if fair value cannot be reliably measured.

Note No 28.3 to the Financial Statements

Compliance with Disclosure Requirements of the Central Bank of Sri Lanka

National Development Bank PLC

Annual Report 2023

291

2. INFORMATION ABOUT THE NATURE AND EXTENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS
2.1

Qualitative Disclosures

Reference			

2.1.1

Risk exposures for each type of financial instrument

2.1.2

Management's objectives, policies, and processes for managing those risks

2.1.3
2.2
2.2.1
2.2.2

Changes from the prior period
Quantitative Disclosures
Summary of quantitative data about exposure to each risk at the reporting date.

Note 56 - Risk Management of the
Financial Statements
Note 56 - Risk Management of the
Financial Statements
N/A

2.2.3

292

Note 56 - Risk Management of the
Financial Statements
Disclosures about credit risk, liquidity risk, market risk, operational risk, interest rate risk and how these Note 56 - Risk Management of therisks are managed.
Financial Statements(i) Credit Risk(a) Maximum amount of exposure (before deducting the value of collateral), description ofcollateral, information about credit quality of financial assets that are neither past due nor
impaired and information about credit quality of financial assets.
Note 56.3 - Risk Management of the(b) For financial assets that are past due or impaired, disclosures on age, factors considered in
Financial Statements and page 337 on
determining as impaired and the description of collateral on each class of financial asset.
Risk Management(c) Information about collateral or other credit enhancements obtained or called.

(d) Other disclosures, refer Basel III Minimum Disclosure Requirement under Pillar III as per the
Banking Act Direction No. 1 of 2016 on Capital Requirements under Basel III for Licensed Banks.
(ii) Liquidity Risk
Note 56.4.(f) - Liquidity Risk of the(a) A maturity analysis of financial assets and liabilities.
Financial Statements and page 337 on(b) Description of approach to risk management.
Risk Management(c) Other disclosures, refer Basel III Minimum Disclosure Requirement under Pillar III as per the
Banking Act Direction No. 1 of 2016 on Capital Requirements under Basel III for Licensed Banks.
(iii) Market Risk(a) A sensitivity analysis of each type of market risk to which the entity is exposed.
Note 56.4 - Market Risk of the(b) Additional information, if the sensitivity analysis is not representative of the entity’s risk
Financial Statements and page 337 on
exposure.
Risk Management(c) Other disclosures, refer Basel III Minimum Disclosure Requirement under Pillar III as per the
Banking Act Direction No. 1 of 2016 on Capital Requirements under Basel III for Licensed Banks.
(iv) Operational Risk
Note 56.5 - Capital Management and page 337
Refer Basel III Minimum Disclosure Requirement under Pillar III as per the Banking Act Direction No.
on Risk Management
1 of 2016 on Capital Requirements under Basel III for Licensed Banks.
(v) Equity risk in the Banking Book(a) Qualitative disclosures• Differentiation between holdings on which capital gains are expected and those taken
under other objectives including for relationship and strategic reasons.
• Discussion of important policies covering the valuation and accounting of equity holdingsin the banking book.
Note 56.4.(d) - Equity Price Risk of the(b) Quantitative disclosures
Financial Statements• Value disclosed in the Statement of Financial Position of investments, as well as the fairvalue of those investments; for quoted securities, a comparison to publicly quoted sharevalues where the share price is materially different from fair value.
• The types and nature of investments• The cumulative realised gains/ (losses) arising from sales and liquidations in the reporting
period.
(vi) Interest rate risk in the Banking Book(a) Qualitative disclosures• Nature of interest rate risk in the banking book (IRRBB) and key assumptions
Note 56.4(a) - Interest Rate Risk of the(b) Quantitative disclosures
Financial Statements• The increase/ (decline) in earnings or economic value (or relevant measure used bymanagement) for upward and downward rate shocks according to management’s method
for measuring IRRBB, brokendown by currency (as relevant).
Information on concentration of risk
Note 56.3.4.9 - Risk Management of the
Financial Statements

National Development Bank PLC

Annual Report 2023

Compliance with Disclosure Requirements of the Central Bank of Sri Lanka

3. OTHER DISCLOSURES
3.1

Capital

3.1.1

Capital structure(i) Qualitative disclosures
Summary information on the terms and conditions of the main features of all capital instruments,
especially in the case of innovative, complex or hybrid capital instruments.

3.1.2

Reference			(ii) Quantitative disclosures(a) The amount of Tier 1 capital, with separate disclosure of:Paid-up share capital/common stock• Reserves• Non-controlling interests in the equity of subsidiaries• Innovative instruments• Other capital instruments• Deductions from Tier 1 capital(b) The total amount of Tier 2 capital(c) Other deductions from capital(d) Total eligible capital
Capital adequacy(i) Qualitative disclosures
A summary discussion of the bank’s approach to assessing the adequacy of its capital to support
current and future activities.

Pages from 337
on Risk Management(ii) Quantitative disclosures
Pages from 337
on Risk Management(a) Capital requirements for credit risk, market risk and operational risk(b) Total and Tier 1 capital ratio(iii) Disclosure requirement under Banking Act Direction No. 10 of 2019 on framework for dealing with
Domestic Systemically Important Banks.
(iv) Disclosure requirement under Banking Act Direction No. 8 of 2018 on Net Stable Funding Ratio
under Basel III Liquidity Standards.				

4. DISCLOSURES APPLICABLE FOR REPURCHASE AND REVERSE REPURCHASE TRANSACTIONS OF DEALER DIRECT PARTICIPANTS IN SCRIPLESS TREASURY BONDS
AND SCRIPLESS TREASURY BILLS
4.1

Registered Stock and Securities Ordinance and Local Treasury Bills Ordinance Directions No. 1 of 2019
dated 20th December 2019 issued by the Monetary Board

Reference			(I) The carrying value of securities allocated for repurchase transactions as at the period end date.

Note No 56.3.4.13 offsetting of Financial Assets
and Liabilities and Note No 27.1(c)		

(ii) The market values of securities received for reverse repurchase transactions as at the period end
date.
(iii) The dealer direct participant policy on haircut for repurchase and reverse repurchase transactions.
(iv) Any penalties imposed for non compliance with this Direction.
5. DISCLOSURES APPLICABLE ON TREASURY OPERATIONS OF THE BANK
5.1

Banking Act Directions No 06 of 2019 dated 29 August 2019 issued by the Monetary Board on Market
Conduct and Practices for Treasury Operations of Banks

Reference			Disclose as a separate item in the Bank’s audited Financial Statements, the profit generated throughall interbank foreign exchange transactions including end user transactions where one leg is in theinterbank market.

Note No 07

Compliance with Disclosure Requirements of the Central Bank of Sri Lanka

National Development Bank PLC

Annual Report 2023

293

Supplementary Information

A Timeless Dedication
We continuously hone our skills and knowledge to develop unmatched insights andbecome leaders in our field, and masters of our craft.
Ikebana is a highly-skilled practice that requires years of dedicated learning and experience. The skills, knowledge
and capabilities garnered over the years ensure that practitioners of ikebana are positioned to deliver timeless,
impactful outcomes.

Key Events
y NDB triumphs at the Best
Corporate Citizen SustainabilityAwards - Emerges as one of theTop 10 winners
y NDB extends currency exchange
and financial transaction services
to luxury cruise liner Ocean
Odyssey passengers at the
Colombo PortJANUARYy NDB emerges as a top employer of AICP& CIMA’s Top Employers list 2023
y NDB and Ceylon Chamber of Commercejoin hands to facilitate the developmentof the SME and Export sectors in Sri
Lanka
y NDB relaunches NDB Araliya proposition
under new tagline of “Giving you morethan what you want for yourself”

FEBRUARYy NDB joins hands with Trinity Rugby and theBradby Shield as the Official Team Sponsorof Trinity College for the third consecutive
year

y NDB Bank employees volunteer in
Mangrove restoration work at theAnawilundawa Ramsar Wetland
Sanctuaryy NDB partners with the International FinanceCorporation (IFC) for a series of webinars toboost and expand operation of SMEs across
Sri Lanka
y NDB partners with The British Council withthe aim of improving the teaching skills of
secondary English language teachers

y NDB facilitates SME integration
with digital technologies inPartnership with International
Finance Corporation (IFC)y NDB joins Mercantile Cricket
Association (MCA) as the Main
Sponsor of the MCA “C” Division
50 Over League Tournament for
the third consecutive year

y NDB named as the Most Awarded Corporate
in Sri Lanka for the second consecutive rearby LMDy NDB enters into a MoU with the Global Green
Growth Initiative (GGGI) to facilitate green
transformation through sustainable financing

MARCH

y NDB Managers recognised at
Great Manager Awards 2022 withthe highest number of GreatManagers

JUNE

y NDB recognises female achievers in Sri Lanka
at the Grand Finale of Season 3 Sri Lanka
Vanithabhimana

MAY

y NDB launches the “Salli Ratin – Thagi
Apen” campaign to boosts remittanceswith Western Uniony NDB partners with the Sri Lanka Societyof Rugby Football Referees to empower
youth sports as its Official Banking Partner
y NDB Bank obtains the ISO 27001:2013
Certification underscoring its commitment
to protecting the privacy and security ofcustomer dataAPRILy NDB honoured as one of the Most
Outstanding Women Friendly
Workplaces in Sri Lanka at the Third
Edition of Women Friendly Workplaces
for 2023

y NDB recognised at the Sri Lanka’s Most Admired
Companies Awards 2022 for sound governanceand favourable financial performancey NDB joins Victoria Golf Resort (VGR) in supportof Young Golfers at the VGR Junior Golf
Championship 2023
y NDB employees volunteer at the Anawilundawa“Accelerated Natural Regeneration of Mangrove”(ANRM) project celebrating the World Ozone
Day 2023
y NDB appointed as a member of the LankaPay
USD Online Payment SystemJULY

y NDB becomes the first commercialbank in Sri Lanka to attain the
ISO 22301:2019 certification for its
Business Continuity Management
System (BCMS)y NDB renews its “Salli Ratin-Thagi
Apen” Campaign to drive remittances

AUGUSTSEPTEMBER

y NDB supports an inclusive culture on
International Sign Language Day 2023 by
way of donations

y Sri Lanka Vanithabhimana, aimed at
empowering women of Sri Lanka,
launches the fourth consecutive edition

y NDB honoured with a merit award inrecognition of its “Secure 360 Security
Management Programme” at NBQSA 2023

y NDB emerges as the recipient of the Prime
Purchase Performer Award at the Daraz
Payment Partner Performance Awards
2023

y NDB and NDBIB join forces with the Sri
Lanka Export Development Board as theSilver Sponsor for the ‘Presidential Export
Awards 2023’
y NDB forms alliance with CPM Sri Lanka
Professional Women’s Chapter, to empower
women entrepreneurs

DECEMBERNOVEMBEROCTOBER

National Development Bank PLC

Annual Report 2023

295

Awards & Accolades 2023
Total countOverall Excellence» LMD Annual Rankings for Most Awarded Entities
2022 - Most Awarded Corporate in Sri Lanka 2022

» Brand Finance Lanka and LMD - Ranked 15th in Sri
Lanka’s Most Valuable Brands» World Business Outlook Awards 2023 - Best Financial
Services Group Sri Lanka» Indian Chamber of Commerce Emerging Asia
Banking Awards 2023

» Finance Derivative Magazine Awards 2023
y Best Financial Services Group Sri Lanka
y Best Bank for Sustainable Development Sri Lankay Winner - the Banking Sectory Winner - Excellence in Capacity Buildingy Runner Up - Excellence in Corporate Governance» World Business Stars Magazine Award 2023 - United
Kingdomy Best Financial Services Group Sri Lanka
y Best Domestic Bank Sri Lankay Winner - Best Performance on Profitability - Sri
Lanka» International Business Magazine Award Winner 2023
- Most Sustainable Domestic Bank Sri Lankay Winner - Best Performance on Growth - Sri Lanka» Business Today Top 40 2022/23 - Ranked 15th

» LMD Annual Rankings for Top 20 Most Respected
Entities 2023 - Winner - Ranked 18th

» National Business Excellence Awards 2021

92

» AICPA & CIMA Sri Lanka, ICC Sri Lanka and Daily
FT Most Admired Companies of Sri Lanka 2022 Honourably mentioned

Excellence in Digital Financial Services» Global Business Magazine Award Winner 2023 - Best
Mobile Banking App Sri Lanka» Global Banking & Finance Review Awards 2023
y The Next 100 Global Awards – Digital Banking
y Best Bank for Digital Banking Services Sri Lanka» LankaPay Technnovation Awards 2023

» Global Business and Finance Magazine Awards
2023 - Most Innovative Financial Services Providers
Sri Lanka» International Investor Awards 2023 - Best Digital
Transformation» Gazet International Awards 2023 - Best Online
Banking Platform Sri Lankay Silver award - Financial Institution of the Year for
adopting LankaSign Digital Signatures» Cosmopolitan The Daily Business Awards 2023 - Best
Payment Technology Innovations - Sri Lankay Merit award - Bank of the Year for Excellence inCustomer Convenience Category B» Global Brand Awards UK 2023 - Most Innovative
Digital Banking Brand, Sri Lanka - 2023”» Global Finance’s Best Digital Banks Awards 2023 Best Innovation & Transformation - Sri Lanka» Brands Review Magazine Award Winners 2023 - Best
Digital Transformation Bank - Sri Lanka» International Business Magazine Award Winner 2023
- Most Reliable Digital Banking Services Provider Sri
Lanka» National ICT Awards, NBQSA 2023 - In-house
category award - For in-house security application
Secure360

Excellence in Retail Banking Products/Services» Global Business Magazine Award Winner 2023 - Best Retail Bank Sri Lanka» Asian Banking & Finance Retail Banking Awards 2023 - Retail Bank of the Year

» Global Banking & Finance Review Awards 2023 - Best Private Bank Sri Lanka» Daraz Payment Partner Awards 2023 - Winner - Prime Purchase PerformanceAward

Excellence in SME Banking» Cosmopolitan The Daily Business Awards 2023 - Best SME Bank - Sri Lanka» Global Brand Awards UK 2023 - Leading SME Banking Brand, Sri Lanka - 2023

Excellence in Corporate Banking» Global Banking & Finance Review Awards 2023 - Best Wholesale Bank Sri Lanka» Global Finance World’s Best Sub Custodian awards - Best Sub Custodian Bank Sri
Lanka» Asiamoney Best Bank Awards 2023 - Best Corporate Bank in Sri Lanka» International Banker 2023 Banking Awards - Best Commercial Bank Sri Lanka 2023

» Brands Review Magazine Award Winners 2023
y Best Customer Centric Corporate Bank - Sri Lanka
y Best Corporate Bank
» World Economic Magazine Awards 2023 - Best Custodian Bank Sri Lanka 2023

Excellence in Project Financing» Global Banking & Finance Review Awards 2023 - Best Bank for Renewable Energy
Financing Sri Lanka» International Finance Awards 2023 - Best Project & Infrastructure Finance Bank –Sri Lanka» Asian Banking & Finance Corporate & Investment Banking Awards 2023 Corporate Client Initiative of the Year» Cosmopolitan The Daily Business Awards 2023 - Best Bank for Green Financing Sri Lanka» Asian Banking & Finance Wholesale Banking Awards 2023 - Domestic Project
Finance Bank of the Year

» World Economic Magazine Awards 2023 - Best Project & Infrastructure FinanceBank Sri Lanka

Excellence in Customer Service» World Business Outlook Awards 2023 - Preferred Customer-Friendly Bank Sri Lanka

296

National Development Bank PLC

Annual Report 2023

Excellence in Empowering the Women’s Market Segment» The Global Economics Awards 2023 - Best BankFor Women Empowerment - Best Bank For Women
Empowerment» Finance Derivative Magazine Awards 2023 - Best
Financial Institution For Women Empowerment Sri
Lanka» Global Banking & Finance Review Awards 2023 - Best
Financial Institution for Empowering Women in
Business Sri Lanka» Asian Banking & Finance Retail Banking Awards 2023
- Banking for Women Initiative of the Year

» Global Brand Awards UK 2023 - Best Banking Brand
for Women Empowerment» World Economic Magazine Awards 2023 - Best Bank
for Women Entrepreneurs Sri Lanka 2023

Excellence in Corporate Sustainability/ ESG» Ceylon Chamber of Commerce - Winner - 10 Best
Corporate Citizens 2022

» The European – Global Business Awards 2023
y Best Ethical Business Practices Bank - Sri Lanka

y Best Supporting Charitable Giving Bank 2023 - Sri
Lankay Best Performing ESG Bank - Sri Lanka

Excellence in Best HR Practices» AICPA and CIMA - Winner - AICPA & CIMA Top 20
Employer in 2023
» The Colombo Leadership Academy - Corporate with
Great Managers 2023

» Women Friendly Workplace Awards 2023 By Satyn
Magazine and AICPA & CIMA - One of Sri Lanka’s Most
Outstanding Women Friendly Workplaces» World Economic Magazine Awards 2023 - Best Bankfor Diversity & Inclusion Sri Lanka

Excellence in Marketing, Branding & Sales» SLIM DIGIS 2023
y Gold award - Cross digital platform integration(Special category award )y Cross digital platform integration (Special
category award)y Silver - Banking/ finance (Main category award)y Grand prix - highest score in boththe main awards category and the special awards
category

Excellence in Investor Relations» Global Business Magazine Award Winner 2023 - Best Investor Relations Bank Sri Lanka

Excellence in Islamic Banking» Global Business and Finance Magazine Awards 2023 - Best Islamic Bank Sri Lanka» World Business Outlook Awards 2023 - Most Promising Islamic Banking Sri Lanka» Gazet International Awards 2023 - Best Islamic Bank Sri Lanka» International Finance Awards 2023 - Best Islamic Finance Bank - Sri Lanka 2023

» Islamic Finance Forum of South Asia (IFFSA) Awards 2023
y Gold Award - Deal of the Year 2022
y Silver Award for the Rising Star of Islamic Banking in 2022 - Misna Mizra of NDB» Sri Lanka Islamic Banking and Finance Industry (SLIBFI) - The deal of the year Gold
award

Leadership Awards» CEO Sri Lanka Magazine - CEO Awards Night 2022 - CEO of the year
» International Investor Awards 2023 - CEO of the Year

» The European – Global Business Awards 2023 - Banking CEO of the Year - Sri Lanka
Mr. Dimantha Seneviratne

Excellence in Annual Reports Presentation» CMA Excellence in Integrated Reporting Awards 2023

» CA Sri Lanka - TAGS Awards 2023

y 10 Best Integrated Reports

y Silver Award winner - Private Banks sectory Winner - Best Integrated Report Banking Sectory Bronze Award winner - Corporate Governance
Disclosure» ACCA Sri Lanka Sustainability Reporting Awards 2022
- Runner-up Banking CategoryAwards won by NDB Investment Bank Limited» Euromoney Magazine Awards for Excellence – 2023 Sri Lanka’s Best Investment Bank,(12th Consecutive Year)» Global Brands Magazine – 2023 Most Trusted Investment Banking Brand, Sri Lanka(9th Time)» Asiamoney Banking Awards – 2023 Best Investment Bank, Sri Lanka (7th Consecutive Year)» Finance Asia Awards 2023 Best Investment Bank in Sri Lanka» Asian Banking & Finance Corporate & Investment Banking Awards 2023 Corporate &Investment Bank of the Year - Sri Lanka (5th time)» World Economic Magazine Awards 2023 Best Investment Bank Sri Lanka 2023

Awards & Accolades 2023

» World Business Stars Magazine Award 2023 Best Investment Bank Sri Lanka 2023

National Development Bank PLC

Annual Report 2023

297

Corporate Governance(For further Compliance Disclosures please refer pages 128 - 136)

STATEMENT OF COMPLIANCE - DIRECTION NO. 11 OF 2007 (AS AMENDED) ON CORPORATE GOVERNANCE ISSUED BY THE MONETARY
BOARD OF THE CENTRAL BANK OF SRI LANKA (THE CORPORATE GOVERNANCE DIRECTION)
The Corporate Governance Direction provides processes and practices deemed to be the framework that facilitates the conduct of the banking
business in a responsible and accountable manner so as to promote the safety and soundness of the Bank, thereby leading to the stability of the overallbanking sector. The disclosures below reflect the Bank’s compliance with the Corporate Governance Direction under the following key principles:1.

The responsibilities of the Board;

2.

The Board’s composition;

3.

Criteria for the assessment of the fitness and propriety of Directors;

4.

Management functions delegated by the Board;

5.

The Chairman and the Chief Executive Officer;

6.

The Board appointed Subcommittees;

7.

Related Party Transactions; and8.

Disclosures;
Rule No.

Corporate Governance Principles

Compliance
Status3 (1) Responsibilities of the Board
3 (1) (i)The Board has strengthened the security and the soundness of the Bank in the following manner:a.

Setting and communicating strategic objectives and corporate values

Compliant

The Bank’s strategic plan for 2021-2025, Voyager 25 strategy (V 25) was reviewed and formally approved by the
Board in August 2020 after detailed discussions had with the Senior Management of the Bank. For this exercise,
the Bank formed a cross functional team of internal staff to obtain their views. The new strategy was formallyrolled out within the Bank during 2020. Alignment of staff to the V 25 strategy was ensured through regularly
updating a dedicated website with all communications, milestones etc relating to the Strategy and its rollout.
Given the rapidly evolving market conditions locally and globally, the senior management engaged in a criticalevaluation of the Strategic Plan in 2023 and developed a medium term strategic plan to be implemented
during FY24 & FY25 period, covering the latter half of V-25 Strategy horizon. This mid-term strategy aims toclosely align the Bank’s business strategy to the current operating environment and address the key concernswith regard to earnings and balance sheet to better position the Bank to face new challenges. These changes
and thinking are being cascaded down to all staff to ensure alignment of the Bank as a whole with theupdated Strategic Plan.
The corporate values of the Bank are embedded in the Bank’s Code of Conduct for Employees which iscommunicated to all employees via the Bank’s intranet, through the induction programmes and refresher
trainings.
b.

Approving overall business strategy including risk policy and risk management
After detailed discussions held with The Leadership Team of the Bank, the Bank’s overall business strategy for2021-2025 was reviewed and approved by the Board in August 2020. In 2023 the Bank’s strategy was further
reviewed.
The Bank has established an Integrated Risk Management Framework approved by the Board covering all risks.
There are separate risk policies and risk management procedures with regard to credit risk, operational risk, andmarket and liquidity risk. The strategic risk is embedded in each of these procedures based on applicability.
Further, the Bank has a Board approved risk appetite statement which is monitored by the Integrated Risk
Management Committee (IRMC) and the Board on a quarterly basis. This has been further reviewed by the
IRMC during the year 2023. The Bank has a Board approved Strategic Plan for 5 years with measurable Key
Performance Indicators.

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CompliantRule No.

Corporate Governance Principles

Compliance
Statusc.

Risk management

Compliant

The Board is responsible for the overall risk framework of the Bank.
The IRMC appointed by the Board, reviews and recommends to the Board, the Bank’s risk policies andprocedures defining the Bank’s risk appetite, identifying principal risks, setting governance structures andimplementing policies and systems in line with the Integrated Risk Management Framework to measure,monitor and manage the principal risks of the Bank. The Board has approved risk management policies andprocedures as reviewed and recommended by the IRMC, based on these parameters and as required by thisDirection.
The following reports provide further insight in this regard:
The Risk Management Report on pages 337 to 340
Integrated Risk Management Committee Report on pages 144 to 146d.

Communication with all stakeholders

Compliant

The Bank has in place a Board approved Communication Policy aimed to encourage effective communicationof corporate information relating to the Bank on its behalf covering all stakeholders including employees,
customers, creditors, shareholders, general public and the regulators. This policy is reviewed regularly in orderto reflect the best practices in communications.
Additionally, the “Investor Relations” page on the Bank’s website contains the quarterly Financial Statements
and Annual Reports together with the key disclosures on Risk Management.
Please refer page 125 of the Corporate Governance Report which illustrates the effective communication with
the Bank’s stakeholders.
e.

Internal control system and management information systems

Compliant

The Board is assisted by the Audit Committee (AC), which evaluates the adequacy and effectiveness of theinternal control systems, and reviews internal control issues identified by the Bank’s Internal Audit, External
Auditor, regulatory authorities and the Management.
The MIS process of the Bank is continuously being improved. The Board also reviews the adequacy of the Bank’sManagement Information Systems, based on the monthly MIS pack submitted to the Board each month.
f.

Key Management Personnel (KMP)

Compliant

Key Management Personnel (KMP) of the Bank have been identified by the Board having considered the
Banking Act Determination No. 1 of 2019 on officers performing executive functions of the Bank, and presently
are the Leadership Team whose names are detailed on pages 30 to 32 of this Report.
All appointments of KMP are recommended by the Nominations and Governance Committee and approvedby the Board.
g.

Define areas of authority and key responsibilities for Directors and KMP

Compliant

The Bank’s internal Code of Corporate Governance sets out a clear division of authority and responsibilities
between the Directors and the KMP. The Directors have set goals and targets for the year 2023. The duties andresponsibilities of KMP are documented in their respective job descriptions and scorecards. The Board throughthe HRRC evaluated the performance of the KMP against set goals and targets.

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Rule No.

Corporate Governance Principles

Compliance
Statush.

Oversight of affairs of the Bank by KMP

Compliant

To enable the Board to discharge its stewardship and fiduciary responsibilities effectively it delegates authority
to the Board committees to oversee specific responsibilities based on clearly defined terms of reference. The
Board has delegated its authority in operational areas to the Senior Management led by CEO within clearly
defined limits. The Board regularly interacts with the Bank’s KMP through reports tabled at both Board,
Subcommittee meetings and at any special meetings convened on a needs basis.
KMP make regular presentations to the Board on matters under their purview and are also called in by the
Board to explain matters relating to their areas.
Banking operations carried out in line with the Bank’s strategic objectives including any issues faced by the
Bank are discussed on an ongoing basis at Board meetings and also at special meetings scheduled with
Directors based on the exigencies of times through which Directors provide the required oversight andguidance to the KMP.
The CEO at weekly meetings held with The Leadership Team updates them on key decision points taken by the
Board.
i.

Assess effectiveness of own governance practices

Compliant

The Nominations and Governance Committee (NGC) has been delegated the function of selection,
nomination and election of Directors to the Board and KMP.
The Bank’s internal Code of Corporate Governance clearly provides guidance on avoiding, managing anddisclosing conflicts of interests. The Directors are required to provide a declaration yearly. The Directors’interests are disclosed to the Board and Directors who have a particular interest have stepped out fromdiscussions and abstained from voting in such a situation and he/she is not counted in the quorum.
Determination of weaknesses in the Board of Directors own governance practices and implementation ofchanges are primarily addressed through the annual self-evaluation process among the Board members. Selfevaluations for the year 2023 have been collected and summarised by the Company Secretary and submitted
to the Chairman for his review. The Chairman then discusses areas of weaknesses and recommends changes
where necessary at a Board meeting in order to ensure that governance practices are continuously improved
throughout the year. Where necessary, the Chairman may engage Directors on a one-on-one basis to discuss
their feedback/address any concerns etc. In addition, the Chairman and the Board being conscious of good
governance principles, focuses on its practical implementation through its routine interaction with andoversight of the CEO and KMP through the monthly Board meetings and as and when needed.
j.

Succession plan for KMP

Compliant

The Succession Plan of the Bank was reviewed and approved by the Board at its meeting held in 20 June 2023.
k.

Regular meetings with KMP

Compliant

The KMP make regular presentations or are called in for discussions at the meetings of the Board and its
Subcommittees on policy and other matters relating to their areas. Progress made towards corporate
objectives and regulatory developments is a regular agenda item for the Board and KMP are regularly involved
in Board level discussions on the same and on a needs basis.
l.

Regulatory environment and maintaining an effective relationship with the regulator
Circulars, directions and guidelines issued by the regulators are circulated to the Directors on a quarterly basis
for their information. In 2023 all new CBSL laws and regulations that were issued and relevant to banking
business were made available on the BoardPac together with explanatory notes which detailed the key areasof impact. Further, a snapshot of key regulatory changes during each quarter with the status of compliance
was provided to the Board.
The CEO meets with the Central Bank officials at the monthly CEO’s meeting. The Chairman of the Bank andthe Chairpersons of the Board Subcommittees also meet with the CBSL officials.
Further, the Directors, the CEO and KMP of the Bank maintain dialogue with the regulators on an ongoing basis
and attend the Director’s forum arranged by the CBSL.

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Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
Statusm.

Hiring and oversight of External Auditors

CompliantAudit Committee Charter includes the functions of hiring and overseeing of the External Auditor. The Audit
Committee (AC) carries out the necessary due diligence regarding the hiring/evaluation of the External Auditor
and makes recommendations to the Board. The appointment/re-appointment of the External Auditor is madeat the Annual General Meeting.
Oversight of the External Auditor is carried out by the AC and the Board is been briefed of any concerns in thisregard if required.
A formal evaluation of the External Auditors’ Performance is assessed annually by the AC by also
considering the evaluation done by VP - Finance/ Chief Financial Officer and conclusions together with any
recommendations are discussed at Board level.
3 (1) (ii)

Appointment of Chairman and CEO and defining and approving their functions and responsibilities

Compliant

In line with the Direction, the Bank’s Board-approved internal Code of Corporate Governance documents thefunctions and responsibilities of the Chairman and the CEO.
The Board has appointed the Chairman and CEO and has approved their functions. There is a clear division of
responsibilities between the Chairman and the CEO, and this requirement is further explained on pages 115.
3 (1) (iii)

Regular Board meetings

Compliant

Regular monthly Board meetings are held and special Board meetings are scheduled as and when the needarises. There have been 16 Board meetings during 2023 which included 04 special meetings. In addition, theSubcommittees of the Board meet as and when necessary.
Each member of the Board brings different areas of expertise, skills and experience to the table which
encourages a robust exchange of alternate views and ways of thinking.
Circulation of Board papers to obtain Board’s consent is minimised and resorted to only when absolutely
necessary. These decisions are in any event later confirmed by the Board at the immediately succeeding Board
meeting. 19 circular resolutions have been passed during 2023.
Please refer page 123 and 124 for Board and Board Subcommittee meeting attendance respectively.
3 (1) (iv)

Arrangements for Directors to include proposals in the agenda

Compliant

All Directors are entitled to include matters and proposals in the agenda for Board meetings and this right has
been entrenched in the Bank’s internal Code of Corporate Governance.
Monthly meetings are scheduled and informed to the Board at the end of the previous calendar year to enablesubmission of proposals in the agenda for regular meetings. This process supports the requirement detailed inthis Direction and a Director may include a proposal (if required) in the agenda of a Board meeting.
3 (1) (v)

Notice of Meetings

CompliantMonthly meetings for a calendar year are scheduled and informed to the Board at the end of the previous
calendar year to provide Directors ample notice and an opportunity to participate.
Formal notice of meetings, the agenda and Board papers related to each Board meeting are circulated at least
7 days in advance of the Board meeting. These documents are uploaded through a secure connection to thetablets of all Directors.
3 (1) (vi)

Directors’ attendanceCompliant

The Company Secretary monitors the attendance register to ensure compliance. All Directors have attended
at least two thirds of the meetings held during the year 2023 and no Director has been absent for threeconsecutive meetings during 2023, if eligible to attend.
Attendance of Directors at Board meetings is detailed on page 123.

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Rule No.

Corporate Governance Principles

Compliance
Status3 (1) (vii)

Appointment and setting responsibilities of the Company Secretary

Compliant

The internal Code of Corporate Governance includes the responsibilities of the Company Secretary as specified
in the statutes and other regulations.
The Company Secretary appointed by the Board is an Attorney at Law who satisfies the provision of Section
43 of the Banking Act, Companies Act and the Articles of Association of the Bank. Please refer page 29 for a
detailed profile and page 116 for duties and responsibilities of the Company Secretary.
3 (1) (viii)

Directors’ access to advice and services of the Company Secretary

Compliant

The internal Code of Corporate Governance of the Bank includes a provision to enable all Directors to havefull access to the advice and services of the Company Secretary to ensure that proper Board procedures arefollowed and all applicable rules and regulations are complied with. For the year 2023, the Company Secretary
has provided assistance to the Directors when requested.
3 (1) (ix)

Maintenance of Board minutes

Compliant

The Company Secretary maintains detailed Board minutes and circulates minutes to all Directors after review
by the CEO and the Chairman. The minutes are approved at the subsequent Board meetings. The Bank’s
internal Code of Corporate Governance also provides that minutes are open for inspection at any reasonable
time, upon reasonable notice given by any Director. Additionally, the Board has access to the past Board papers
and Board minutes through a secure connection to the tablets of all Directors.
3 (1) (x)Maintaining minutes with sufficient details to serve as a reference for regulators and supervisory
authorities

Compliant

A Board-approved procedure is in place for recording the Board minutes by the Company Secretary.
The minutes contain adequate details appropriate to the matters dealt with. The minutes are read together
with the corresponding Board papers, which supplement information in the minutes. All matters required tobe minuted in terms of 3(1) (x) (a)–(f) of the Direction are recorded in the minutes. Please refer page 116 of the
Corporate Governance report.
3 (1) (xi)

Directors’ ability to seek independent professional advice

Compliant

There is a process for Board members to obtain independent professional advice at the expense of the Bank.
The Board has obtained professional advice during the year.
3 (1) (xii)

Dealing with conflicts of interest

Compliant

The Directors are conscious of their obligations to deal with situations where there is a conflict of interest inaccordance with the Articles of Association of the Bank and the Corporate Governance Direction No 11 of 2007(as amended).
The internal Code of Corporate Governance adopted by the Board, requires each Board member to determine
whether he/ she has a potential or actual conflict of interest. If a Director of the Bank has a conflict of interestin a matter to be considered by the Board, which the Board has determined to be material, such matters aredisclosed and discussed at the Board meetings, where Independent Non-Executive Directors who have nomaterial interest in the transaction, are present.
Further, Directors abstain from participating in the discussion and voting on Board resolutions in relation towhich such Directors or any of their close relation/s or a concern in which such Directors or any of their close
relation/s have substantial interest, and/or are interested in. Further, their votes are not counted in the quorum
for the relevant agenda item at the Board meeting.
3 (1) (xiii)

Formal schedule of matters reserved for Board decision

Compliant

The Board has a formal schedule of matters specifically reserved to it for decision to ensure that direction andcontrol of the Bank is firmly under its authority.
3 (1) (xiv)

Inform the Central Bank on probable solvency issues
The Bank is aware of the requirement, but the situation has not arisen within the year. The Bank has a Board
and IRMC approved Liquidity Contingency Funding Plan in place to inform the Director of Banking Supervisionof same, prior to taking any decision or action to suspend payments due to depositors and other creditors.
Also, a Solvency Statement is prepared when the Bank declare the dividend payment to shareholders which is
audited by the External Auditors.

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Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
Status3 (1) (xv)

Capital adequacy

CompliantMonthly and quarterly compliance reports have been submitted to the Board which contains the Capital
Adequacy Ratio (CAR). The Bank is fully compliant with the Capital Adequacy requirements stipulated by
the Central Bank of Sri Lanka. Also, the Internal Capital Adequacy Assessment Process (ICAAP) covers capitalplanning over the next 4 years. Refer page 357 to 365 on Basel III Disclosures under Pillar III as per the Banking
Act Direction No 01 of 2016 (as amended).
3 (1) (xvi)

Publish Corporate Governance Report in this Annual ReportCompliantThis Report forms part of the Corporate Governance Report of the Bank which is set out on pages 110 to 127
and pages 298 to 313
3 (1) (xvii)

Self-assessment of Directors

Compliant

In accordance with the Direction, the Board annually assesses the effectiveness of the Director’s own
governance practices and therefore the Board has adopted a scheme of self-assessment to be undertaken byeach Director annually. The evaluation covers a range of issues including the Board composition, timelinessand quality of information provided to the Board and their individual goals and responsibilities.
The Chairman reviews the responses based on the summarised responses for the previous year’s selfassessment of the Directors to the self-assessment questionnaire and reports to the Board on any identified
weaknesses and lapses and recommends an action plan for approval of the Board if necessary. The Board
periodically reviews the progress made on the action plan. Where necessary, the Chairman may engage
Directors on a one-on-one basis to discuss their feedback/address any concerns etc.

3 (2) Board Composition
3 (2) (i)Number of Directors

Compliant

The number of Board Directors during the year 2023 was in compliance with the thresholds detailed in thisDirection and the Articles of Association of the Bank. As at 31 December 2023, the Board comprised ten (10)Directors.
3 (2) (ii)Period of service of a Director

CompliantNone of the Directors have exceeded 9 years of service during the year 2023.
The Company Secretary monitors this requirement. Details of tenure of service is given on page 112.
3 (2) (iii)

Board balance

Compliant

The CEO of the Bank is the only Executive Director and thus the Bank complies with this requirement
3 (2) (iv)

Independent Non-Executive Directors

Compliant

The Board through Nominations and Governance Committee assesses the independence or nonindependence of each Non-Executive Director based on a declaration made by each Director to the Company
Secretary each year.
As at 31 December 2023 there were 6 Independent Non-Executive Directors on the Board which is above theregulatory requirement. The Independent Non-Executive Directors are detailed on page 111 of this report.
3 (2) (v)Alternate Independent Directors

Compliant

Directors appoint Alternate Directors in line with this direction and the Articles of the Bank as and whenrequired for a particular meeting. During the year 2023, Alternate Directors appointed by Independent
Directors for a particular meeting met the criteria that apply to an Independent Director.
3 (2) (vi)

Criteria for Non-Executive Directors

Compliant

A Board-approved procedure to select and appoint Non-Executive Directors is in place.
The Non-Executive Directors of the Bank are persons with credible track records and have necessary skills andexperience to bring an independent judgment to bear on issues of strategy, performance, risks and resources.
Please refer the profiles of Non-Executive Directors on pages 22 to 29 of this Report.
3 (2) (vii)

More than half the quorum to comprise of Non-Executive Directors

Compliant

The CEO of the Bank is the only Executive Director. Hence all Board meetings have met this requirement.

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Rule No.

Corporate Governance Principles

Compliance
Status3 (2) (viii)

Identify Independent Non-Executive Directors in communications and disclose categories of
Directors in this Annual ReportCompliant

The Independent Non-Executive Directors are expressly identified as such in all corporate communications
that disclose the names of Directors of the Bank.
The composition of the Board, by category of Directors, including the names of the Chairman, Executive Director,
Non-Executive Directors and Independent Non-Executive Directors are given on page 111 of the Corporate
Governance Report.
3 (2) (ix)Formal and transparent procedure for appointments to the Board

Compliant

There is in place a formal, considered and transparent procedure for the appointment of new Directors to theBoard.
In practice, Directors are appointed based on recommendations made by the Nominations and GovernanceCommittee.
The Board has additionally evolved a succession plan collectively with the NGC to make certain the orderly
succession of appointments to the Board.
3 (2) (x)Election of Directors filling casual vacancies

CompliantAppointment to fill a casual vacancy is made by the Board on the recommendations of the Nominationsand Governance Committee. A person so appointed would stand for re-election at the next Annual General
Meeting in accordance with the Articles of Association. Ms. Shweta Pandey and Mr Hasitha Premaratne were to
fill a casual vacancy and upon being recommended by the Board, and they will stand for re-appointment by
the shareholders at the forthcoming Annual General meeting to be held in March 2024.
3 (2) (xi)Communication of reasons for removal or resignation of Director

Compliant

There was only one resignation during 2023 all of which complied with the disclosure requirements detailed in
the direction and the CSE Listing Rules.
3 (2) (xii)Prohibition of Directors or employees of a Bank becoming a Director of another bankCompliant

No Directors or employees of the Bank are a Director of another Bank.
The Nominations and Governance Committee takes into account this requirement in their deliberations
when considering the appointments of Directors. The Bank’s “Code of Conduct” further incorporates thisrequirement for employees.

3 (3) Criteria to assess fitness and propriety of Directors
3 (3) (i)Age of Director should not exceed 70

Compliant

There are no Directors who are over 70 years of age.
3 (3) (ii)

Directors should not be Directors of more than 20 companies/entities/institutions inclusive of
subsidiaries or associate companies of the Bank.

Compliant

No Director holds Directorships of more than 20 companies.
The Directorships of each of the Directors are disclosed on pages 22 to 29 of the Annual Report.
3 (3) (iii)

Director or CEO of the Bank shall not be appointed before the expiry of a period of 6 months from thedate of cessation of his/her office at another licensed bank (Cooling-off Period)

Compliant

The Company Secretary monitors this requirement.

3 (4) Management functions delegated by the Board
3 (4) (i)Understand and study delegation arrangements

3 (4) (ii)

Extent of delegation should not hinder the Board’s ability to discharge its functions

3 (4) (iii)

Review delegation arrangements periodically to ensure relevance to operations of the Bank
The Board periodically reviews and approves the delegation arrangements in place to ensure they are relevant
and addresses the needs of the Bank.
Delegation papers are prepared in detail and recommended by the IRMC to the Board.
Terms of Reference (TOR) of each of the Board Subcommittees which are incorporated in the respective
charters of each Board Subcommittee are approved by the Board.
In addition it is to be noted that by delegating, the Board does not lose the authority to deal with matters thathave been delegated when necessary.

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National Development Bank PLC

Annual Report 2023

Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
Status3 (5) The Chairman and Chief Executive Officer
3 (5) (i)Separation of roles

Compliant

The roles of Chairman and CEO of the Bank are held by separate individuals. In addition, there is a clear divisionof responsibilities between the Chairman and the CEO thereby maintaining the balance of power between thetwo roles.
3 (5) (ii)

A Non-Executive Independent Director as the Chairman or if not independent, designation of an
Independent Director as the Senior Director

Compliant

The Articles of Association of the Bank mandates that the Chairman of the Bank must be an Independent
Director. As such, a Non-Independent Director cannot be appointed as the Chairman and hence the need toappoint a Senior Independent Director cannot arise. Currently, Mr. Sriyan Cooray, Independent Non-Executive
Director is the Chairman of the Bank.
3 (5) (iii)

Disclosure of identity of Chairman and CEO and any relationships with the Board members

Compliant

In accordance with this Direction, the Company Secretary obtained declarations from each Director to identify
the nature of any relationship [including financial, business, family or other material/relevant relationship(s)], ifany, between the Chairman and the CEO and the relationships among members of the Board.
Based on the said declarations there were no material relationships between the Chairman and the CEO andamong the Board members.
3 (5) (iv)

Chairman to provide leadership to the Board

Compliant

The Chairman is responsible for the running of the Board, preserving order and ensuring that proceedings at
meetings are conducted in a proper manner. Further, he ascertains the views of the Directors on the issues
being discussed before decisions are taken. The self-evaluation process carried out by the members of theBoard each year assists the Chairman to effectively carry out his responsibilities by providing him the required
feedback.
3 (5) (v)

Responsibility for agenda lies with the Chairman but may be delegated to the Company Secretary

CompliantWhilst noting that the overall responsibility lies with the Chairman, he has delegated the drawing up of theagenda Company Secretary who carries same out in consultation with the CEO and subject to the Chairman’s
approval.
The Bank’s internal Code of Corporate Governance also casts this responsibility with the Chairman.
3 (5) (vi)

Ensure that Directors are properly briefed and provided adequate information

Compliant

The Directors are adequately briefed in the course of discussions by the Chairman, CEO and officers of senior
management in respect of matters that are taken up by the Board.
The following procedures are in place to ensure this:Board papers are circulated in advance among the Directors.
Management information is provided on a regular basis to enable the Directors to assess the performance andstability of the Bank.
Relevant KMP are on hand for explanations and clarifications.
The Directors are able to seek independent professional advice on a need basis at the Bank’s expense.
3 (5) (vii)

Encourage active participation by all Directors and lead in acting in the interests of the Bank

Compliant

The Chairman ensures that all members effectively participate as a team in Board deliberations and decisions
and Directors concerns and comments are duly recorded in the minutes.
3 (5) (viii)

Encourage participation of Non-Executive Directors and relationships between Non-Executive andExecutive Directors

Compliant

All Directors of the Board except the CEO are Non-Executive Directors and the Chairman requests andencourages their active participation, as needed. Further, Non-Executive Directors participate in Boardappointed Subcommittees providing further opportunity for active participation.
In addition, the feedback received from the self-evaluation process carried out by the Board supports the
Chairman in improving contributions of Non-Executive Directors.

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Rule No.

Corporate Governance Principles

Compliance
Status3 (5) (ix)

Refrain from direct supervision of KMP and executive duties

Compliant

Chairman is a Non-Executive Director and he does not directly get involved in the supervision of KMP or any
other executive duties.
3 (5) (x)Ensure effective communication with shareholders

CompliantShareholders are encouraged to provide their feedback to the Company Secretary using feedback forms madeavailable with the Annual Report.
In addition, there is an e-mail address dedicated for investor relations and the link is available on the Bank’s
website. The Bank also has a dedicated Investor Relations Team. The Chairman together with the CEO ensureseffective communication with shareholders through investor’s forums or calls held each quarter/as needed
and through continuous engagement with our institutional investors. Members of the Board are apprised of
the views of major investors and other key stakeholders pursuant to these meetings.
3 (5) (xi)CEO functions as the apex executive in charge of the day-to-day operations

Compliant

The CEO is responsible for providing the leadership, expertise and professional environment within the Bankfor the implementation of the Board’s policies and the achievement of the Bank’s goals and objectives. The
operations of the Bank are carried out in conformity to this requirement.

3 (6) Board appointed committees
3 (6) (i)Establishing Board Committees, their functions and reporting

Compliant

The Board has established nine (9) Board Subcommittees, of which 4 committees named Strategic Issues
Committee, Board Credit Committee, Related Party Transactions Review Committee and Digital Transformation
Committee were appointed to meet the business requirements of the Bank and 5 committees that are Audit
Committee, Human Resources and Remuneration Committee, Nominations and Governance Committee,
Integrated Risk Management Committee and Discretionary and Capex Committee, which are mandated by the
CBSL regulations.
Minutes of Board Subcommittee meetings are shared with the main Board and the Chairmen/Chairpersons ofBoard Subcommittees update the Board on recommendations made and any matters of importance that are
discussed at the respective Board Subcommittee.
This Annual Report includes individual reports of each such Subcommittee on pages 139 to 155 which reports
include a summary of duties, roles and performance of each Subcommittee.
3 (6) (ii)

Audit Committee (AC)a.

Chairman of the committee shall be an Independent Non-Executive Director who possesses
qualifications and experience in accountancy and/or audit

Compliant

Mr. Sujeewa Mudalige the Chairman of the AC is an Independent Non-Executive Director and a Fellow
Member of the Chartered Institute of Management Accountants, UK, Institute of Chartered Accountants of Sri
Lanka, Association of Chartered Certified Accountants UK and CPA – Australia). Mr. Sujeewa Mudalige’s profile isgiven on page 24.
b.

Committee to comprise solely of Non-Executive Directors

Compliant

All members of the AC are Non-Executive Directors.
c.

Audit Committee functions

Compliant

The following matters referred to in the Direction are reviewed and appropriate recommendations are madeby the AC;(i) Re-appointment of the External Auditor for audit services has been recommended to the Board by the AC;
The AC has discussed the audit plan and methodology with the External Auditor.
(ii) - (iii) AC has discussed the implementation of the Central Bank guidelines issued to Auditors from time totime and the application of the relevant accounting standards;(iv) In order to ensure the independence of the Auditor to comply with the requirements of this Direction
the External Audit Partner was rotated as per the five-year rotation requirement. The AC evaluates and makes
recommendations to the Board with regard to the audit fee.
Refer the ‘Report of the Audit Committee’ given on pages 147 to 148.

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Corporate GovernanceRule No.

Corporate Governance Principles

Compliance
Statusd.

Review and monitor External Auditor’s independence and objectivity and the effectiveness of theaudit processes

Compliant

The AC reviews and monitors the external auditor’s independence and objectivity and the effectiveness of theaudit processes in accordance with applicable standards and best practices through the representations fromthe External Auditor.
e.

Provision of non-audit services by External Auditor

Compliant

A Policy for ‘Engaging the External Auditor for non-audit services’ is in place which covers all aspects stated inthis Direction. This Policy is reviewed and the relevant amendments are approved by the AC and the Board.
Assigning such non-audit services to External Auditor is discussed at AC meetings and the required priorapproval is obtained to that effect.
Further, relevant information is obtained from the External Auditor to ensure that their independence is not
impaired, as a result of providing any non-audit services.
f.

Determines scope of audit

Compliant

The AC Charter requires the AC to discuss and finalise with the External Auditor the nature and scope of theaudit. In order to comply, the External Auditor makes a presentation at the AC meeting detailing the proposed
audit plan and scope.
The Committee discussed and finalised the audit plan, methodology and scope with the External Auditor toensure that it includes:
An assessment of the Bank’s compliance with the relevant Directions in relation to Corporate Governance andInternal Controls over Financial Reporting;
The preparation of Financial Statements for external purposes in accordance with relevant accounting
principles and reporting obligations.
As all audits within the Group are carried out by the same External Auditor, there was no requirement todiscuss arrangements for coordinating activities with other Auditors.
g.

Review financial information of the Bank

Compliant

The AC reviews the quarterly Financial Statements as well as year-end Financial Statements. The review focuseson the following:
(i)
(ii)
(iii)
(iv)
(v)

major judgemental areas;
any changes in accounting policies and practices;significant adjustments arising from the audit;
the going concern assumption; andcompliance with relevant Accounting Standards and other legal requirements.

The AC makes their recommendations to the Board of Directors on the above on a quarterly basis.
h.

Discussions with External Auditor on interim and final audits

Compliant

The Committee met the External Auditor twice during the year (i.e. in February and November 2023), without
the presence of the Executive Management, to discuss issues, concerns and reservations arising from theiraudits.
i.

Review of management letter and Bank’s response

Compliant

The AC reviewed the External Auditor’s Management Letter for the year ended 2022 and the Management’s
responses thereto.

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Rule No.

Corporate Governance Principles

Compliance
Statusj.

Review of internal audit function

Compliant

The AC has oversight of the Internal Audit Department (IAD) of the Bank and carries out the following duties:(i) Reviews and discusses with the Head of Internal Audit (HIA) the annual Audit Plan covering the Group, theadequacy of the scope and functions and the resources of IAD.
(ii) The Audit Plan for the year is approved by the AC and the progress is tabled at the AC meetings. The AC
reviews the internal audit reports and discusses the Management Action Plans to resolve the issues raisedby IAD. Further, AC Chairman is kept informed of “Critical” and “Significant” issues arising from ongoingaudits, as a “Heads up”. All audit findings are sent to Operational Risk Department to identify any process
improvements required and to follow up on implementing controls.
(iii) Evaluates the performance of the HIA, based on the feedback given by the CEO and AC Chairman. Further,
HIA discusses the senior audit team members’ performance with the AC.
(iv) The AC is kept informed of the senior staff member appointment/resignations.
(v) Any outsourced internal audit services are done with the approval of AC.
(vi) Ensures that the internal audit function is independent of the activities it audits and that it is performed
with impartiality, proficiency and due professional care. The IAD staff reports directly to the HIA who in turnreports directly to the AC.
k.

Internal investigations

Compliant

Major findings of internal investigations are reviewed by the AC and Management responses are obtained.
Also, the status of implementation of the recommendations made during investigations is discussed atCommittee meetings.
l.

Attendees at Audit Committee meetings

CompliantHead of Internal Audit and VP/ Chief Financial Officer attended all meetings as a permanent invitee. The CEO
attended meetings as well on invitation and other members of the Senior Management were invited to attend
meetings on a need basis. Please refer pages 147 to 148 and 124 for “AC report” and AC attendance for 2023.
On the invitation of the Committee, the Bank’s External Auditor, Ernst & Young attended all meetings during
the year.
The AC met the External Auditor twice during the year (i.e. in February and November 2023) without thepresence of KMP.
m.

Explicit authority, resources and access to information

Compliant

The Charter of the AC clearly defines the authority and terms of reference of the Committee, which is incompliance with this Direction.
n.

Regular meetings

Compliant

The AC has scheduled regular quarterly meetings and additional meetings are scheduled when required.
Accordingly, the Committee met seven times during the year. Members of the AC are served with due noticeof issues to be discussed and the conclusions in discharging its duties and responsibilities are recorded in theminutes of the meetings maintained by HIA who functions as the Secretary to the AC.
o.

Disclosure in Annual ReportCompliantPlease refer ‘Audit Committee Report’ on pages 147 to 148 for the details of the activities of the Audit
Committee.
Attendance of the Committee members at each of these meetings is given in the table on page 124 of theAnnual Report.
p.

Maintain minutes of meetings

Compliant

The Head of the Internal Audit functions as the Secretary to the AC and maintains detailed minutes of all
meetings. Copies of these approved minutes have been tabled at Board Meetings.

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National Development Bank PLC

Annual Report 2023

Corporate GovernanceRule No.

Corporate Governance Principles

Compliance
Statusq.

Whistle Blowing Policy and relationship with External Auditor

Compliant

The Bank has in place a Board-approved Whistle Blowing Policy to make it easier for members of staff tobe able to report irregularities in good faith, without having to fear that their actions may have adverse
consequences on themselves. This Policy is reviewed and approved by the AC and the Board of Directors.
Further strengthening the whistle blowing mechanism, the Bank introduced a feature of reporting through thestaff intranet for added convenience and security.
The employees of the Bank may, in confidence, raise concerns about possible improprieties in Financial
Reporting, Internal Controls or other matters. A process has been established to track such whistle blowing
and take necessary action.
The Bank also has an established external informational mechanism, known as the “NDB Ombudsman”, towhom confidentially matters can be whistle blown.
The AC is the key representative body for overseeing the Bank’s relations with the External Auditor.
3 (6) (iii)

Board Human Resources and Remuneration Committee (HRRC) Composition & Responsibilities

CompliantPlease refer pages 142 to 143 for the composition and responsibilities of the Human Resources andRemuneration Committee (HRRC).
a.

Determine the Remuneration policy relating to Directors, CEO and KMP

Compliant

The HRRC reviews and where necessary makes recommendations on remuneration payable to Directors andKMP of the Bank.
A Board approved Remuneration Policy and process is in place for Directors, CEO and KMP.
b.

Set goals and targets for the Directors, CEO and KMP

Compliant

The goals and targets set for the CEO and KMP were reviewed and approved by the HRRC and noted/approvedby the Board. Further, the goals and targets of KMP who head control functions were reviewed and approvedby their respective Subcommittee.
The goals and targets for the Directors for the year 2023 have been deliberated in detail and approved at HRRC
and Board level.
c.

Evaluate the performance of the CEO and KMP against the set goals and targets and determine
remuneration benefits

Compliant

The performance of KMP against set goals and targets are evaluated by the HRRC of every year andrecommendations are then discussed and approved by the full Board. Further, the performance of KMP who head
control functions are considered by their respective Subcommittees/chairpersons of such Subcommittees prior
to being submitted to the HRRC and Board. The CEO’s performance is evaluated by the full Board having beenreviewed by the HRRC as needed/if so decided. The above process was complied within 2023 for the year 2022.
d.

The CEO attendance at Committee meetings

Compliant

The CEO was present, if invited, at all meetings and stepped out when matters relating to the CEO werediscussed
3 (6) (iv)

Board Nomination and Governance Committee (NGC)CompliantPlease refer pages 139 to 141 for the composition and responsibilities of the NGC.
a.

Appointment of Directors, CEO and KMP

Compliant

The NGC has in place a procedure to select new Directors.
A Board-approved procedure to select CEO and KMP has been in place since December 2008 and has beenreviewed last in 2023.
b.

Re-election of Directors

CompliantThis is a requirement of the Nominations and Governance Committee Charter.
The NGC determines the Directors who will be retiring and whether they are eligible to be re-elected every
year pursuant to taking into account the performance and contribution made by the Director concerned
towards the overall discharge of the Board’s responsibilities. The Committee in February 2022 has considered
and recommended the re-election of Mr. Sujeewa Mudalige and Mr. Bernard Sinniah. This is in addition to any
Directors who are appointed during the financial year to fill casual vacancies who hold office until the next
AGM and stand before the shareholders for re-appointment.

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309

Rule No.

Corporate Governance Principles

Compliance
Statusc.

Eligibility criteria for appointments to key managerial positions including CEO

Compliant

The NGC has set a procedure to assess eligibility including criteria such as qualifications, experience and key
attributes, for appointment or promotion to Key Management Positions including the position of the CEO.
The committee is guided by applicable statutes in considering the suitable criteria for each appointment/
promotion.
d.

Fit and proper persons

Compliant

The Company Secretary obtains the declarations for the year 2023 from the Directors. The said annual
declarations are submitted to the NGC to ensure that they are fit and proper persons to hold office as specified
in the criteria given in Direction 3(3) and as set out in the statutes. Thereafter the required affidavits of Directors
are submitted to CBSL. The required affidavits are obtained from KMP at the time of appointment, promotions,extensions, lateral moves as required by the regulation.
This process has been followed for the year 2023.
e.

Succession plan and new expertise

Compliant

The NGC considers Board vacancies based on the expertise required by the Bank and recommends suitable
candidates when necessary in accordance with the Board-approved procedure for selection and appointment
of Directors and this procedure was followed in 2023.
The NGC also recommended the Succession Plan for KMP to the Board.
The Succession Plan for KMP was reviewed and approved by the Board in 2023.
f.

Committee to be chaired by an Independent Director

Compliant

The NGC is chaired by the Chairman of the Bank who is an Independent Director. The CEO is present only if
invited.
3 (6) (v)

Board Integrated Risk Management Committee (IRMC)

CompliantPlease refer pages 144 to 146 for the composition and responsibilities of the IRMC. The Terms of Reference of
the IRMC was reviewed and updated in February 2023.
a.

Composition of IRMC

CompliantPlease see detailed Report on pages 144 to 146 of this report.
b.

Risk assessment

Compliant

The IRMC assesses all risks of the Bank and Group on a monthly basis through Key Risk Indicators, Risk
Dashboards and through quarterly Risk Assessment reports done for the Bank and Group. The Bank has formed
management committees to assess risks on a monthly/quarterly basis and their findings are submitted to the
IRMC and a summary of the minutes of the IRMC and quarterly risk assessment reports are submitted to themain Board.
c.

Review of management level committees on risk

Compliant

The adequacy and effectiveness of all management level Committees against the respective TORs based on an
independent assessment was reviewed at an IRMC meeting and the result was satisfactory.
Further, all members carried out self-assessments for the year 2023 and the findings were at a satisfactory level.
d.

Corrective action to mitigate risks exceeding prudential levels

Compliant

The IRMC takes prompt corrective action to mitigate the effects of specific risks in the case such risks areat levels beyond the prudent levels decided by IRMC on the basis of the Bank’s policies and regulatory andsupervisory requirements. The Risk Appetite of the Bank decided through the ICAAP was approved by the
Board.
e.

Frequency of meetings

Compliant

The Committee has met 05 times in the year 2023. Please refer page 124 for attendance.
f.

Actions against officers responsible for failure to identify specific risks or implement corrective action
If the need arises the IRMC shall take action appropriate to the relevance of the situation as per the Bank’s
Human Resources Policy.

310

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Annual Report 2023

Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
Statusg.

Risk Assessment Report to the Board

CompliantA detailed report is submitted to the Board subsequent to the IRMC meeting seeking the Board’s views,
concurrence and/or specific directions.
h.

Compliance function

Compliant

The Bank has appointed a dedicated Compliance Officer who is a KMP to head the compliance function of theBank.
The compliance function is an independent function of the Bank that supports the Board of Directors andSenior Management of the Bank to manage compliance risks by supporting the Bank to embed a cultureof compliance within the Bank, disseminate new laws and regulations to business in a timely manner,provide guidance on the interpretation of regulatory requirements, support business with the creationand implementation of regulatory compliant policies and procedures, undertake independent compliancemonitoring of business with relevant laws and regulations and all measures taken to mitigate compliance risks.
The Compliance Officer submits to the IRMC and the Board a detailed report on the Compliance status of the
Bank each quarter.

3 (7) Related Party Transactions
3 (7) (i)Avoid conflict of interest

Compliant

The Bank has is in place a Board-approved Related Party Transactions (RPT) Policy which has set out theprocedure to be followed when transacting with related parties. The RPT Policy was adopted by the Bank to
identify, report, approve, monitor, clarify and disclose transactions with related parties of the Bank.
The Bank has in place a list of related parties which is updated as and when changes occur and reviewed on aquarterly basis to ensure all related parties are listed accurately.
The list of related parties is circulated to all relationship managers of business units and branch managers
together with an internal circular which describes the regulations that would apply when dealing with relatedparties.
Further, every quarter a sign off is obtained from the business lines confirming that they have complied withthe related party policy when entering into a transaction with a related party.
These processes are in place to remind business lines of the regulatory requirements in relation to related party
transactions thereby ensuring that the Bank avoids conflicts of interests with related parties of the Bank.
The Bank has obtained the annual declarations in 2023 from the individual Directors confirming that they haveavoided conflicts of interests.
Steps have been taken by the Board to avoid any conflicts of interest, that may arise, in transacting with relatedparties as per the definition of this direction. Please refer Section 3(1) (xii) on page 302 of this report for further
information.
Transactions carried out with related parties as defined by LKAS on ‘ Related party Disclosures’ in the normal
course of business are disclosed in Note 52 to the Financial Statements on ‘Related Party Disclosures’ on page
252 to 256.
The net accommodation granted to each category of related parties as a percentage of the Bank’s regulatory
capital is given under Rule No 3 (8) (ii) (e) on page 313.
3 (7) (ii)

Types of Related party transactions covered by the direction

Compliant

The RPT Policy of the Bank covers all transactions that come within the scope of this Direction.

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311

Rule No.

Corporate Governance Principles

Compliance
Status3 (7) (iii)

No more favourable treatment to Related Parties of the Bank

CompliantA list identifying Related Parties of the Bank in line with this Direction is shared with business lines on aquarterly basis.
The regulations and process that needs to be complied with is explained in an internal circular whichaccompanies the related party list.
Business lines are requested to ensure compliance with the required regulation and to refrain from granting
related parties of the Bank “more favourable treatment”.
Further, the Compliance Department reviews transactions with related parties on an ongoing basis todetermine if “more favourable treatment” have been offered to them. Any deviations are required to bereported to the Related Party Transactions Review Committee the Audit Committee and the Integrated Risk
Management Committee.
3 (7) (iv)

Granting accommodation to a Director or close relation of a Director

CompliantThis requirement has been included in the Bank’s RPT Policy and all frontline staff/Business lines have been
made aware of the procedures to be followed, approvals to be obtained etc. The Company Secretary upon
being informed of a transaction with a related party and receiving the required proposal, shall ensure
submission of the related papers/information to the Board for approval.
3 (7) (v)

Accommodations granted to persons, concerns of persons, or close relations of persons, who
subsequently are appointed as Directors of the Bank

CompliantPrior to the appointment of a Director, the Director is required to submit an affidavit disclosing all their interests
with the Bank. Accordingly, the Company Secretary will take steps to inform the relevant internal/control
functions of these disclosures so that the frontline staff/Business lines are aware and can take the necessary
regulatory/statutory steps.
3 (7) (vi)

No favourable treatment or accommodation to Bank employees or their close relations

CompliantNo favourable treatment/accommodation is provided to Bank employees other than staff benefits. Employeesof the Bank are informed through operational circulars to refrain from granting favourable treatment to other
employees or their close relations or to any concern in which an employee or close relation has a substantial
interest.
3 (7) (vii)

Remittance of accommodation subject to Monetary Board approval

CompliantSuch a situation has not arisen in the Bank to date.

3 (8) Disclosures
3 (8) (i)Publish annual and quarterly financial statements

Compliant

The Financial Statements for the year ended 31 December 2023 and quarterly Financial Statements are inconformity with all rules and regulations. These Statements have been published in the newspapers in all threelanguages.
Compliant

3 (8) (ii)Disclosures in Annual Reporta.

A statement to the effect that the Annual Audited Financial Statements have been prepared in linewith applicable accounting standards and regulatory requirements, inclusive of specific disclosures
Compliance with applicable accounting standards and regulatory requirements have been reported under the‘Directors’ Responsibility for Financial Reporting on page 156, the Responsibility Statement of Chief Executive
Officer and Vice President-Finance on page 159 and Note 2.1 (Statement of Compliance) to the Financial
Statements on page 177.

b.

Report by the Board on the Bank’s internal control mechanism

Compliant

The Directors’ Report on the effectiveness of the internal control system over Financial Reporting is given
under the “Statement of Internal Control” on pages 157 to 158.
c.

External Auditors Certification on the Effectiveness of the Internal Control Mechanism
The Assurance Report issued by the External Auditor on the internal control over Financial Reporting based on
the auditing framework issued by ICASL, is detailed on page 160 of this report.

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Annual Report 2023

Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
Statusd.

Details of Directors, including names, fitness and propriety, transactions with the Bank and the totalof fees/remuneration paid by the Bank

CompliantPlease refer “Board Directors” on pages 22 to 29 “Directors’ Interest in Contracts with the Bank” on pages 137138 and Note no 14 on page 195 for Directors’ remuneration.
The Executive Director is the CEO of the Bank and as such is not paid any additional remuneration or benefits
by virtue of him being an Executive Director.
Details of Directors’ transactions with the Bank are given below:
Transactions

Outstanding balance as at 31 December 2023
LKR’000

Accommodation
Deposits
Investments
e.

1,500
222,395
5,000

Total accommodation granted to each category of related party and as a percentage of the Bank’s
regulatory capitalCompliantTotal Net Accommodation granted to related parties as a percentage of the Bank’s regulatory capital are given
below:
Category of Related Parties

Net Accommodation
as at 31 December
2023
LKR’000% ofRegulatory
Capital

1,500

0.002%

130,7080.175%

650,000

0.872%

Directors/Close Family Members/Substantial Interest
concerns
Key Management Personnel/Close Family members/
Substantial Interest concerns
The Bank’s subsidiaries and associate companiesf.

Aggregate values of remuneration to and transactions with KMP

CompliantAggregate values of remuneration paid by the Bank and transactions of the Bank with its KMP

g.

Transaction type

Aggregate values/Outstanding balances
as at 31 December 2023 in LKR ‘000

Remuneration Paid
Accommodation
Deposits
Investments

320,139
130,708592,209
7,000

External Auditors Certification of Compliance

CompliantComplied by this Report.
h.

Report confirming compliance with prudential requirements, regulations, laws, and internal controls

Compliant

There are no material non-compliance to prudential requirements regulations, laws and internal controls
affecting the Bank.
i.

Non-compliance ReportCompliant

There were no supervisory concerns on lapses in the Bank’s Risk Management System or non-compliance withthis Direction, that have been pointed out by the Director of the Bank Supervision Department of the CBSL andrequiring disclosure to the public.

3 (9) Transitional and other general provisions
The Bank has complied with the transitional provisions, where applicable.

Corporate Governance

National Development Bank PLC

CompliantAnnual Report 2023

313

STATEMENT OF COMPLIANCE - CODE OF BEST PRACTICES ON CORPORATE GOVERNANCE 2023 (THE CODE) ISSUED BY THE INSTITUTE
OF CHARTERED ACCOUNTANTS OF SRI LANKA (CA SRI LANKA).
The Bank has over the years been cognizant of the standards set forth in the Code of Best Practices of 2017, and has been fully compliant therewith. The
revised Code of Best Practices on Corporate Governance 2023 (the “Code”) was launched on 08 December 2023, building on the previous Code of Best
Practices 2017. The Code is intended to provide a corporate governance framework that supports strong business ethics, sound policies and procedures
and an effective monitoring system which is in line with international best practices.
The Code is broadly divided into three areas, namely the Company, Shareholders and other matters
I. The Company
Key principles are detailed under the following broad areas viz. Directors, Directors’ Remuneration, Relations with shareholders, and Accountability and Audit.
II. Shareholders
Key principles are detailed under the following broad areas viz. Institutional Investors and Other Investors.
III. Other Matters
This section covers the areas Internet of Things and Cyber-security, Sustainability: Environmental, Social and Governance (ESG) Risk and Opportunities, andSpecial Considerations for listed entities.
The Bank’s adherence with the revised code is detailed below with explanatory comments as follows;

Rule No.

Corporate Governance Principles

A.

Directors

A.1

The Board

Compliance
Status

As at 31 December 2023 the Board comprised of ten Directors, nine of whom, including the Chairman, functioned
in a non-executive capacity. The members of the Board consists of professionals in the fields of banking, finance,
management, treasury, law, accounting, auditing, IT, economics, investments, private sector exposures and possess
the skills, experience and leadership required to direct, lead and control the Bank. The Chief Executive Officer (CEO)is the only Executive Director. The Board has appointed several Board subcommittees to assist in the discharge of
their collective responsibilities.

Compliant

The Bank is mindful of the need to maintain an appropriate mix of skills and experience in the Board through aregular review of its composition in ensuring that the skill representation is in alignment with current and futureneeds of the Bank. Additionally, individual Directors are encouraged to seek expert opinion and/or professional
advice on matters where they may not have full knowledge or expertise.
A.1.1

Regular Board meetings
The Board usually meets on monthly intervals, but meets more frequently whenever it is necessary. The Board
met sixteen (16) times during the year which included four (4) special meetings. Scheduled Board and Board
subcommittee meetings are arranged at the end of the previous calendar year. Attendance at Board andsubcommittee meetings is provided on pages 123 to 124.

A.1.2

Role and responsibilities of the Board
Business Strategy

Compliant

The Board is responsible to stakeholders for creating and delivering sustainable shareholder value through the
management of the Bank and Group‘s businesses. It determines the strategic objectives and policies of the Bankand Group to deliver such long term value, providing overall strategic direction within a framework of rewards,
incentives and controls. Given the rapidly evolving market conditions locally and globally, the senior management
engaged in a critical evaluation of the Strategic Plan in 2023 and developed a medium term strategic plan to be
implemented during FY24 & FY25 period, covering the latter half of V-25 Strategy horizon. This mid-term strategy
aims to closely align the Bank’s business strategy to the current operating environment and address the key
concerns with regard to earnings and balance sheet to better position the Bank to face new challenges. Thesechanges and thinking are being cascaded down to all staff to ensure alignment of the Bank as a whole with theupdated Strategic Plan.

314

CompliantNational Development Bank PLC

Annual Report 2023

Corporate GovernanceRule No.

Corporate Governance Principles

Compliance
StatusSenior Independent Director

Compliant

In terms of the Bank’s Article of Association the Bank’s Chairman is mandatorily an Independent Director therefore
the need to appoint a Senior Independent Director does not arise.
The CEO and Management Team skills, experience and knowledge to implement the strategy

Compliant

The Human Resources and Remuneration Committee (HRRC) and the Nominations and Governance Committee
ensure that the CEO and Key Management Personnel (KMP) have the required skills, experience and knowledge toimplement strategy.
The CEO and The Leadership Team consist of senior bankers with substantial experience in the field of banking andfinance. The profiles of The Leadership Team are available on the pages 30 to 32.
Succession strategy of CEO and KMP

Compliant

The succession plan of the Bank was reviewed and approved by the Board at its meeting held in June 2023.
Budgets and major capital expenditure

CompliantAnnual budget is approved before the commencement of the year. Major capital expenditure requires the approvalof the Board.
Delegation of Authority

Compliant

To enable the Board to discharge its stewardship and fiduciary responsibilities effectively it delegates authority to
the Board Subcommittees to oversee specific responsibilities based on clearly defined Terms of References which
are also detailed under Section 3(1)(i)(h) of the CBSL table on page 300 of this report.
Integrity of information, internal controls, cyber security, business continuity and risk management

Compliant

The Board is responsible for the overall risk framework of the Bank.
There is in place an adequate system of internal controls. Policies relating to securing information, cyber security,business continuity and risk management have been approved by the Board. These policies have been reviewed
by either the Integrated Risk Management Committee (IRMC) or the Audit Committee (AC).
The AC reviews Internal Audit reports submitted by the Internal Audit Department and monitors follow up action.
Further, based on the assessment of Internal Control Over Financial Reporting (ICOFR), Directors concluded that theBank’s Internal Control Over Financial Reporting is effective.
The IRMC appointed by the Board, reviews and recommends to the Board, the Bank’s risk policies and procedures
defining the Bank’s risk appetite, identifying principal risks, setting governance structures and implementing
policies and systems in line with the Integrated Risk Management Framework to measure, monitor and manage
the principal risks of the Bank. The Board has approved risk management policies and procedures as reviewed andrecommended by the IRMC, based on these parameters and as required by Regulation.
The following reports provide further insight in this regard:y

The Risk Management Report (pages 337 to 356)y

The Board Integrated Risk Management Committee Report on (pages 144 to 146)y

The Directors’ Statement on Internal Control (pages 157 to 158)y

The Audit Committee Report (pages 147 to 148)

Availability of Information and Communications Technology (ICT) roadmap in line with business strategy

Compliant

The Bank has established an ICT roadmap in line with the Bank’s business strategy. The Bank diligently monitors theimplementation progress of the ICT roadmap through the ICT dashboard,
Compliance with laws, regulations and ethical standards

Compliant

The compliance function is an independent function of the Bank that supports the Board of Directors and Senior
Management of the Bank to manage compliance risks by supporting the Bank to embed a culture of compliancewithin the Bank, disseminate new laws and regulations in a timely manner, provide guidance on the interpretationof regulatory requirements, support business with the creation and implementation of regulatory compliant
policies and procedures, undertake independent compliance monitoring of business with relevant laws andregulations and take measures to mitigate compliance risks.
The Compliance Officer submits to the IRMC and the Board a detailed report on the Compliance status of the Bank
each quarter.

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315

Rule No.

Corporate Governance Principles

Compliance
StatusAll stakeholder interests are considered in corporate decisions

Compliant

The Board of Directors considers the views/impact on all stakeholders of the Bank when decisions are made at
Board meetings.
Sustainable business development and “integrated reporting”

CompliantSustainable business development is one of the key areas of focus considered by the Board when taking decisions.
Please refer to the Bank’s Sustainability Report on pages 102 to 103 for more details.
The Bank’s Annual Report is presented in line with the integrated reporting guidelines issued by the Institute ofChartered Accountants of Sri Lanka.
Accounting policies and fostering compliance with financial regulations

Compliant

The AC and the Board reviews accounting policies annually to ensure that the Financial Reporting Model of the
Bank is in line with such policies, financial regulations, evolving international and local accounting standards andindustry best practices.
The Board ensures that the Financial Statements of the Bank are prepared in accordance with the approved
accounting policies.
Monitoring and evaluation of progress on strategy implementation, budgets, plans and related risks

Compliant

The Management monitors budgets on frequent intervals (daily/weekly/monthly) and is reviewed by the Board on amonthly basis. Strategy is approved by the Board Strategic Issues Committee and the Board. The Board also reviews
the implementation progress regularly.
Corporate reporting relevant to the Bank

Compliant

The Bank is listed in the Colombo Stock Exchange and conforms to the Listing Rules issued by the Colombo Stock
Exchange and also adheres to the regulations applicable to Licensed Commercial Banks. Therefore corporate
reporting on an annual and quarterly basis is carried out in line with the regulations
Fulfilling such other Board functions as are vital, given the scale, nature and complexity of the businessconcerned

Compliant

The Board makes every endeavour to fulfill its stewardship obligations on behalf of all stakeholders. The Board iscommitted to fulfilling their functions in line with laws, regulations and good governance practices adopted by the
Bank.
A.1.3

Act in accordance with laws
There is significant emphasis across the Bank to ensure compliance with applicable laws and regulations.

CompliantIn order to preserve the independence of the Board and to strengthen the decision making, the Board seeks
independent professional advice when deemed necessary. The Board-approved internal Code of Corporate
Governance contains the procedure to be followed when a Director or the Board wishes to obtain independent
professional advice on any matter.
A.1.4

Access to advice and services of Company Secretary
The Company Secretary advises the Board and ensures that matters concerning the Companies Act, Board procedures
and other applicable rules and regulations are followed.

Compliant

All Directors have access to the Company Secretary and she possesses the required qualifications as set out in
the Companies Act and the Banking Act. For the year 2023 the Company Secretary has provided assistance to the
Directors when requested. The Company Secretary exclusively serves in the capacity of Company Secretary and does
not hold simultaneous employment in another capacity within the Bank. Please refer page 116 for more details on therole of the Company Secretary.
The Bank has in place an insurance cover for the Directors and its Officers.
A.1.5

Independent judgment
The Board combines an appropriate and diverse balance of skills, industry experience and perspective to objectively
discharge its responsibilities. All Directors bring their independent judgment to matters discussed at Board meetings.
Details of Directors deliberations are contained in the minutes maintained by the Company Secretary.

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Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
StatusA.1.6

Dedicate adequate time and effort to matters of the Board and the Company
Every member of the Board has dedicated adequate time and effort for the affairs of the Bank by attending Board
meetings, Board Subcommittee meetings and by making decisions via circular resolutions. In addition, the Board
members have meetings and discussions with the Management when required.

Compliant

Board papers are circulated to the Board at least seven days prior to each Board meeting. Any request for additional
information is made to the Company Secretary. The relevant member of staff is informed by the Company Secretary
and the requisite information is forwarded. All matters that require follow up are discussed at the immediately
succeeding Board meeting under ‘Matters Arising’. Business heads regularly update the Board on the status anddevelopment in their respective fields.
The CEO on a regular basis updates the Board on business changes, operational risks and controls relevant to the Bank.
Please refer page 120 which illustrates how the Board spent its time in 2023.
A.1.7

Call for a resolution to be presented to the Board
All Directors are entitled to include matters and proposals in the agenda for Board meetings and this right has been
entrenched in the Bank’s internal Code of Corporate Governance.

CompliantMonthly meetings are scheduled and informed to the Board at the beginning of each calendar year to enablesubmission of proposals in the agenda for regular meetings. This process supports the requirement detailed in thisCode and a Director may include a proposal (if required) in the agenda of a Board meeting.
A.1.8

Board induction and training
The Board policy on Directors’ training is to provide adequate opportunities for continuous development, appropriate
for each Director.

Compliant

The Chairman is responsible for ensuring that the Directors continually update their skills, knowledge and awarenessof the Bank’s policies and procedures as required to fulfill their roles both on the Board and on Committees appointed
by the Board.
New Directors are provided with a comprehensive induction pack on appointment to the Board. Please refer thesection on “Induction and Training of Directors” on page 116 for more details. During their onboarding, new Directors
are also made aware of internal policies and external laws regulating Directors’ conduct, thus ensuring that the new
Directors give due consideration to responsibilities of their role, their ability to dedicate time and possessing requiredcompetencies. Directors also submit a declaration when they are appointed (and thereafter on an annual basis)
disclosing all potential conflicts of interest.
A.2

Separating the business of the Board from the executive responsibilities for management of the Bank

A.2.1

Divisions of Responsibilities between the Chairman and CEO

A.5.7
A.5.8

The posts of Chairman and CEO of the Bank are held by two separate persons and there is a clear division of
responsibilities between them thereby maintaining the balance of power between the two roles. As such, there is norequirement to appoint a Senior Independent Director.

A.3

Chairman’s role in preserving good corporate governance

A.3.1

Conducting Board proceedings in a proper mannerCompliantCompliant

The Board-approved internal Code of Corporate Governance formally details the role of the Chairman. The
Chairman ensures that the affairs of the Board are conducted in an effective manner. He encourages Directors
to share their views on matters discussed and ensures the participation of both Executive and Non-Executive
Directors thereby maintaining a balance of power between Executive and Non-Executive Directors. The Chairman
approved the agenda for each meeting in consultation with the CEO and the Company Secretary and ensured
that all Board proceedings were conducted in a proper manner. All Directors are encouraged to seek informationconsidered necessary to discuss matters on the agenda of meetings. The views of Directors on issues underconsideration are ascertained and records of such deliberations are reflected in the minutes.
A.4

Availability of financial acumen and knowledge to offer guidance on matters of finance

A.4.1

Financial Acumen and Knowledge

Compliant

The Chairman of the AC who is an Independent Non-Executive Director is a Fellow Member of the CA Sri Lanka
ensuring a sufficiency of financial acumen within the Board on matters of finance. Further, 8 of the 10 Directors
have a vast experience on matters of financeCorporate Governance

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Annual Report 2023

317

Rule No.

Corporate Governance Principles

Compliance
StatusA.5

Board balance

A.5.1

Board to have a balance of Executive and Non-Executive Directors

Compliant

9 of the 10 Directors on the Board are Non-Executive Directors. The CEO is the only Executive Director. The
Chairman is a Non-Executive Independent Director.
A.5.2 –
A.5.5

Board Independence

Compliant

The Board’s independence was strengthened in 2023, with the appointment of 2 new Independent Directors(Ms. Shweta Pandey and Mr. Hasitha Premaratne). There were 9 Non-Executive Directors on the Board as at 31
December 2023. Of them 8 are independent of management and free of business dealings that may be perceived
to interfere with the exercise of their unfettered and independent judgement. Each Non-Executive Director has
submitted a signed and dated declaration in 2023 of his/her independence and any developments bearing an
impact on their status of independence are disclosed to the Company Secretary immediately.
The details of Non-Executive Independent Directors are given on pages 111 and 123 of this report. Accordingly, thenumber of Independent Non-Executive Directors exceeds two-thirds of the total number of Directors on the Board.

A.5.6

Appointing an Alternate Director

Compliant

Directors appoint Alternate Directors in line with the Listing Rules, the Articles of the Bank and the Banking Act
as and when required for a particular meeting. An Alternate Director of a Non-Executive Director will not be an
Executive Director, and an Alternate Director of an Independent Director is also Independent.
A.5.9

Chairman to meet only with Non-Executive Directors as necessary and at least once each year

Compliant

As and when needed the Chairman discusses matters related to the Executive Director only in the presence of
Non-Executive Directors.
A.5.10Recording of a dissenting view

CompliantDissenting views are recorded in the Board minutes in detail.
Directors’ concerns regarding matters which are not resolved unanimously are also recorded in the minutes.
A.6

Supply of Information

A.6.1 A.6.2

Provision of providing appropriate and timely information to the Board

Compliant

The Management provides comprehensive information including both quantitative and qualitative information forthe monthly Board meetings generally 7 days prior to the Board meetings.
Members of The Leadership Team make presentations to Directors on important issues relating to financial
performance, strategy, risk management, investment proposals, systems and procedures, where necessary.
The Directors also have access to the Management to obtain further information or clarify any concerns they may
have. As described above, they also have the right to seek independent professional advice at the Bank’s expense.

A.7

Appointments to the Board

A.7.1

Nominations and Governance Committee

Compliant

The Board has established a Nominations and Governance Committee in line with the Listing Rules of the Colombo
Stock Exchange and the Banking Act which makes recommendations to the Board on new Board appointments.
The Committee comprises 4 Non-Executive Directors, with 3 of them serving as Independent Directors. The
Committee Chairmanship is held by an Independent Non-Executive Director, underscoring the Bank’s commitment
to impartial and diligent decision making in shaping the composition of the Board.

318

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Annual Report 2023

Corporate GovernanceRule No.

Corporate Governance Principles

Compliance
StatusA.7.2

Ensure Board appointees are fit and proper

Compliant

There is in place a Board-approved policy and process for appointments of Directors to the Board. The Nominationsand Governance Committee also assess the Board composition against pre-defined criteria of skills, diversity andknowledge to ensure that Board appointees are fit and proper. The Committee has actively prioritised diversity inBoard composition, taking into account gender, age and any other factors that are relevant to the Banking industry.
The Composition of the Board was further diversified and strengthend in 2023 with the appointment of 2 new
Independent Directors. Ms. Shweta Pandey brings relevant experience in the fields of payments, IT and FinTech, andMr. Hasitha Premaratne brings valuable financial expertise and perspectives from the private sector of the country.
The Members of the Committee have not participated in decision making relating to their own appointment/
reappointment and the Chairman of the Board does not chair the Committee when it is dealing with theappointment of his successor.
Please refer pages 139 to 141 for the report of the Nominations and Governance Committee.
A.7.3

Succession plan for the Chief Executive Officer and KMP

Compliant

The Nominations and Governance Committee has ensured that there is a succession plan for the Chief Executive
Officer and Key Management Personnel. The Committee has determined the training and development
requirements for those identified for succession.
A.7.4

Disclosure to shareholders on new appointments to the Board

Compliant

When there are new Director appointments or Alternate Director appointments, disclosures are made toshareholders in terms of the Listing Rules issued by the Colombo Stock Exchange.
A.7.5

Nominations and Governance Committee Members to be disclosed in the Annual ReportCompliant

The Chairman and Members of the Nominations and Governance Committee have been identified in the Annual
Report.
Please refer pages 139 to 141 for the report of the Nominations and Governance Committee for a description of its
scope of work and processes.
A.8

Re-election

A.8.1A.8.2

Re-election of Directors at regular intervals

Compliant

Directors to retire at the Annual General Meeting (AGM):
As per the Articles of the Bank, 1/3rd of the Directors (except the CEO, any Director appointed to fill a casualvacancy and any Nominee Director of the Ministry of Finance) should retire at each AGM and be subject tore-election. Such Directors who retire are those who held office for the longest time period since the election/
re-appointment. In accordance with this provision, The Nominations and Governance Committee in February 2024
has considered and recommended the re-election of Mr. Sriyan Cooray and Mr. Sujeewa Mudalige.
Prior to recommending the above re-election/re-appointments of Directors the Nominations and GovernanceCommittee considered the fitness and proprietary of each Director and made recommendations for re-election.

A.8.3

Resignation of a Director

Compliant

There was only one resignation during 2023.
The Bank made the relevant disclosures as required under Section 3(2)(xi) of the CBSL table on page 111 of thisreport and the Listing rules.
A.9

Appraisal of Board and Committee Performance

A.9.1 A.9.4

Self-evaluation process of Board Members & Subcommittees

Compliant

The Board carried out its self-evaluation process in respect of the year 2023. The process is led by the Chairman andall Directors were required to complete a detailed questionnaire. The Bank intends to review this process and makenecessary revisions thereto, in line with the recent revisions to the Code.
The processes adopted are detailed on page 116 of this report.
All Subcommittees also carried out a self-evaluation process in 2023 to determine the effectiveness of theirperformance in 2023 and to identify areas for improvement which are subsequently discussed at their respective
meetings, the minutes of which are submitted to the Board.

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Rule No.

Corporate Governance Principles

Compliance
Status

A.10

Disclosure of Information in Respect of Directors

A.10.1

Annual Report to disclose specified information regarding Directors
Information Required

Compliant
Page Reference

Name, qualification and brief profile

24 to 29Nature of his/her expertise in the relevant functional areas

111

Immediate family and/or material business relationships with other Directors of the Bank
Whether Executive, Non-Executive and/or Independent Director

117
111 and 123

Names of listed companies in which the Director concerned serves as a Director

24 to 28

Names of other companies or companies in a group in Sri Lanka in which the Director
concerned serves as a Director

24 to 28

Board meeting attendance123

The total number of Board seats held by each Director
Board committee served as the Chairman/member

123 to 124

Committee meeting attendance

123 to 124

A.11

Appraisal of the CEO

A.11.1 A.11.2

Setting annual targets and the appraisal of the CEO

B

Directors’ remuneration

B.1

Remuneration procedure

B.2

24 to 29 and 304 item
3 (3) (ii)Compliant

The Board discussed and set financial and non-financial targets to be achieved during the year by the CEO withreference to the short, medium and long term objectives of the Bank at the beginning of 2023. The HRRC/Board
will evaluate the performance of the recently appointed CEO against the goals and targets set for 2024, in thefollowing year.

The Bank has a formal and transparent procedure for developing policy on executive remuneration and the
remuneration packages of individual Directors. No Director is involved in fixing his/her own remuneration.

CompliantLevel and make-up of remuneration

CompliantLevel and make-up of remuneration of both Executive and Non-Executive Directors are sufficient to attract andretain the Directors in order to run the Bank successfully. A proportion of the Executive Director’s remuneration is
structured to link rewards to corporate and individual performance ensuring the balance between short, medium
and long-term perspectives of the performance outcomes.
B.2.1

Establishment of a Remuneration Committee

Compliant

The Board has established a Human Resources and Remuneration Committee (HRRC) to develop policy
and determine remuneration for the Directors and KMP. No Director was involved in deciding his/her own
remuneration.
B.2.2

Composition of the Remuneration Committee

B.2.15

The HRRC consists of 4 Non-Executive Directors out of which 3 are independent. The Chairman Mr. Sriyan Cooray
is an Independent Non-Executive Director. Please refer pages 142 to 143 for the report of the HRRC for more details
on the composition and activities carried out by the HRRC for the year 2023.

B.2.3

Seek professional advice

CompliantCompliant

The HRRC has access to professional advice from within and external consultants. During the year, HRRC reviewed
the information provided by the Bank’s Human Resources Department to determine market and industry trends
with remuneration and perquisites for its Senior Management team.
B.2.4

Remuneration for Executive Directors

B.2.5

The Executive Director is an ex-officio Director on account of being the CEO of the Bank and as such is not paid any
additional remuneration or benefits by virtue of him being an Executive Director. The CEO’s remuneration is linked
to the Bank’s performance as well as his individual performance and is designed to promote the short medium
and long-term performance of the Bank. The Executive Director does not participate in the HRRC when matterspertaining to his remuneration are discussed.

320

National Development Bank PLC

Annual Report 2023

CompliantCorporate GovernanceRule No.

Corporate Governance Principles

Compliance
StatusB.2.6

Positioning the Bank’s remuneration levels relative to other companies in the industry

Compliant

The HRRC reviews information relating to remuneration and perquisites of CEO and Senior Management of the
Bank and due care is taken to ensure that remuneration is commensurate with industry standards and both theBank’s and individual performance. Regular salary surveys are carried out and the HRRC is informed of the results ofthe survey.
B.2.7

Comparison of remuneration levels with other Companies in the Group

CompliantSize and scale of the Bank are not comparable with Group Companies.
B.2.8

Performance related remuneration of CEO & Executive Directors

Compliant

The goals and targets of the CEO are set at the beginning of the year and cascaded to the rest of the Bank.
Executive remuneration and performance bonuses are decided based on achievement of the goals and targets
agreed upon. The Committee reviews annually the performance of the CEO against the set targets and goals,
which have been approved by the Board, and recommend the basis for revising remuneration, benefits and otherpayments of performance-based incentives.
The Committee has ensured that the guidelines for fair and transparent procedures recommended by theCommittee and approved by the Board for evaluating senior management’s performance and revising theirremuneration, benefits and other payments of performance-based incentives have been followed.
B.2.9

Employee Share Options

Compliant

An employee share scheme was established in 2016 which was approved by the shareholders in line with thelisting rules of the CSE. However no shares were issued under this scheme in 2023. Details are given in the Financial
Statements on pages 243 to 244 .
B.2.10Designing schemes of performance related remuneration

Compliant

No remuneration or benefits are paid to the only Executive Director who is the CEO on account of his Executive
Directorship. Please refer pages 142 to 143 for the report of the HRRC for more details on remuneration.
B.2.11 –B.2.12

Early termination of Executive Director

B.2.13

Determining the remuneration of the Non-Executive Directors including the members of theRemuneration Committee

CompliantTermination of service of the Executive Director will be in accordance with his contract of employment as he is an
ex-officio Director.
Compliant

The HRRC determines the remuneration of the Non-Executive Directors in line with the Board approved
Remuneration Policy and approvals for the remuneration are obtained from shareholders at the AGM.
B.2.14

Levels of remuneration of Non-Executive Directors

Compliant

Non-Executive Directors are remunerated in line with the prevailing regulations and market practices while thishave been reviewed periodically. However they are not entitled to receive any performance-based remuneration
which includes shares under the existing Share Option Scheme of the Bank.
B.3

Disclosure of remuneration

B.3.1

Disclosures related to remuneration in Annual ReportCompliantPlease refer pages 142 to 143 of the Annual Report for the Report of the HRRC.
Also refer Note 14 on page 195 of the Financial Statements for aggregate remuneration paid to Executive and NonExecutive Directors.
B.3.2

Annual Report to disclose the number and aggregate remuneration of the Senior Management personnel
reporting directly to the CEO

Compliant

The aggregate values of remuneration to the KMP of the Bank are disclosed on page 252.

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Annual Report 2023

321

Rule No.

Corporate Governance Principles

Compliance
StatusC

Relations with shareholders

C.1

Constructive use of the AGM and conduct of General Meetings

C.1.1

Notice of the AGM

Compliant

The AGM provides a forum for all shareholders to participate in decision making matters reserved for theshareholders. Notice of the AGM is circulated 15 working days in advance with the Annual Report and Accounts.
A summary of the procedures governing voting at General Meetings is included on page 403 of this Annual Report.
C.1.2

Separate resolutions for substantially separate issues

Compliant

Separate resolutions are obtained for substantially separate matters to provide shareholders with an opportunity
to deal with each significant matter separately. The Annual Report of the Board of Directors and Accounts are laid
before the shareholders of the Bank for their consideration as a separate item on the agenda at the AGM.
C.1.3

Valid proxy appointments

Compliant

The Bank has in place an effective mechanism to record all proxy votes to indicate to the Chairman the level ofproxies lodged on each resolution and the number of votes for and against each resolution. As a matter of practice,
proxy votes together with the votes of shareholders present at the AGM are considered for each resolution andduly recorded in the minutes.
C.1.4

Board subcommittee Chairmans available at AGM

Compliant

The Chairman of the Board functions as the Chairman of the Nominations and Governance Committee, Human
Resources and Remuneration Committee, Strategic Issues Committee and the Related Party Transactions Review
Committee. He ensures that the Chairpersons of the other Board Subcommittees are also present at the AGM toanswer all queries that may be raised. The Chairpersons of the Board Subcommittees participated at the AGM heldin 2023.
C.1.5

Adequate notice of all meetings to shareholders

Compliant

The notice of meeting and related documents are circulated to the shareholders 15 working days prior to the AGM.
Summary of the procedures governing voting at the AGM is provided in the proxy form, which is circulated toshareholders together with the notice of meeting 15 working days prior to the AGM.
The Board encourages all shareholders to actively participate in the AGM. The shareholders may raise any queries
they have with the Directors.
C.2

Communication with shareholders

C.2.1

Effective communication with shareholders

Compliant

The Bank has in place a Communication Policy which sets out many channels of communication to reachall shareholders of the Bank in order to disseminate timely information. The effective communication withshareholders are detailed in Section 3(1)(i)(d) of the CBSL table on page 299 of this report.
Also please refer page 404 on “Investor Relations” for more details on communication with our shareholders.
C.2.2 C.2.3

Disclosure of the policy and methodology for communication with shareholders and implementation

C.2.4 –
C.2.7

Contact person for communication with shareholders matters and process for Directors awareness ofmajor concerns/issues.
Details of the contact personnel are provided in the “Corporate Information” section on page 404 of this Report. In
addition, shareholders are encouraged to provide their feedback to the Chairman and/or the Company Secretary.
The Bank’s website’s Investor Relations page also carries contact details of the Company Secretary and a dedicatede-mail for investor relations is also provided.
The principal forum for shareholders is the AGM, while matters can also be raised through the Company Secretary.
The Company Secretary keeps the Board apprised of issues raised by the shareholders to ensure that they are
addressed in an appropriate manner keeping in line with the corporate values of the Bank. Matters raised in writing
are responded by the Company Secretary in writing. Shareholder correspondence on major issues are handled by
the Chairman who will communicate to the Board of Directors as an when necessary.

322Compliant

There is in place a Board-approved Disclosure Policy and a Communication Policy that deals with communications
with shareholders. Please refer the “Corporate Governance Report” on page 125 for details of the policy andmethodology adopted for communication.

National Development Bank PLC

Annual Report 2023

Corporate GovernanceCompliantRule No.

Corporate Governance Principles

Compliance
StatusC.3

Major and material transactions

C.3.1 –
C.3.2

Disclosure of major and material transactions

C.3.3

Disclosure requirements and shareholder approval by special resolution

Not Applicable

During 2023 there were no major transactions as defined by Section 185 of the Companies Act No. 7 of 2007 whichmaterially affected the Bank’s net asset base.
Compliant

The Bank being a public listed company complies with the disclosure requirements and shareholder approvalby special resolution as required by the rules and regulation of the Securities Exchange Commission and by the
Colombo Stock Exchange as well as the Companies Act and the Bank’s Articles of Association.

D

Accountability and audit

D.1

Financial and business reporting

D.1.1

True, fair, balanced and understandable presentation of Annual Report including Financial Statementswith the relevant laws and regulations

CompliantDeclarations by the Directors as required by the Code of Best Practice on Corporate Governance are provided on
page 156 in the ‘Statement of Directors’ Responsibilities for Financial Reporting.
D.1.2

Balanced and understandable assessment of interim and other price-sensitive public reports to regulators

Compliant

The Board is aware of its responsibility to present regulatory and statutory reports in a balanced andunderstandable manner. A statement to this effect is provided on page 156 of this Report.
The Interim Accounts and Annual Financial Statements were published on a timely basis in 2023. Regulatory reports
were filed by the Bank on or before the due dates in 2023. Price sensitive information was disclosed to the Colombo
Stock Exchange on a timely basis in accordance with the Bank’s Board-approved Disclosure Policy.
The Bank makes every effort to provide a detailed and transparent analysis of strategies, performance and future
strategies to support investors in making an informed decision.
In addition to the information provided in the reports mentioned above, a summary of the Interim Accounts and asection on understanding our financials in Financial Capital are provided in the Annual Report. Please refer pages
379 to 380 and 56 to 59 of this Report.
D.1.3

Declarations by the CEO, CFO and the Board on Financial Statements

CompliantPlease refer the Responsibility Statement of Chief Executive Officer and Vice President/ Chief Financial Officer on
page 159 and the Directors’ Statement on Internal Control over Financial Reporting on pages 157 to 158.
D.1.4

Declarations by the Directors in the Directors’ ReportCompliantDeclarations by the Directors as required by the Code are provided on pages 14 to 15 in the ‘Annual Report of theBoard of Directors on the affairs of the Bank’.
D.1.5

Preparation of Financial Statements and reporting responsibilities of auditors

Compliant

The Statement of Directors’ Responsibility, Statement on Internal Controls and Report of the Auditors are provided
on pages 156 to 158 and 166 respectively in the Annual Report.

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323

Rule No.

Corporate Governance Principles

Compliance
StatusD.1.6

Inclusion of a “Management Discussion and Analysis” report in the Annual Report.

Compliant

D.1.7

Information Required

Page Reference

Business Model
Industry structure and developments
Opportunities and threats
Risk management
Internal control systems and their adequacy
Corporate and Enterprise Governance
Stakeholder relationships
Social and environmental governance carried out by the Bank
Financial performance
Investment in physical and intellectual capital
Human resources management carried out by the Bank
Prospects for the future

52-53
40-42
40-42
337
117
110
47-49
95-10356-59
78-79 and 88-89
80
104

Notify serious loss in Net Assets

Compliant

In the unlikely event of the net assets of the Company falling below 50% of Shareholders’ Funds, the Board will
summon an Extraordinary General Meeting (EGM) to notify the shareholders of the position and to explain theremedial action being taken.
This situation has not arisen during 2023.
D.1.8

Disclosure of Related Party Transactions

CompliantA detailed Board-approved documented process is available and has been circulated to all staff through the NDB
Cloud for compliance.
Accordingly, each Related Party has submitted signed and dated quarterly declarations in 2023 mentioning
whether they have related party transactions with the Bank as required under regulations applicable to the Bank tocomply with the disclosure requirements;
The Company Secretary keeps a record of related party transactions and makes necessary disclosures accordingly;
A record on Related Party and Related Party Transactions are maintained by the Bank to capture information tocomply with the respective related party disclosure requirements imposed by CBSL/SEC/Accounting Standards/
Auditing Standards and similar regulations.
Please refer Section 3(7) (i) - 3(7) (vii) of the CBSL table on pages 311 to 312 for more details on the process adopted.
D.2

Risk management and internal control

D.2.1

Adoption of a framework for risk management

Compliant

The Board has adopted a framework for risk management and the processes to identify, assess, monitor andmanage risks with clear delegation of responsibilities to ensure its effectiveness in supporting achievement of thestrategic, operational, and financial objectives of the Bank.
D.2.1.1

Robust assessment of the principal risks

Compliant

The Bank has carried out a robust assessment of the top risks faced by the Bank and an overview of the same isgiven on pages 108 – 109.
D.2.1.2

Description of the risk management framework in the Annual ReportCompliantPlease see the Risk Management Overview on pages 108 – 109 for a description of the risk management
framework, and how identified risks are being managed or mitigated.
D.2.1.3
D.2.1.4
D.2.1.8

Establishment of a Risk Committee

D.2.1.5
D.2.1.7

Composition of the Risk Committee

Compliant

Considering regulatory requirements and the industry specific business risks, the Board has established an
Integrated Risk Management Committee to oversee risk management.
Compliant

The Integrated Risk Management Committee (IRMC) consists of 6 Non-Executive Directors, the CEO, Vice PresidentRisk Management, Vice President – Legal and the Compliance Officer. The Chairman is an Independent NonExecutive Director.
Please refer pages 144 – 146 for the report of the Integrated Risk Management Committee for more details on thecomposition and activities carried out by the Integrated Risk Management Committee for the year 2023.

324

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Corporate GovernanceRule No.

Corporate Governance Principles

Compliance
Status

D.2.1.6

Risk Committee to have written TOR

Compliant

The IRMC has a set of Terms of Reference (TOR) clearly outlining its authority and duties. The TOR shall state how it
would assist the Board’s oversight of risk management.
D.2.2

Establishment of a process to ensure internal control have been designed, implemented and monitored

Compliant

The Board has established a process to ensure that internal controls are designed, implemented and monitored
in order to provide reasonable assurance of the achievement of the Bank’s objectives on reliability of financial
reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.
D.2.2.1

Establishment of internal controls in respect of financial, operational and compliance system

Compliant

The Board has established an effective system of internal controls in respect of financial, operational andcompliance system. The processes and practices have been monitored regularly. The Board annually reviews theeffectiveness of the internal control systems and has provided a report in the Annual Report.
D.2.2.2

Internal audit function

Compliant

The Bank has a fully-fledged Audit Department over which the AC has oversight. The AC reviews the Internal Audit
function at regular intervals.
D.2.2.3

The Audit Committee to review the process and effectiveness of risk management and internal controls,and document to the Board

Compliant

The AC reviewed the internal controls and procedures at 7 meetings held during 2023. The minutes of the ACmeetings are tabled at the meetings of the Board.
The Internal Audit Department carries out regular reviews on the internal control system including internal control
over financial reporting. The AC reviews and evaluates the effectiveness of the internal control system including theinternal controls over financial reporting. The IRMC reviews processes relating to the risk management frameworkof the Bank. The AC Report and the IRMC Report are detailed on pages 147 to 148 and 144 to 146 of this Annual
Report.
D.2.2.4

Maintaining a sound system of internal control and the contents of the Statement of Internal Control

CompliantPlease refer pages 147 to 148 for the AC Report and refer pages 157 to 158 for Directors’ Statement of Complianceon Internal Controls in the manner in which the Board complied with this requirement.
D.3

Audit Committee

D.3.1

Composition of Audit Committee

Compliant

The Audit Committee consists of four Non-Executive Directors, majority of who are Independent. The Chairman is
an Independent Non-Executive Director who has relevant experience in financial reporting and control. Members
are selected to provide a broad set of financial, commercial and other relevant experience to meet the Committee’s
objectives.
Other Members also have financial, commercial and other relevant experience to meet the Committee’s objectives.
D.3.2

Terms of reference of the Audit Committee

CompliantTerms of Reference of the AC is clearly defined in the Charter of the Audit Committee approved by the Board of
Directors, which was last revised and updated in October 2023. This clearly explains the purpose of the Committee,
its duties and responsibilities together with the scope and functions of the Committee. The Committee mainly
deals with matters pertaining to statutory and regulatory compliance in financial reporting and matters with regard
to the External Auditors and Internal Audit.
D.3.3

Disclosures regarding Audit Committee.

CompliantPlease refer pages 147 to 148 of the AC report
D.4

Risk Committee

D.4 .1

Composition

Compliant

The Board has established an Integrated Risk Management Committee (IRMC) which comprises of 6 Non-Executive
Directors, the CEO, Vice President - Risk Management, Vice President - Legal with the Compliance Officer. The
Chairman Mr. Sriyan Cooray is an Independent Non-Executive Director.
D.4.2

Terms of Reference

CompliantTerms of Reference of the IRMC is clearly defined in the Charter of the IRMC approved by the Board of Directors,
which was last revised and updated in February 2023. This clearly explains the purpose of the Committee, its duties
and responsibilities together with the scope and functions of the Committee.

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325

Rule No.

Corporate Governance Principles

Compliance
StatusD.4.3

Regular Risk Meetings

Compliant

The Committee held 05 meetings, during the year under review to discuss the normal scope of work. The quorum
for a meeting is four members of which two shall be Non-Executive Directors. The proceedings of the Committee
meetings have been regularly reported to the Board of Directors.
D.4.4

External Professional Advice

Compliant

The Committee has the authority to seek external professional advice in connection with the performance of its duties
D.4.5

Disclosure on the roles and responsibilities

Compliant

The Committee has disclosed in the Annual Report the roles and how the committee has discharged its
responsibilities.
D.5

Related Party Transactions Review Committee

D.5.1

Related Party and Related Party Transactions will be as defined in LKAS 24

Compliant

The Bank has in place a Board-approved Related Party Policy which ensures that necessary processes are
implemented by the Bank to identify, approve, monitor and disclose related party transactions as required under
Corporate Governance Direction No. 11 of 2007 (as amended), Section 9 of the Listing Rules of the Colombo Stock
Exchange on Corporate Governance and Related Party Transactions and identification and disclosure requirementsin accordance with LKAS 24.
D.5.2

Composition of the Related Party Transactions Review Committee

Compliant

In terms of Section 9 of the Listing Rules issued by the Colombo Stock Exchange, the Bank has constituted a Board
appointed Related Party Transactions Review Committee. The Related Party Transactions Review Committee
consists exclusively of Non-Executive Directors and majority of whom are Independent.
D.5.3

Terms of Reference of the Related Party Transactions Review Committee

Compliant

The Bank has a Board-approved TOR and a Board-approved Related Party Transactions Policy in place which
addresses requirements under this Code.
D.6

Code of business conduct and ethics

D.6.1

Code of Conduct for Directors and Senior Management

D.6.5

The employees of the Bank are governed by a number of robust policies, including the Code of Ethics, Anti-Bribery
and Corruption Policy and the Securities Trading Policy. The Board of Directors and KMP follow the Corporate
Governance Code which broadly addresses inter alia share dealing, confidentiality, conflict of interest and bribery
and corruption.

D.6.6
D.6.7

Compliant

Noting the new requirements and timelines stipulated by the Colombo Stock Exchange, the Bank is in the processof establishing a single Code of Business Conduct and Ethics.
D.6.2

Identification and reporting of material and price sensitive information

Compliant

The Bank has in place a Board-approved Disclosure Policy which ensures that material and price sensitive
information is promptly identified and reported in accordance with the relevant regulations.
D.6.3

Monitoring and disclosure of shares purchased by any Director, KMP or any other employee involved infinancial reporting

Compliant

The Bank has in place a Board-approved Group Securities Trading Policy which restricts Directors and employees
from trading in the NDB share during certain specified blackout periods to ensure that they do not trade basedon price sensitive information. Further, this policy ensures that there is no speculative trading on the NDB shareand a minimum holding requirement. All share trades carried out by the Directors and employees of the Bank aremonitored to ensure compliance.
D.6.4

Establishment of a Whistleblower Policy

Compliant

The Bank has implemented a comprehensive procedure to address concerns raised by Whistleblower Policy, underthe Bank’s Whistleblower Policy. The Bank additionally has an independent ombudsman for staff complaints whichenable employees to raise concerns and complaints.
D.7

Corporate governance disclosures

D.7.1

Disclosure of Corporate GovernanceCompliant

The Bank’s Corporate Governance practices are in accordance with the Banking Act Direction No. 11 of 2007 (asamended) issued by CBSL, the Code, as well as the Corporate Governance Rules for Listed Companies issued by the
Colombo Stock Exchange. The requirement is met with the presentation of this Corporate Governance Report frompages 110 to 136 of the Annual Report and its relevant annexures on pages 298 to 336.

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Corporate GovernanceRule No.

Corporate Governance Principles

Section 2

Shareholders

E

Institutional investors

E.1

Shareholder voting

E.1.1

Encourage voting at AGM

Compliance
StatusCompliant

All shareholders are encouraged to participate at General Meetings and cast their votes.
The AGM is used as an effective channel to create a dialogue between the shareholders and the Board of Directors.
Also, the Chairman and CEO have regular structured meetings with institutional shareholders. Board members arebriefed about the matters discussed at such meetings. Please refer the Investor Relations section on pages 367 to 383.
E.2

Evaluating the corporate governance initiatives of the Bank

CompliantInstitutional investors are encouraged to give due weight to all relevant factors in Board structure and composition.

F.

Other investors

F.1

Independent advice for decision making when investing or divesting directly in shares of the Bank

Compliant

The Annual Report contains sufficient information for a potential investor to carry out his/her own analysis. The
following reports aim to provide a balanced overall assessment of the Bank’s activities, performance and prospects.
Reflections from the Chairman on pages 16 to 17. CEO’s Review on pages 18 to 19.
Management Discussion and Analysis on page 56 onwards. Annual Financial Statements on pages 163 to 290.
Further, Interim Financial Statements published each quarter, provide sufficient information to enable the retailinvestors to make informed judgments regarding the performance of the Bank.
Additionally, there is a separate part of the Bank’s website dedicated to Investor Relations which provides thisinformation online to all investors/shareholders.
F.2

Encourage voting by individual shareholders in General Meetings

CompliantIndividual shareholders are encouraged to participate at the General Meetings of the Bank and exercise their voting
rights.

G.

Internet of Things and Cyber Security

G.1

Process to identify how in the organisation’s business model will mitigate the Cyber Security risks

Compliant

As per the Bank’s Information Security Governance structure, the Information Security Unit defines the policies
required to control Bank-wide information security.
IT Department is responsible in implementing required security standards and monitoring the same while
escalating any anomalies to the Bank’s Senior Management which are then escalated to the IRMC and towards
regulatory authorities as defined.
As per the Information Security Policy in the Bank, access via external devices to the Bank’s network has been
restricted where any exceptional requirement will be approved by the higher management following industry
standard security measures.
G.2

Appointment of Chief Information Security Officer (CISO) and Policies for Cyber Security risk management

Compliant

The Bank’s Information Security Unit has implemented Board approved information security policies and performs
periodic reviews in line with regulatory requirements and industry best practices. A designated officer is appointed
overlook the functions of CISO.
The policies include a robust cyber security risk management process, an incident reporting system, vendor
management system, disaster recovery plan and a governance structure to monitor effective implementation,
reporting process, scope, regularity of an Information and Communications Technology (ICT) audit.
Technology Risk Management unit was instilled as part of Regulatory Framework on Technology Risk Resilience forlicensed banks which is applicable to the entire operations of the Bank including operations carried out throughagents and third party service providers.
G.3

Allocate regular and adequate time on the Board meeting agenda for discussions about cyber risk
management

Compliant

Cyber security risks are discussed at Information Security Committee as the apex management level body responsiblefor information technology resilience of the Bank and IT Steering Committee as relevant and when required.
On a quarterly basis at the IRMC, the Information Security Function will present the status of cyber security risk anddevelopments.

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Rule No.

Corporate Governance Principles

Compliance
StatusG.4

Independent periodic review and assurance on effectiveness of the Cyber Security risk management

CompliantIndependent security reviews & VAPT (Vulnerability Assessment & Penetration Testing) were conducted by KPMG
for all Mobile Payment applications & other public delivery channels including the corporate website. In addition tothis, effectiveness testing for WAF (Web Application Firewall) which provides additional security layer for all public
web applications was also conducted.
It was identified that required security controls are in place as per the industry standards.
G.5

Disclosure of the process to identify and manage Cyber Security risks

CompliantPlease refer page 14 of the Board of Directors report on the affairs of the Bank and page 124 of the Corporate
Governance Report which details the process to identify and manage cyber-security risks.

H

SUSTAINABILITY: ESG RISK AND OPPORTUNITIES

H.1

ESG risk and opportunities

Compliant

The Board has taken into consideration the ESG risk and opportunities in the Bank’s business model, operations,short- and medium-term planning and in its long-term strategy to ensure that the Bank has remained resilient andis able to deliver durable and sustainable value over the short, medium and long term in order to maintain theconfidence and continued engagement of shareholders and all significant stakeholders.
H.1.1

Impact of ESG risks and opportunities

Compliant

The Bank has included the impact of ESG risks and opportunities in its business plans, strategic plans and theseplans are submitted to the Board on a regular basis.
H.2

Views of Stakeholders

Compliant

The Board and Key Management Personnel have engaged with and have considered the views of its stakeholders
in order to understand and manage the Bank’s ESG risk and opportunities since stakeholder expectations haveheightened across various issues relating to the protection of environment and other ESG issues.
H.2.1

Process to recognise significant stakeholders

Compliant

The Bank has a system in place to recognise significant stakeholders and material matters relating to significant
stakeholders and a method of engagement relevant to their level of interest and influence.
H.3

Governance Framework

Compliant

The Board has established a governance framework and structure which includes conformance, performance and
ESG factors.
H.3.1

Sustainability factors

Compliant

The Board has addressed sustainability factors through an environmental, social and governance framework.
H.3.1.1

Environmental GovernanceCompliant

The Bank has adopted an integrated approach in relation to Environmental Governance which takes into accountthe direct and indirect economic, social, health and environmental implications on business strategies, plans,decisions and operations.
H.3.1.2

Social GovernanceCompliant

The Bank has adopted an integrated approach in relation to Social Governance in order to be able to engage withrepresentative groups of the community, customers, employees, suppliers, outsourced providers and any otherparty that could influence the Bank’s business model in relation to aspects material to the Bank’s sustainablegrowth.
Relationship with community
The Bank has adopted an integrated approach in building relationships with the community for sustainable
development.
Relationship with Customers
The Bank has adopted an integrated approach in building relations with the customers. The Bank has a policy inplace for customer feedback through engagement, efficient service deliver, standards for product responsibility
and product recall and other matters that are material and relevant to the Bank’s business model and customer
experience.
Labour Practice Governance
The Bank’s labour practice related governance encompasses all policies and practices in relation to work performedby or on behalf of the Bank. The governance also contains policies and practices such as health and safety, equal
opportunity, gender balance, career development and training, reward and recognition, conditions of work, worklife balance and industrial relations.

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Corporate Governance Principles

Compliance
StatusSuppliers and Outsourced Providers

Compliant

The Bank has policies and procedures in place to ensure that suppliers and outsourced providers comply withsocial and governance norms of the Bank.
H.4

Establishment of a governance structure to support ESG factors

Compliant

The Board has established a governance structure to support ESG factors.
H.4.1

Recognition of key resources/capitalCompliant

The Board has recognised its key resources/ capital deployed in its business and stakeholders.
H.4.2

Process in ascertaining, assessing and managing ESG factors

Compliant

The Board has implemented a process to ascertain, assess and manage ESG factors which has an impact on thesustainability of the Bank.
H.4.3

Establishment of financial and non-financial measures

Compliant

The Board has established financial and non-financial measures in respect of all material matters relating tosignificant stakeholders, environmental and social factors.
H.5

Disclose ESG risks and opportunities

Compliant

The Board has disclosed how all its ESG risks and opportunities are recognised, managed, measured and reported
in the annual report.
H.5.1 H.5.4

ESG Reporting

Compliant

The Board has implemented ESG policies and practices into the Bank’s strategy, business model, governance andrisk management and reports on its likely impacts and implications.
The Board has disclosed on how the Bank has complied with the mandatory and voluntary codes of corporate
governance. The Bank’s leadership structure, organisational culture, code of conduct and business model supports
the sustainability of the Bank in the short, medium and long term.
Please refer pages 102 to 103 for more information on the Bank’s Commitment to Sustainability.

I

Special Considerations For Listed Entities

I.1

Establishment and maintenance of policies and other requirements

I .1.1 - I.1.4

Being a listed entity, the Bank is cognizant of the requirement to establish and maintain the 12 mandatory policies
and disclosing its existence in the Bank’s website.

CompliantAs such, the Bank is in the process of renewing existing policies and establishing new policies where necessary, inline with the timelines specified by the Colombo Stock Exchange.
I.2

Policy on Matters Relating to the Board of Directors

I.2.1 –
I.2.2

Establishing policies relating to the Board of Directors

Compliant

The Bank’s existing Corporate Governance Code enshrines good governance principles in relation to the Board andis supported by the Articles of Association and several other governance related policies adopted by the Board of
Directors.
Noting that this requirement arises under the Listing Rules as well, a review and revision of the existing policies will
be carried out to ensure compliance with the Listing Rules within the timelines stipulated therein.

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STATEMENT OF COMPLIANCE - SECTION 9 - THE LISTING RULES OF THE COLOMBO STOCK EXCHANGE ON CORPORATE GOVERNANCE
The Corporate Governance Rules and the Rules on Related Party Transactions applicable to listed entities of Sri Lanka were previously enumerated in Rule7.10 and Section 9 of the Listing Rules of the Colombo Stock Exchange. In September 2023, the Colombo Stock Exchange consolidated these sections andintroduced a new section to its Listing Rules entitled “Section 9 - Corporate Governance”. The new Section 9 specifies the minimum standards of corporate
governance to be followed by listed entities. These Rules are required to be complied with on a staggered basis during the period 1st October 2023 to 1st
October 2024.
The Rules broadly cover areas such as Policies, Board Committees (specifically Nominations and Governance Committee, Remuneration Committee, Audit
Committee and Related Party Transactions Review Committee), Shareholder relations, Chairperson and CEO, Fitness and Propriety of Directors, Board
Composition, Alternate Directors and Director related disclosures.
The Bank’s adherence with Section 9 of the Listing Rules is detailed below with explanatory comments as follows;(Compliance with the specific disclosure requirements of Section 9 of the Listing Rules is detailed on pages 130 - 132)
Rule No.

Corporate Governance Requirement/Explanatory comments

9.1

Applicability

9.1

Bank to publish a statement confirming the extent of compliance with the Corporate
Governance Rules set out herein, in the Annual Report of the Entity.

9.2

Policies

9.2.1

Establish and maintain the following policies, and disclose its existence and details of
implementation on the website-(w.e.f 1st October
2024)

Compliance Status/Page
reference in Annual Report

Policy on the matters relating to the Board of Directors
Policy on Board Committees
Policy on Corporate Governance, Nominations and Re-election
Policy on Remuneration
Policy on Internal Code of Business conduct and Ethics for all Directors and employees,
including policies on trading in the Bank’s listed securities
Policy on Risk management and Internal controls
Policy on Relations with Shareholders and Investors

Noting the effective date,the Bank is in the process ofreviewing existing policies andre-establishing new policies
to be within the stipulated
deadline.

Policy on Environmental, Social and Governance Sustainability
Policy on Control and Management of Company Assets and Shareholder Investments
Policy on Corporate Disclosures
Policy on Whistle blowing
Policy on Anti-Bribery and Corruption
9.2.4

Policies above to be made available to shareholder upon request

9.3

Board Committees

9.3.1/9.3.2

Following Board Committees to be established and Bank to be compliant with thecomposition, responsibilities and disclosure requirements set out in the Rules Nominations and Governance Committee

Compliant

In view of the revised Listing Rules, the scope of the Bank’s Nominations Committee
was expanded to include duties falling under the governance pillar and was thus
renamed as Nominations and Governance Committee in 2023
Compliant Remuneration Committee
The Terms of Reference of the Bank’s Human Resources and Remuneration
Committee was amended in view of the revised Listing Rules.

Compliant Audit Committee
The Terms of Reference of the Bank’s Audit Committee was amended in view of therevised Listing Rules.
 Related Party Transactions Review Committee
The Terms of Reference of the Bank’s Related Party Transactions Review Committee
was amended in view of the revised Listing Rules.

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Corporate GovernanceCompliantRule No.

Corporate Governance Requirement/Explanatory comments

Compliance Status/Page
reference in Annual Report

9.3.3
w.e.f 1st October
2024

Chairperson of the Board shall not be the Chairperson of the above Board Committees

Noting effective date, will becompliant by Q2 2024

9.4

Principles of democracy in shareholder dealings

9.4.1

Bank to maintain records of all resolutions and the requisite information of shareholder
resolutions and provide copies to the SEC or CSE if requested.

Compliant

The Company Secretary maintains records of all shareholder resolutions andrequisite information and is able to provide extracts of such resolutions to the SEC
and CSE if required.
9.4.2(w.e.f 1st October
2024)

A shareholder communications and relations policy to be established and its existence tobe disclosed in Annual Report and website.

Noting the effective date,the Bank is in the process ofreviewing existing policies andestablishing new policies
CompliantBank to have and disclose a contact person for communication with shareholders
Details of the contact personnel are provided in the “Corporate Information” section
on page 404 of this Report. In addition, shareholders are encouraged to provide
their feedback to the Chairman and/or the Company Secretary. The Bank’s website’s
Investor Relations page also carries contact details of the Company Secretary and a
dedicated e-mail for investor relations is also provided.

Compliant

The shareholder communications and relations policy shall include a process to makeall directors aware of major issues and concerns of shareholders and this process to bedisclosed in Annual Report and website.
The Company Secretary keeps the Board apprised of major issues and concerns raised by
the shareholders to ensure that they are addressed in an appropriate manner keeping inline with the corporate values of the Bank. Shareholder correspondences on major issues
are handled by the Chairman with the concurrence of the Board/the CEO as appropriate.

CompliantShareholder meetings conducted virtually/in hybrid mode to comply with the Guidelines
issued by CSE.
The Bank ensures that virtual shareholder meetings are conducted in compliancewith the Guidelines issued by the CSE as incorporated in the Articles of Association of
the Bank.

9.5

Policy on Board related matters

9.5.1

Bank to establish and maintain a formal policy governing matters relating to the Board of
Directors covering the requisites in 9.5.1(w.e.f 1st October
2024)

9.6

Chairperson and CEO

9.6

Chairperson of the Bank should be a Non-Executive Director and the position of
Chairperson and CEO shall not be held by the same person

Noting the effective date,the Bank is in the process ofreviewing existing policies
and establishing new policies
within the stipulated deadline.
Compliant

The Articles of Association of the Bank requires that the Chairperson of the Bank
should be an Independent Director. As such, the positions of Chairperson and CEO
are not held by the same person.
9.6.3

If Chairperson and CEO are the same person; or if the Chairperson and CEO are closefamily members or related parties, Bank to appoint a Senior Independent Director (SID)
and comply with the requirements in 9.6.3

Not Applicable

Same as above.

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Rule No.

Corporate Governance Requirement/Explanatory comments

9.7

Fitness of Directors and CEO

9.7.1/9.7.2/9.7.3/9.7.4

Bank to ensure that the Directors and CEO and the persons recommended by the
Nominations and Governance Committee are at all times, fit and proper persons as per
the criteria in 9.7.3. Bank to obtain declarations from all directors and CEO on an annual
basis confirming their fitness and propriety.

Compliance Status/Page
reference in Annual ReportCompliant

The Company Secretary obtains declarations from the Directors on an annual basis.
In view of these Rules, a declaration in the form of an affidavit confirming each
Director’s fitness and propriety in line with the Listing Rules has been included inthese annual declarations from 2023 onwards. The said annual declarations are
submitted to the Nominations and Governance Committee to assess and ensure thatthe Directors are fit and proper persons to hold office as specified in the criteria given
in laws applicable to the Bank.

9.8

Board Composition

9.8.1

Minimum number of Directors shall be 5.

w.e.f 1st October
2024

The number of Directors during the year 2023 was in compliance with the thresholds
detailed in these Rules. As at 31 December 2023, the Board comprised ten (10) Directors.

9.8.2

Minimum number of Independent Directors shall be 2 or 1/3rd of the total number of
Directors (whichever is higher). Any change to be rectified within 90 days.

9.8.3
9.8.5
(Not applicable.
w.e.f. 1st October
2024 (for minimum
number of
Independent
Directors; and70 year age limit
for Director
independence)

Compliant

The Company Secretary obtains declarations from the Directors on an annual basis.
In view of these Rules, a declaration confirming each Director’s independence in theform prescribed in the Listing Rules has been included in these annual declarations
from 2023 onwards. The said annual declarations are submitted to the Nominationsand Governance Committee to assess and ensure that the standards of Board
composition stipulated in laws applicable to the Bank are met.
The Board through Nominations and Governance Committee assesses theindependence or non-independence of each Non-Executive Director based on
the annual declarations. As at 31 December 2023 there were 9 Independent NonExecutive Directors on the Board which is above the regulatory requirement. The
Independent Non-Executive Directors are detailed on page 111 of this report.

9.9

Alternate Directors

9.9Bank to follow the requirements laid down in 9.9 when appointing Alternate Directors
and incorporate such requirements in the Bank’s Articles of Association.

(w.e.f. 1st January2024)

Compliant

Directors appoint Alternate Directors in line with the Articles of Association of the
Bank and the Banking Act as and when required for a particular meeting. Alternate
Directors appointed by an Independent Director have also been independent. The
Bank’s Articles of Association are in conformity with these Rules and immediate
Market Announcements are made when an Alternate Directors is appointed.

9.10

Director Disclosures

9.10.1

Bank to disclose policy on the maximum number of directorships allowed to be held by a
Director. If such number is exceeded, an explanation to be provided in the Annual ReportCompliantCompliant

As required by the Banking Act Directions, no Director holds Directorships of morethan 20 companies. The Directorships of each of the Directors are disclosed on pages
24 to 28 of the Annual Report.
9.10.3

Bank shall make an immediate Market Announcement regarding any changes to thecomposition of the Board Committees referred to in Rule 9.3 containing, at minimum, thedetails of changes including the capacity of directorship with the effective date thereof.
The Bank makes the required announcements as and when necessary.

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Corporate Governance Requirement/Explanatory comments

9.11

Nominations and Governance Committee

9.11.1

Bank shall have a Nominations and Governance Committee (NGC). NGC to have written
Terms of Reference.

9.11.3Compliance Status/Page
reference in Annual ReportCompliant

In view of the revised Listing Rules, the Terms of Reference of the Bank’s Nominations
Committee was expanded to include duties falling under the governance pillar andwas thus renamed to Nominations and Governance Committee in 2023.
9.11.2

Establish and maintain a formal procedure for appointment and re-election of Directors
through the NGC

Compliant

The NGC considers Board vacancies and recommends suitable candidates whennecessary in accordance with the Board-approved procedure for selection andappointment of Directors and in line with applicable laws and regulations.
9.11.4

Functions and Composition of the NGC

Compliant

9.11.5- Comprise a minimum 3 directors out of which minimum 2 shall be independent(w.e.f. 1st
October 2024 forcomposition)- not consist of executive directors- chairperson to be an independent director
Please see detailed report on pages 139 to 141 for the functions and composition of the NGC.

9.12

Remuneration Committee

9.12.2

Bank shall have a Remuneration Committee and the Committee to have written Terms ofReference.

9.12.5Compliant

In view of the revised Listing Rules, the Terms of Reference of the Bank’s Human
Resources and Remuneration Committee (HRRC) was amended in 2023.
9.12.39.12.4

HRRC shall establish and maintain a formal and transparent procedure for developing
policy on Executive Directors’ remuneration and for fixing the remuneration packages ofindividual directors. Remuneration of Directors to be based on policy which adopts nondiscriminatory pay practices.

Compliant

The Bank has a comprehensive Board-approved Remuneration Policy addressing theabove areas, for Directors, CEO and KMP.
9.12.6Functions and Composition of the HRRC

(w.e.f. 1st
October 2024 forcomposition)yComprise a minimum 3 directors out of which minimum 2 shall be independenty

not consist of executive directors

ychairperson to be an independent director

CompliantPlease see detailed report on pages 142 to 143 for the functions and composition of
the HRRC.
Where parent and subsidiary are both listed the HRRC of the parent may be permitted tofunction as the HRRC of the subsidiary

Not Applicable.

Not applicable since none of the subsidiaries are listed.
Until 1st October
2024, the Listed
Entity shall at aminimum comply
with previous Rule7.10.5 (a)The remuneration committee shall comprise of Non-Executive Directors a majorityof whom shall be independent. One Non-Executive Director shall be appointed as
Chairman of the committee by the Board of Directors.

CompliantPlease see detailed report on pages 142 to 143 for the functions and composition of
the HRRC.
In a situation where both the parent company and the subsidiary are ‘listed Entities’, theremuneration committee of the parent company may be permitted to function as the
remuneration committee of the subsidiary.

Not Applicable.

Not applicable since none of the subsidiaries are listed.

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Rule No.

Corporate Governance Requirement/Explanatory comments

9.13

Audit Committee and IRMC

9.13.1

Where Listed Entities do not maintain separate Committees to perform the Audit andRisk Functions, the Audit Committee of such Listed Entities shall additionally perform the
Risk Functions set out in Rule 9.13 of these Rules. Audit Committee to have written Termsof Reference.

9.13.2Compliance Status/Page
reference in Annual ReportCompliant

The Bank has a separate Audit Committee and an Integrated Risk Management Committee(IRMC) with written Terms of Reference. See detailed report on pages 144 to 146.
Compliant9.13.3Functions and Composition of the AC

9.13.4y(w.e.f. 1st
October 2024 forcomposition)

Comprise a minimum 3 directors out of which minimum 2 or a majority (whicheverhigher) shall be independenty

not consist of executive directors

ychairperson to be an independent director

Please see detailed report on pages 147 to 148 for the functions and composition of the ACyCompulsory meetings on a quarterly basis prior to recommending the financials tobe released to the marketyQuorum- majority of those in attendance shall be independentyCEO and CFO to attend meetings by invitation.

yProvided however where there is a separate Risk Committee, the CEO shall attend
the Risk Committee meetings by invitation.

The AC had 7 meetings in 2023 with at least 1 meeting per quarter and the Rule wascomplied with during all those meetings. Further, the IRMC has had 5 meetings in
2023 and the CEO attended all those meetings by invitation.
Where parent and subsidiary are both listed the AC of the parent may be permitted tofunction as the AC of the subsidiary
Not applicable since none of the subsidiaries are listed.
The Chairperson of the AC shall be a Member of a recognised professional accounting
body. Provided however, this Rule shall not be applicable in respect of Risk Committees
where there is a separate Risk Committee and Audit Committee.
The Chairman of the AC, Mr. Sujeewa Mudalige has over 34 years of experience as aChartered Accountant. His qualifications are FCA (ICA - SL), FCMA (CIMA – UK), FCCA
(ACCA – UK) and FCPA (CPA – Australia).
Until 1st October
2024, the Listed
Entity shall at aminimum comply
with previous
Rule 7.10.6 (a) forcomposition of
Audit Committee

The Audit Committee shall comprise of Non-Executive Directors a majority of whomshall be independent.
One non-executive director shall be appointed as Chairman of the committee by theboard of directors.
Unless otherwise determined by the audit committee, the Chief Executive Officer andthe Chief Financial Officer of the Listed Entity shall attend audit committee meetings.
The Chairman or one member of the committee should be a Member of a recognised
professional accounting body.
See above comments and please see detailed report on pages 147-148 for compositionof the AC.
In a situation where both the parent company and the subsidiary are ‘listed Entities’, theaudit committee of the parent company may function as the audit committee of thesubsidiary.
Not applicable since none of the subsidiaries are listed.

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Corporate GovernanceCompliantRule No.

Corporate Governance Requirement/Explanatory comments

Until 1st October
2024, the Listed
Entity shall at aminimum comply
with previous
Rules 7.10.6 (b)and (c) relating to
the functions anddisclosures in the
Annual Report
relating to the
Audit Committee.

Functions and Annual Report Disclosures of the AC.

9.14

Compliance Status/Page
reference in Annual ReportCompliantPlease see detailed report on pages 147 to 148 for the functions and disclosures of
the AC.

Related Party Transactions Review Committee
Bank shall have a Related Party Transactions Review Committee (RPTRC)

9.14.19.14.2CompliantCompliant. The Terms of Reference of the Bank’s Related Party Transactions Review
Committee was amended in view of the revised Listing Rules.
Functions and Composition of the RPTRC

Compliant9.14.3yComprise a minimum 3 directors out of which 2 shall be independent(w.e.f. 1st April
2024 forcomposition)y

may include executive directors

ychairperson to be an independent director

Please see detailed report on pages 149 to 150
Where parent and subsidiary are both listed the RPTRC of the parent may be permitted
to function as the RPTRC of the subsidiary

Not applicable.

Not applicable since none of the subsidiaries are listed.
9.14.4General Requirements
Frequency of meetings shall be at least quarterly

Compliant

In 2023, the RPTRC had 4 meetings, with 1 meeting per quarter.
Minutes of meetings are properly documented and communicated to the Board of
Directors

Compliant

The minutes of the RPTRC are tabled at the meetings of the Board of Directors on aperiodic basis.
Please see detailed report on pages 149 to 150.
Members of the RPTRC to ensure they have or have access to adequate knowledge
expertise and advice

Compliant

The RPTRC ensures this through this being enshrined in the Terms of Reference of the
RPTRC, the members being aware of the same exercises this right as and when needed.
Where necessary, the RPTRC shall request the Board of Directors to approve the Related
Party Transactions which are under review by the RPTRC. In such instances, the approvalof the Board of Directors should be obtained prior to entering into the relevant Related
Party Transaction

Compliant

When necessary, Related Party Transactions were submitted to the Board in 2023.
Interested directors shall not vote on or be present during the deliberations on thespecific matter

CompliantInterested directors did not vote on or participate in any discussions during
deliberations on the interested matters in 2023.

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Rule No.

Corporate Governance Requirement/Explanatory comments

9.14.5

Subject to the exemptions, RPTRC shall review in advance all proposed RPTs

Compliance Status/Page
reference in Annual ReportCompliant

The RPTRC reviews all transactions falling within the scope of its Terms of Reference. For
details of activities of the RPTRC, please see the report of the RPTRC on pages 149 to 150.
In the event of any material changes to a previously reviewed Related Party Transactionin terms of Rule 9.14.5 (1) such proposed material changes shall also be reviewed by the
RPTRC prior to the completion of the transaction.

CompliantThis requirement has been incorporated into the Terms of Reference and is followedin the Bank.
The RPTRC shall be provided with all the facts and circumstances of the proposed RPT by
the senior management to facilitate the review of a RPT.

CompliantThis requirement has been incorporated into the Terms of Reference and is followedin the Bank.
Directors shall not participate in discussions where there is conflict except for the express
purpose of providing information. Where necessary, a special committee to be created toreview a proposed RPT.

CompliantInterested directors did not vote on or participate in any discussions during
deliberations on the interested matters in 2023.
For recurrent RPTs, the RPTRC may establish guidelines for the senior management tofollow in its ongoing dealings with the Related Party. Thereafter, the RPTRC on an annual
basis, shall review and assess ongoing relationships with the Related Party to determine
whether they are in compliance with the Committee’s guidelines and that the RPT
remains appropriate.

CompliantThis requirement has been incorporated into the Terms of Reference of the RPTRC.
9.14.6

Bank to obtain shareholder approval by Special Resolution for the RPTs specified in 9.14.6

9.14.9Acquisition and Disposal of substantial assets from/to related parties to be done withshareholder approval as per Rule 9.14.9.

Not ApplicableNo such transactions took place in 2023.

No such transactions took place in 2023.

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Corporate Governance

NilRisk Management
THE RISK LANDSCAPE IN 2023
The Banking sector continued to operate underchallenging conditions with domestic macrofinancial developments continuing to have broadbased implications on the sector. Credit demandremained subdued in the backdrop of sluggish
economic conditions and elevated interest rates
while repayment capacities and credit quality
continued to be impacted by liquidity constraints
brought on by persisting inflationary pressures andtax adjustments. Uncertainties surrounding theimpact of the sovereign’s debt restructuring on thelocal banking sector weighed in heavily during thefirst part of the year, although these concerns dissipated to a large degree with the finalisation of the Debt
Optimisation program in July 2023. Faced with these evolving dynamics, the Bank strengthened its risk
management processes during the year to effectively manage these risk factors and emerge stronger in avolatile environment.
Sluggish economic conditions

Credit Contraction

Interest rate volatility

Deterioration of Asset
Quality

Persisting inflationary pressures

Liquidity Constraints

Uncertain surrounding sovereign’s debt restructuring

HOLISTIC RISK MANAGEMENT
The complex risk environment that prevailed during the year called for strategic decision making and a holistic approach to risk management that not only
addressed short term challenges but also considered the long term implications. Key aspects of our risk management process in 2023 are summarised below anddetailed in subsequent sections of the Report.
BANK’S RISK MANAGEMENT APPROACH
The economic crisis and its aftermath have brought forth unprecedented challenges, demanding a more robust and forward-thinking approach to risk
management. The Bank’s approach to risk management is underpinned by a comprehensive Integrated Risk Management (IRM) Framework, which is regularly
reviewed and strengthened to remain relevant in an increasingly dynamic operating landscape. The Board-approved framework clearly defines governancestructures and the process for identifying, measuring, monitoring, and controlling the Bank’s risk exposures. The framework was reviewed and revised during theyear, in view of the rapid changes in the operating environment.

MARKET RISK MANAGEMENTLIQUIDITY RISK MANAGEMENTRISK APPETITE FRAMEWORKyProactive monitoring of interest rate risk & exchange
rate risk continuously to ensure positions are maintained
within the Bank’s risk appetiteyCautious management of net open positions
and foreign currency liquidity levels amidst
debt restructuring processyRe-aligning the Bank’s risk appetite
objectives to recent market
developmentsyStress testing and scenario analysis on open positions,and interest rate sensitive assetsyRegular cash flow projections to manage
liquidityyExpanding the limit framework for key
areas

y

Prudent management of government debt, withuncertainties on Debt RestructuringyStrengthening of key liquidity ratios tooptimise liquidity levelsyStringent limits for Credit,
Concentration and Liquidity RiskyTimely pricing strategies of asset and liabilities to reduce
the negative impacts, of a volatile interest rate regimeyEnhanced engagement through ALCO tomanage liquidity constraintsyReview and update broad framework of policies andlimitsyStrengthen stress testing and reviewing relatedparameters and economic triggers

OPERATIONAL RISK MANAGEMENTyClose monitoring of potential areas at risk/ revisit the vulnerable processes and strengthen/ introduce newcontrols as appropriatey

Key Risk Indicators are closely monitored and root causes identified where thresholds are breached andmitigating action taken to reduce risk exposure.

y

Implemented security solutions for the prevention of data leakage.

CREDIT RISK MANAGEMENTyStrengthening and up-skilling theRemedial Management (Business
Revival) unit to rehabilitate financiallydistressed borrowersyStrengthened recovery effortsyAutomation of staging requirementsySetting up a Stage 2 Monitoring Task
Force

y

Close monitoring of Stage 2 portfoliowith monthly reviewsyStrengthened control processes
and process governance throughimplementation of work flow system
for the individual impairment
assessment

INFORMATION SECURITY RISK MANAGEMENTyStringent security measures and raised staff and customer awareness on avoiding cyber-attacks/ security threats.

yDeployment of technical controls to mitigate cyber risks such as multi- layer firewalls, network separation andintrusion prevention systemsyyContinuous monitoring & security hardening of online channels & related infrastructure as per industry bestpractices

Increased monitoring and curtailed
lending to high risk segmentsyySubscribes to threat intelligent services to defend against emerging threatsyInternal and external penetration tests by employing external service providers.

Strengthening underwriting standards
considering the challenging economic
environment

Aligned with ISO 27001 standard, demonstrating steadfast commitment to robust information security practices.

yyFrequent portfolio reviews in view of
emerging conditions

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RISK APPETITE & STRATEGYR

PRINCIPAL
RIS

INTEGRATEDRISK MANAGEMENTFRAMEWORKRISK POLICIES & PROCESSESRISK POLICIES& PROCESSESCAPITAL
MANAGEMENT

Strong culture that promotes
responsible, ethical andprofessional behaviour

O

KS

ISKS

Driven by the Bank’s strategic
aspirations and relevant
considerations from theexternal environment

RISK CULTURE

RISK
CU
LT
UR
R
ER
TH

CAPITAL MANAGEMENTE
TIT
PE EGYP
A AT
KIS STR&E

Board-approved articulation of
the type and level of risk the
Bank is willing to assume

GOVERNANCE & OVERSIGHT
Robust governance structurewith clearly-defined,
transparent and consistent linesof responsibility

UR

G

E

S
EME
OV
RGING RISKOV ERN
CT
ER AN
RU
T
SIG CE &
AS
HT
INFR

Sound risk management
processes to actively identify,
measure, control, monitor
and report risks inherent inproducts, activities, processes,
systems and exposures

INFRASTRUCTURE
Sufficient resources andsystems infrastructure
to enable effective risk
management

MAIN OBJECTIVESy

To establish common principles and standards for the management and control of all risksy

To provide a shared framework and language to improve awareness of risk management processes among all stakeholdersy

To provide clear accountability and responsibility for risk managementy

To ensure consistency throughout the Bank in risk management

RISK UNIVERSERISK APPETITE & STRATEGYIn addition to the main risks (viz. Credit Risk, Market
Risk and Operational Risk) the Bank considers
several other material risks such as Liquidity Risk,
Sovereign Risk, Cyber Risk, underestimation ofCredit Risk in Standardised Approach, Residual
Credit Risk, Concentration Risk, Compliance
Risk, Legal Risk, Strategic Risk, Governance Risk,
Cross-border Risk, Settlement Risk, Reputational
Risk, Model Risk, Risk in Off Balance Sheet items,
Environmental and Social Responsibility Risk andGroup Risk. The Risk framework permeates alllevels of the organisation and has underpinned thecreation of a risk-conscious culture.

Risk Appetite is defined as the quantum of risk the Bank is willing to assume in achieving its strategic
objectives and ensuring maintenance of the desired risk profile. The Bank’s risk appetite is twofold. The top
level risk appetite statement indicates the objectives that the Bank is trying to achieve, which is followedby the sum of mechanisms linking this top level statement to the firm’s day-to-day risk management
operations. The Risk Appetite framework and Risk Tolerance limits are defined by the Board in consultation
with the management and are articulated through limits or qualitative checkpoints.

The Risk Management narrative set out in thesubsequent pages has been structured inaccordance with the key elements of the Bank’s
Integrated Risk Management Framework.

The top level statement which is set to guide management and to inform investors about the Bank’s risk
appetite is given below.
Risk Appetite Statement of NDBNDB Bank’s risk appetite statement defines the amount of risk we are willing to assume in pursuit of ourstrategic and financial objectives. We recognise the challenges in the current operating environment in our risk
approach and capital planning and strive to maintain resilience.
Our guiding principle is to practice sound risk management, supported by optimal capital and funding
positions, as we pursue our client focused strategy. In defining our risk appetite, we take into consideration our
vision, values, strategy and Corporate Social Responsibility along with our risk capacity (defined by regulatory
framework).
Our risk appetite defines how we conduct business in a manner that is consistent with the objectives specified
under each risk category.

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Risk Management

Credit Risk

Environmental & Social Risk

We take Credit Risk primarily in our core activityof lending. We aim to maintain the high quality of
the loan portfolio, while acknowledging that someof our lending involves greater risks arising fromthe external economic factors. The majority of
our lending would be domestic. We acknowledge
the Credit Risk in our FCY investment portfolioand strive to manage same at acceptable levels,
through appropriate provision cover.

We give priority for sustainability, high ethical and social standards, and protection of the environment in ourlending operations. We do not finance projects that are undesirable from a sustainability or social standards
perspective. This includes potential deterioration of the physical, natural, or cultural environment, thesurrounding community, or the health and safety of workers directly resulting from the business activity to befinanced.

The Risk appetite framework is aligned to the Bank’s overall business strategy and reviewed and updated
based on emerging developments thereby, providing clear direction for on-going operations and risk
management. In the event of a breach of a risk appetite threshold, risk management strategies and controls
are implemented to normalise the exposures to the accepted range.

Concentration Risk
We diversify lending across customer groups andindustries to avoid excessive risk concentrations.

Market Risk
We consider that Market Risk parameters are capableof optimising the risk/return to capitalise on market
opportunities. The risk and delegated approvalparameters ensure that Bank is not exposed toexcessive risks and it operates within the predefined framework of risk whilst safeguarding andenhancing the shareholder value.

During the year, the risk appetite of the Bank was reviewed considering the challenges in operating
environment and further strengthened by expanding and fortifying the limit framework in order to achieverisk appetite objectives.
Capital Management
Effective capital management through proactively managing the Bank’s capital position, capital mix andcapital allocation is crucial in protecting the Bank against insolvency while safeguarding the financial
position and reputation of the Bank. Bank’s approach to capital management is driven by strategic
objectives and guided by the Basel principles.
BASEL III FRAMEWORKBasel III capital standards endeavour to strengthen the quantity and quality of capital in Banks.

Liquidity Risk
We maintain a liquidity portfolio where a large
majority of the assets are of Government securities
to support the Bank’s operations and liquidity
position. Having a sound liquidity position
enables us to manage our core activities under
severely stressed market conditions. We diversify
borrowings in terms of currencies, maturities,
instruments and investor types in order to avoid
excessive reliance on individual markets andfunding sources.

PILLAR I – MINIMUM CAPITAL REQUIREMENTThe objective of minimum capital requirements under Pillar I of the Basel III framework is to ensure thatbanks hold sufficient capital for Credit, Market and Operational Risks.

Credit Risk

Interest Rate Risk in the Banking Book (IRRBB)Market Risk

We manage the IRRBB effectively as the economic
value of the banking book positions change withthe change in interest rates thereby safeguarding
the Bank’s capital and earnings.

Operational
Risk

Operational Risk
We maintain strong Operational Risk management
strategies and use Operational Risk tools such
as Incident/ Loss data management, RCSA, KRI
monitoring and Scenario analysis to minimise
losses at all times. The Bank has a zero tolerance
policy to internal fraud and theft and any
significant or high residual exposures shall always
be deemed beyond tolerance and measures aretaken to mitigate the risk.

yCurrently using Standardised Approach for Credit Risk minimum capital computation
purposesyRolled out rating models with the assistance of CRISIL Limited India in 2014y

The internal rating models were validated by KPMG

yy

Use of Standardised Measurement Approach to compute minimum capitalrequirement
Use of Advanced Measurement Approach such as VaR models in measuring Market Risky

Use of the Basic Indicator Approach (BIA) to compute the capital charge

PILLAR II – SUPERVISORY REVIEW PROCESSThe Pillar II (Supervisory Review Process - SRP) requires banks to implement an internal process, called theInternal Capital Adequacy Assessment Process (ICAAP), for assessing capital adequacy in relation to therisk profiles as well as a strategy for maintaining capital levels. The Pillar II also requires the supervisory
authorities to subject all banks to an evaluation process/ SRP. The Bank has in place an ICAAP since January
2013 which has strengthened its risk management practices and capital planning process.
The Bank’s capital management objectives can be summarised as follows:y Maintain sufficient capital to meet minimum regulatory capital requirementsy Hold sufficient capital to support the Bank’s risk appetite

Compliance Risky Allocate capital to businesses to support the Group’s strategic objectives

We comply with policies, regulations andprocedures, in both the letter of law and spirit.

y Ensure that the Bank maintains capital in order to withstand the impact of potential stress events

Risk Management

The Bank identified twenty material risks based on directions given by CBSL and self-assessment of mostimportant risk categories which require a separate mention from an ICAAP perspective. These risks are
Credit Risk, Market Risk, Operational Risk, Concentration Risk, Liquidity Risk, Sovereign Risk, Cyber Risk,
under-estimation of Credit Risk, Residual Risk, Strategic Risk, Reputational Risk, Legal Risk, Compliance Risk,
Governance Risk, Model Risk, Settlement Risk, Environmental and Social Responsibility Risk, Group Risk,
Cross-border Risk and Risks in Off Balance Sheet exposures.

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339

The annual Capital Planning process involves detailed planning of the strategic capital plan over at least a three-year horizon. The plan highlights the capitalprojections, capital requirements, levels of capital and capital mix to support the Bank’s business plan and strategic objectives. The projected capital also takes into
consideration the Bank’s organic growth. NDB Group also has the option to raise capital under normal and stressed scenarios by way of equity/ capital infusion,issue of innovative perpetual debt instrument, issue of sub-ordinate bonds or hybrid capital instruments.
Raising capital remained a key challenge for Banks, amidst the ongoing economic, political and social challenges in the country. Considering the extraordinary
circumstances caused by the current macroeconomic conditions, the Regulator allowed banks to draw down on the capital conservation buffer built over the years
to absorb unexpected losses during the period.
Efficient capital and balance sheet management will remain a key priority of the Bank’s strategy as it focuses on strengthening resilience. Capital retention would
happen through profit capitalisation and based on the Bank’s dividend policy. In January 2023, the Bank announced to the Colombo Stock Exchange its plan to raise
up to a maximum of LKR 10 Bn within a year from the date of obtaining shareholder approval via a Basel III compliant debenture issue. Accordingly, the Bank issued
Basel III compliant, Tier 2 listed, rated, unsecured subordinated redeemable debentures with a non-viability conversion, at the par value of LKR 100 each, aiming toraise five billion rupees. The issue of fifty million debentures was oversubscribed.
Stress Testing
The Bank’s comprehensive stress testing policy has been formulated in line with regulatory guidelines and global best practices. Stress tests are conducted atvarious frequencies in line with the Board-approved framework and results are reported to the Board. Considering the changes in the operating environment, theBank carried out a comprehensive review of its stress testing policy and framework where the adequacy of stress tests, frequency, shock levels and assumptions
were critically reviewed and changes were incorporated to policy and framework as required. Reverse stress testing is also included in stress testing policy andframework to overcome the possibility of a false sense of security that might arise from regular stress testing in which the Bank may identify manageable impacts.
The outcome of stress testing process is proactively monitored and remedial actions taken in case of breaches. The Bank also carried out certain adhoc stress tests
to understand the impact of specific scenarios on capital adequacy/ liquidity given the challenges.
The Stress Tests carried out as at 31 December 2023 are given below.

Credit Risk

Exchange Rate Risk

Adhoc Stress Tests

y Impact of increase in the Non-Performing Assets on
Capital Adequacy Ratio (CAR)y Impact of exchange rate movements of Bank’s (DBU and FCBU)Net Open position on CAR

y Impact of default of Large Borrowers on CAR

y Impact of exchange rate movements of Domestic Banking Unit
(DBU) Net Open Position on profitsy Impact of additional
Impairment on
International Sovereign
Bonds and Sri Lanka
Development Bonds
on CARy Impact of forex trading - Value at Risk measurement on CAR

Credit Concentration Risky Impact of default by the largest group on CAR
y Impact of default in specific sector/ region on CAR

Interest Rate Risky Impact of change in interest rates - Trading Book
(Debt Securities)y Impact of Value at Risk measurement of the TradingBook on CAR
y Impact of change in interest rates – FVOCI Book
(Debt Securities) on CAR
y Impact of change in interest rates on CAR for
Banking Booky Impact of change in interest rates of Sovereign
Bonds on CAR

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Liquidity Risk

Reverse Stress Tests

y Market specific stress test - Adverse impact on money market &institutional borrowings/ drop in market liquidity on Liquid Asset
Ratio (LAR)y Reverse Stress Testing
on CARy Bank specific - Run down on CASA & time deposits on LAR
y Market / Bank Specific - Adverse Impact on total liquid liabilities
on LARy Impact of loss of large depositors on LAR
y Impact of exchange rate movement on LAR - DBU
y Impact of funding cost on balance sheet mismatches on CAR
y Impact on CAR due to higher interest paid in a deposit run off
scenarioy Impact of specific stress scenarios on maintenance of Liquidity
Coverage Ratio

Annual Report 2023

Risk Managementy Reverse Stress Testingon LARPILLAR III – DISCLOSURESThe Bank provides enhanced quantitative and qualitative disclosures in line with the Basel III requirements in Annual Report, website and press to provide ameaningful assessment of the extent and nature of various risks that the Bank is exposed to and the efficiency of Banks’ risk management practices.
GOVERNANCE AND OVERSIGHT
The Bank’s Board of Directors holds apex responsibility for risk management and sets the tone at the top for the effective management of risks. In discharging its
risk-related responsibilities, it is supported by two key committees, namely the Integrated Risk Management Committee (IRMC) and the Audit Committee (AC)which have been formed in compliance with the CBSL Direction No. 11 of 2007 on Corporate Governance.

Board of Directors

The ultimate governing body with overall risk oversight responsibility
Board Sub Committees

Integrated Risk Management Committee(IRMC)

Reviews the risk profile and policiesof the Bank, its Group companies andtheir application in the operations of
the business in respect of the main risk
categories viz. Credit Risk, Operational Risk,
Liquidity Risk, Market Risk, Strategic Risk,
IT/ Cyber Risk, Legal Risk, Reputational Risk,
Environmental & Social Risk, Compliance
Risk, and ensures such risks are managed
within the prudent levels decided by the
Board of Directors.

Audit Committee (AC)Board Credit Committee (BCC)

Assists the Board in the general oversightof financial reporting, internal controls andfunctions relating to internal and external
audit.

Reviews and approves Credit Proposals
coming under Committee’s delegatedlending authority.

Composition - Four members of the Boardof Directors. The Vice President Internal
Audit functions as the Secretary to theCommittee. The CEO, VP - Finance/ CFO,
External Auditors attend the meetings on
invitation and other members of the senior
management where necessary.

Composition – Minimum of three Non Executive Directors and CEO

Composition – Minimum of three NonExecutive Directors, CEO, CRO/VP – Risk
Management, VP - Legal and Compliance
OfficerManagement Level Committees

Credit and Market Risk Policy Committee

Reviews the Bank’s risk policy framework,overall performance and the potential
risks faced by specific lines of business andsupport functions.
Composition - CEO, DCEO, VP - Finance/ CFO,
CRO/VP - Risk Management, Head of Credit
Review, Heads of Business Units, Head ofTreasury, Head of Credit Risk Managementand Head of Market Risk Management

Risk Management

Operational Risk Management
Committee (ORMC)

Reviews the Operational Risk
management framework and theBank’s Operational Risk Policy. Regularly
assesses the Operational risk profileof the Bank and deliberate on any
potential/ emerging Operational Risks
that the bank needs to counteract.
Composition - CEO, DCEO, CRO/ VP- Risk Management, VP - Finance/ CFO,
Compliance Officer, Heads of Business
Units, Heads of Support functions andHead of Operational Risk Management

Asset Liability Committee (ALCO)

Reviews all Market and Liquidity related
exposures on a monthly/ more frequentbasis and decisions are made to facilitatebusiness requirements and makeinvestment/ policy decisions.
Composition - CEO, CRO/ VP - Risk
Management, Head of Treasury, VP Finance/ CFO, Head of ALM, Head of Strategy& Business Intelligence, Head of Market
Risk Management, Head Branch Network
Management & Product Development,
Head Centralised Recoveries and Heads ofBusiness Units

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GOVERNANCE STRUCTURE

Responsibility

Role

The risk governance structure ensures accountability and ownership, whilst facilitating an appropriate level of independence and segregation of duties. The
structure is based on the three lines of defence and defines the lines of authority, roles and responsibilities to efficiently manage risk across the Bank. The activities
carried out during the year by the above mentioned Board Subcommittees is covered in detail in the Board Sub-committee Reports.

1st Line of Defence

2nd Line of Defence

3rd Line of Defence

Business Line/ Credit Committee

Risk Management/ ComplianceInternal Audit

Managing Business Line Operations

Risk Management & ComplianceIndependent verification

Accountability with decentralised primary
responsibilities

Centralised oversight and independently
challenges the first line

Assurance and review

y Primary responsibility for identifying,
managing and reporting risk

Risk Management Activities
Develop and implement the risk
management framework, policies, systems,
procedures and toolsyReview effectiveness of risk management
practices and internal control frameworkyConfirm level of complianceyProviding support to the business units,review and report key risks to the IRMCy

Identify gaps, control weaknesses inprocesses and highlights same to therelevant stakeholders

y Self-Assessment of Risk and Control
y Compliance with all policies andproceduresInternal Audit ActivitiesyActivities

Compliance ActivitiesyEnsure Bank operates in compliance withthe regulatory environmentyEffective management of Bank’s
compliance risksyEnsure adherence with Anti Money
Laundering and countering Terrorist
Financing guidanceExternal Audit ActivitiesyReporting to shareholders, giving an
opinion on the true and fair view of thefinancial statements and reviewing internal
controls over financial reporting process

RISK MANAGEMENT DIVISION

The Bank’s Risk Management Division is independent of the business units and profit targets and reports directly to the Integrated Risk Management
Committee. Each unit within the Risk Division contributes to the management of risk and co-ordinates with business functions to ensure that risk
considerations are proactively integrated into the Bank’s culture.
Further, the Loan Review unit within the Risk Management department carries out Loan Review Mechanism (LRM) activities as prescribed by the regulator.
Its responsibilities extend to identifying potential problematic loans/ facilities (post approval/ granting) and providing rational, objective and professional
recommendations for remedial action for implementation by line management. In order to ensure the independence and to strengthen the pre-approval
process the Credit Review Division which handles the pre credit review/ approvals was taken under the Risk Management Division.

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RISK CULTURE

A culture of risk awareness is fundamental to the effective management of risks within the Bank and serves as the foundation upon which a strong risk
management structure is built. The Bank’s commitment is clearly demonstrated through the establishment of strong policies and guidelines and ensuringthat non-compliance risks are effectively managed. The key characteristics of a strong risk culture are identified as follows:

Commonalityof Purpose,
Values andEthicsSRA

CTERIS

TIC

A

Universal
Adoption andApplication

Risk is considered in all activities, fromstrategic planning to day-to-day operations

A Learning
Organisation

The collective ability of the organisation to
manage risk more effectively is continuously
improving

Understanding
the Value of
Effective Risk
Management

People understand the value of risk
management• Each individual is committed to upholding theBank’s values in line with the Code of Conduct for
Employees• Adoption of the risk governance model• Operational Risk Coordinators in all vital
Departments• E-Learning modules in Risk Management andComplianceBank’s Context

CH

People’s individual interests, values andethics are aligned with those of the Bank

• Awareness sessions on Risk and Compliance

RISK POLICIES & PROCESSESCREDIT RISKKey Developments in 2023 included the following:

Main Objectives

Definition: Credit Risk is the risk of financial loss if a customer or counterparty fails to meet a payment
obligation under a contract. It arises principally from direct lending, trade finance and leasing business, andfrom off balance sheet products such as letters of credit and guarantees. As the Bank’s most significant risk
exposure, Credit Risk generates the largest regulatory capital requirement.

OBJECTIVES OF CREDIT RISK MANAGEMENTThe objectives of Credit Risk Management are:y Ensure optimal risk-reward pay-off for the Bank to maximise returns
y Maintain the quality of the portfolio by minimising the non-performing loans and probable lossesy Maintain a well-diversified portfolio by prudently managing the risk asset portfolio to ensure that therisk of excessive concentration to any industry, sector or individual customer is minimisedy Ensure that exposures to any industry or customer are determined by the regulatory guidelines, clearly
defined internal policies, debt service capability and balance sheet management guidelinesy Avoid all situations of conflict of interest and report all insider-related credits to appropriate bodies


Risk Management

Strengthened the Remedial Management
Unit which was set up under the purview of
the Risk Management department with thestrategic objective of preserving financiallydistressed or sick borrowers businesses (withviable business plans for revival). The main
objective of this unit is to minimise losses tothe Bank by providing orderly coordinated,timely and pre-emptive rehabilitation
solutions enabling such borrowers/
businesses to finally become competitive andproductive
Strengthened recovery efforts by providing
additional resources and infrastructure to
support the Recoveries team
Automation of staging requirements in linewith SLFRS 9 with the implementation of corebanking system
Implementation of a workflow system forthe individual impairment process withindependent approval from Risk Management
Department thereby strengthening thegovernance in the individual impairment
process
Setting up of a Stage 2 Task Force toproactively manage the stage 2 portfolio toprevent slippage into non-performing status
with frequent discussions on client-wisestrategies and review of MIS

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Credit Process
A WELL-DEFINED CREDIT POLICY APPROVED
BY THE BOARD OF DIRECTORS

1y

Set the credit culture of the BankySpecify target markets for lendingySpecify prohibited lendingy

Set acceptable risk parametersy

Set remedial and recovery actions

3

DELEGATION OF AUTHORITYy

Three Credit Committees representing the Business Linesy

The delegated authority limits are reviewed periodically andthe Bank follows the four-eye principleyLending decisions are based on detailed credit evaluation

5

Price the Credit Risk using scientific methods

7

Maximum exposure limits on;yPrudential Group Exposure LimitsySubstantial ExposuresyIndustry/ Economic Sector LimitsyCross-border/ Country Exposure LimitsyThe primary source of repayment for each credit is froman identifiable cash flow from the counterparty’s normal
business operations or other financial arrangementsyAdopt a pricing mechanism that reflects variation in the risk
profile of various exposures to ensure that higher risks arecompensated by higher returnsy

The financial performance of borrowers is to be continuously
monitored and frequently reviewed

RISK RATINGy

System driven obligor risk rating, facility risk rating and retailscore cards to suit the diverse client portfolios of the BankyIncorporating both quantitative and qualitative parameters

POST SANCTION REVIEW AND MONITORINGyWarning signals are identifiedyWatch listing processy

Non-performing assets are identified at an early stage

8

PORTFOLIO MANAGEMENTy

Evaluates exposures on the basis of industry concentration,
rating quality, internally established pre-specified early
warning indicatorsyRegular portfolio reviews, stress tests and scenario analysis

CREDIT RISK MITIGATIONyThe exposures in off balance sheet products are treated withutmost careyWays out analysisyyComprehensive and legally enforceable documentation of
credit transactions

Rapid portfolio reviews in case of any geopolitical or natural
disaster eventsyObtaining of collateral in line with the Bank’s policy andensuring enforceability

9344Single Borrower/ Group Exposures

Credit is extended only to suitable and well-identified
customers

6

PRUDENTIAL LIMITS

y

y

4

RISK PRICINGySTRUCTURED AND STANDARDISED CREDIT
APPROVAL

2

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Annual Report 2023

10

IMPAIRMENTyBoard-approved policyyClearly defined processy

Impairment based on Expected Credit Loss

Risk Management

Portfolio at a glance
Credit Risk Exposure – 31 December 2023
Classification

On-Balance
Sheet
Exposure

Off-Balance
Sheet
Exposure

Total
Exposure

Individual
Impairment

Collective
Impairment

Net
Exposure(LKR ‘000)(LKR ‘000)(LKR ‘000)(LKR ‘000)(LKR ‘000)(LKR ‘000)

Financial Investments

259,750,934-

259,750,934

255,344

25,546,482

234,204,452

Loans and Receivables to Other Customers

496,068,384

286,669,677

782,738,061

26,001,781

19,066,829

763,671,232

7% 2%

23%

Business Segment-wise Composition

Business Line-wise Composition ofPortfolio - 2022/2023
1%

Rated Portfolio Concentration

2023

34%

0% 4%

12%

0%

10%

23%

13%

4%

12%

20%
1%

21%

35%

2022
22%
22%

23%

AAA

20%

AA

30%

A+

40%

A

50%

60%

70%

80%

90%

BBB+

BBB

BB

B

C

100%

D

21%

Asset quality of the portfolio further deteriorated with the impact of the economy downturn which wasreflected in the rated portfolio.
Wholesale Banking

RetailProject Finance

Other

Business Banking

The Bank’s portfolio exhibited a downward
trend throughout the year, with each businessline intentionally reducing its portfolio size inalignment with the Bank’s strategic objectives forthe period.
Group/ Single Borrower Concentrationy The Bank was in compliance with regulatory
limits and internal limits set by the Board on
Group/ Single Borrower concentrations which
are more stringent than those prescribed by theregulatory The aggregate of the substantial exposuresof the Bank accounted for only 94.02% of thecapital base and was well within the internallimit
Sector Concentration
Bank maintained a well-diversified portfolio with noover concentration to any particular sector. Sector
concentrations were managed carefully during theyear considering the stresses seen in certain sectors.
The Bank was also in compliance with the minimum
lending requirement of 10% to Agricultural sector.

Risk Management

Geographical concentration

Geographical Concentration of Portfolio 31 December 2023
1%
2%
2%
3%

1%

5%
6%

NPL and Impairment
The Bank’s Impairment (Stage 3) to Stage 3 Loans
Ratio rose to 41.11% (compared to 37.44% in2022), while the Impaired Loans (Stage 3) Ratio
stood at 8.58%. A notable increase in impairment
was observed during the year, influenced bymacroeconomic shocks and the downturn in the
country’s economy.

9%71%

Western

CentralEastern

Southern

North Central

Northern

North Western

Sabaragamuwa

Uva

Based on Sri Lanka’s economic activity, thehighest concentration of domestic portfolio wasin the Western Province with a contribution of
71% during the year.

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Annual Report 2023

345

MARKET RISKDefinition: Market Risk is the risk to earnings or capital due to changes in market driven variables that affect the value of trading and accrual positions. The
Bank’s portfolios are exposed to these variables and correlations in varying magnitudes.
Key Market Risk
category

Risk
componentInterest rate

Description

Measurement
tools

Severity

ImpactProbability

Risk of loss arising from movements orvolatility in interest rates
Re-pricing

Holding assets and liabilities and offbalance sheet positions with different
principal amounts, maturity dates orre-pricing dates, which creates exposure
to Interest rate changes

Re-pricing gaps and Interest ratesensitivity limits

Moderate

Major

LikelyYield curve

Arises when unanticipated shifts occur
in the slope and the shape of the yield
curvesRate shocks, VaR ( Value at Risk)
analysis, Duration, holding period
limit, PVBP analysis, Price sensitivity
and MIS reports

Moderate

Major

LikelyBasis

Differences in the relative movementof rate indices that are used to priceinstruments with similar characteristics

Rate shocks, VaR analysis
and MIS reports

Moderate

Major

LikelyForeignexchange

Risk of losses arising from the
movements in foreign exchange rates byholding foreign currency denominatedassets and liabilities with different
currencies and maturities

Regulatory Net Open Position (NOP)
limit, individual and aggregate
currency exposure limits, VaR
analysis, gap limits, scenario analysis,
stress testing and stop loss limits

Moderate

Major

Possible

EquityPossible losses arising out of prices orvolatilities in individual equities

Mark to Market calculations

Low

Minor

Possible

Commodity

Exposure to changes in prices andvolatilities of individual commodities

MediumModerate

Possible

Market Risk arises mainly from interest rate risk and foreign exchange risk, where non-trading portfolio (Banking Book) which accounted for 92% of the total assets
and 92% of total liabilities excluding shareholder funds. The Bank had a negligible exposure to equity risk and was insensitive to commodity related price risk.
The Market Risk exposure by trading and non-trading portfolios of the Bank is set out in the table below.
As at 31 December 2023

Market Risk Measurement

Assets subject to Market Risk
Cash and cash equivalents
Balances with the Central Bank of Sri Lanka
Placements with banks
Derivative Financial Instruments
Financial assets recognised through profit or loss measured at fair value
Financial assets at amortised cost-loans and receivables to other customers
Financial assets at amortised cost-debt and other instruments
Financial assets measured at fair value through other comprehensive income
Total
Liabilities subject to Market Risk
Due to Banks
Derivative Financial Instruments
Financial Liabilities at amortised cost-due to depositors
Financial Liabilities at amortised cost
- due to debt securities holders- due to other borrowers
Debt securities issued
Total

346

National Development Bank PLC

Annual Report 2023

Carrying
amountTradingbook

Non-trading
book(LKR ‘000)(LKR ‘000)(LKR ‘000)

16,564,215
7,040,421
33,743,602
3,083,815
24,021,340
452,660,461
125,672,370
83,805,398
746,591,622
7,679,195
93,361
573,569,302
15,632,569
24,636,539
29,388,875
650,999,841

Risk Management

16,564,215
7,040,421
33,743,602
3,083,815
24,021,340

27,105,155

452,660,461
125,672,370
83,805,398
719,486,467
7,679,195

93,361
573,569,302

93,361

15,632,569
24,636,539
29,388,875
650,906,480

OBJECTIVES OF MARKET RISK MANAGEMENT
Ensure that business units optimise the risk-reward relationship within the Bank’s pre-defined risk appetite and avoid exposing the Bank to unacceptable losses.
Identify, assess, control and report Market Risks to ensure that the Bank operates within the allocated risk appetite levels.
Market and Liquidity Risk Governance Structure
Board

Board Integrated Risk Management Committee - BIRMC
Executive Committees

Credit and Market Risk Policy Committee - CMRPC

Asset and Liability Management Committee - ALCO

Risk Management

Market Risk Management Unit - MRMUPOLICY FRAMEWORK
Risk monitoring is guided by a well-defined policy framework and limit structure, covering Market, Liquidity, Asset and Liability risk management aligned to the
Bank’s business model, balance sheet and risk appetite. The Board supported by IRMC approves the risk parameters as recommended by ALCO and MRMU.
PROCESSES
The Market Risk management process (as set out below) provides guidance on the procedure for Market Risk management within the overall risk appetite of theBank. The implementation of the Bank’s risk management policies, procedures and systems are delegated to the Head of Market Risk & Treasury Middle Office whoreports to the Chief Risk Officer.

Policy formulationy

Policy formulation/ renewal
are carried out considering
the regulatory guidelines,
economic factors, bestpractices and materialchanges in risk management/
limit monitoring process

Risk measurement
methodologiesyRisk monitoring pertains toMarket Risk & Treasury Middle
Office are assessedyLimits are assessed andrecommended to ALCO/
Board approval. All limits inforce will be independently
monitored by MRMU on predefined time bands

Risk reporting andcommunicationyRisks and exposures aremonitored and reported tothe senior management/
Board for necessary action

Systems and controlsyImplementation ofmanagement reporting
systems to accurately reflect
the risks taken by the Bank.
Develop, implement andreview the controls Risk andControl Self Assessments(RCSA) that enforce theadherence to established risk
limitsy

The Bank upgraded theCore-Banking system which
improved the online/realtime monitoring of Treasury
limits/exposures for better
management of Treasury
exposures

Key developments in 2023
Implemented comprehensive measures to manage foreign exchange risk arising on individual & aggregate currency exposures within the regulatory limits
Adoption of prudential risk tolerance limits on forex exposures, stress testing, VaR analysis and hedging strategies which enabled the Bank to effectively
manage its foreign exchange risk in a volatile market
Measurement of interest rate risk on earnings perspective through earnings at risk measures and made timely re-pricing decisions of assets/liabilities in avolatile interest rate environmentStrengthened the stress testing methodologies and stress levels to reflect the impact of the market movements



Close monitoring and managing of the Government Debt Securities portfolio amidst uncertainties of the Domestic Debt Restructuring process

Increased the provisioning to withstand a probable haircut with respect to foreign currency Government debt

Risk Management

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Annual Report 2023

347

Value at Risk (VaR)

The table below shows the Bank’s consolidated foreign exchange position and the exposure held
against the Bank’s capital base which is managed well within the regulatory limit of 30%.
Overall exposurein respective
foreign currency

Overall
exposure
in LKR

‘000

‘000

2,005
17
(1,378)(26,826)
(24)
60
2,578

649,537
6,878
493,514
61,297
5,217
14,538134,310
1,365,292
70,147,877
1.95%

USD
GBP
EUR
JPY
AUD
CAD
Other currencies ( in USD)
Total exposure ( in LKR)
Total capital funds as at 31 December 2023
Total exposure as a % of total capital funds

In accordance with the BASEL guidelines the Bank’s
foreign exchange trading portfolio is subject to VaRmeasurement on historical simulation on a daily basis,
with the objective of measuring the maximum potential
loss due to holding of an investment/ position in the
Bank’s trading book. The Bank did not carry a trading
portfolio as at 31 December 2023
Stress testing on DBU net open position (NOP)
Stress testing on DBU- NOP under different magnitudesof shocks to the exchange rate are performed to assess
the impact on profitability as given below.

Bank’s Foreign Currency DBU Net Open Position and Stress Test Results as at 31 December 2023
Net openposition
Magnitude of shock (adverse)
Spot rate movement
Net open position-DBU (USD) / Stress P&L (LKR)

324.00548,127

USD/ LKR

Scenario 1

Scenario 2

Scenario 3

Scenario 4

5%
307.80(8,879,663)

10%
291.60(17,759,326)

15%
275.40(26,638,989)25%
243.00(44,398,316)

Sensitivity analysis
The Bank’s major foreign currency net open positions (NOP) are subject to daily sensitivity analysis to determine the impact of exchange rate movements by way of
profit or loss to the Bank’s Income Statement.
Exchange Rate Sensitivity of Major Foreign Currency Net Open Positions as at 31 December 2023
Spot rate shocks

LKR depreciate

LKR appreciate

Currency

Net openposition

-5%

-2.5%

-1%

Spot rate

1%

2.50%

5%

USD
GBP
EUR
JPY
AUD
Total

2,004,744
16,706(1,377,955)(26,825,972)(23,692)

32,476,856
344,552(24,642,225)(3,081,368)(261,430)
4,836,385

16,238,428
172,276(12,321,113)(1,540,684)(130,715)
2,418,193

6,495,371
68,910(4,928,445)(616,274)(52,286)
967,277

324.00412.48357.662.30
220.69(6,495,371)(68,910)
4,928,445
616,274
52,286(967,277)(16,238,428)(172,276)
12,321,113
1,540,684
130,715(2,418,193)(32,476,856)(344,552)
24,642,225
3,081,368
261,430(4,836,385)

Interest Rate Risk (IRR)

Interest Rate Risk in Trading Book

Assets in the Bank’s trading book areheld primarily for generating profits
through short term differences inprices/yields while the banking
book comprises interest earning
assets and interest-bearing liabilities
and off-balance sheet items,
which are contracted basically forsteady income generation and are
generally held till maturity. Thus, theBank assesses the price risk in the
trading book, whilst the earnings
or economic value changes aremonitored in the banking book.

Key Indicator

348

Mark to market of Financial Assets measured at fair value through profit orlossMark to market of Financial Assets measured at fair value through othercomprehensive income
Duration of debt securities - Financial Assets measured at fair value throughprofit & loss
Duration of debt securities - Financial Assets measured at fair value throughother comprehensive income

National Development Bank PLC

Annual Report 2023

Risk Management

Position as at 31
December 2023

Position as at 31
December 2022

LKR 183.24 Mn

LKR (28.16) Mn

LKR 5,628.54 Mn

LKR 368.85 Mn

0.62 Years

0.51 Years

1.07 Years

1.13 Years

The Bank’s fixed income securities portfolio is subject to VaR measurement under historical simulation method on a daily basis and the portfolios are managed atprudent levels.
Value at Risk (VaR) on Treasury Bill / Bond portfolio

As at 31
December 2023

As at 31
December 2022

LKR Mn

LKR Mn

12.43
93.92

30.22
123.91

Debt securities - Financial Assets measured at fair value through profit or loss
Debt securities - Financial Assets measured at fair value through other comprehensive income
Historical approach, 1 day holding period, at 99% confidence, 250 historical data
Interest Rate Risk in the Banking Book (IRRBB)The IRRBB arises mainly through non-trading asset and liabilities such as loans and advances, which is measured and managed through price sensitivity /EVE
(Economic Value of Equity), NII (Net Interest Income) and interest rate sensitivity gap analysis. The price sensitivity/ duration analysis (Economic value perspective)on the Statement of Financial Position is managed within the risk parameters whilst maximising the market potential on interest sensitive assets and liabilities.
During the year, the Bank’s net interest margin declined to 3.96% from 4% in 2022 due to reprising mismatches in assets and liabilities with the sharp decline in themarket interest rates.
Price Sensitivity of Assets and Liabilities

As at 31
December 2023

As at 31
December 2022

LKR Mn

LKR Mn

137
657
-394

506
1,217
14

Average for the year
Maximum for the year
Minimum for the year
Price Sensitivity - sum of value change in portfolio due to a 1% change in interest rate
Interest Rate Sensitivity Gap Analysis
The Bank monitors the interest rate sensitivity of assets and liabilities using re-pricing gap report. (Disclosure Note No 56.4 (a)Equity Price Risk

The Equity price risk arises due to adverse movement in the value of the individual stock price or equity index. The Bank does not engage in equity trading atpresent. However, the investments held in the fair value through other comprehensive income portfolio is subject to mark to market valuation.
TYPE

Financial Assets measured
at fair value through profit
or loss *Financial Assets measured
at fair value through othercomprehensive income

Carrying value

Fair value

Realised gains/losses

Unrealised gains/lossesAmount included in capital adequacy
calculation
Amount adjusted
from CET 1 capital

Amountconsidered forMarket Risk

-

-

-

-

-

-

2,128,521

1,142,712-(985,809)

583,656-* No outstanding portfolio as at 31 December 2023
Commodity Risk
Commodity price risk arises due to volatilities in thecommodity exposure of the Bank. The commodity
exposures are limited to gold loan and pawning
portfolio as no commodity trading activities are
performed by the Bank.
Interbank Counterparty Risk
When undertaking foreign exchange dealing andtrading with interbank counterparts and corporates,
two general types of risks arise.

Risk Managementy Pre-settlement Risk - Refers to the counterpart
becoming insolvent prior to the settlement dateof transaction. The exposure comes by way ofBank’s inability to find an alternate party to deal
on same rates (interest or exchange) due tomarket changes
y Settlement Risk - Relates to the event where
the counterpart to the deal is unable to honour
settlement obligations to the Bank after having
taken possession of funds paid by the Bank insettlement

The Bank sets individual counterparty limits andMaximum Daily Delivery Limits (MDDR limits) tomitigate above risks. Policies, procedures andlimit structures are in place to monitor Bank
counterparties considering the financial/economic
performance at frequent intervals. Counterparty
limits were recalibrated to capture the economiccrisis impact capturing the revised risk landscape forfew counterparties.

National Development Bank PLC

Annual Report 2023

349

LIQUIDITY RISKThe Bank is also equipped with a comprehensive Liquidity Contingency Funding Plan (LCFP) linked to thebusiness continuity plan in line with the regulatory guidelines. The LCFP clearly defines the responsibilitiesof the liquidity management team, Internal/external Liquidity Risk trigger points, stage for plan invocation/de-activation and the action plans to be exercised to ensure that all stakeholders of the Bank aresafeguarded. Further the Bank developed a recovery plan that defines a wide range of stress scenarios
and recovery options to safeguard the Bank from Market & Liquidity Risk aspects which were aligned to
the LCFP. In addition, the Bank has entered into a reciprocal liquidity funding agreement with an identified
counterpart Bank to ensure stability.

Definition: Liquidity Risk is the risk that the
Bank is unable to meet its financial obligations
in a timely manner without incurring
unacceptable losses. Financial obligations
include liabilities to depositors, payments
due under derivative contracts, settlement ofborrowings under securities and repurchasetransactions, lending and investmentcommitments. Further the Banks are exposed to
Liquidity Risk by the mismatches on maturities
of assets and liabilities.

LIQUIDITY RISK ANALYTICSOBJECTIVES OF LIQUIDITY RISK MANAGEMENT

Liquidity is measured through stock approach or flow approach. The stock approach utilises key ratios
which portray the liquidity levels in the balance sheet while the flow approach is based on a statement of
maturities of assets and liabilities in time bands according to the residual time to maturity. Separate gap
limits are set for the local currency and foreign currency maturity mismatches based on the size and thenature of the Bank’s Statement of Financial Position.

The objective of our liquidity framework is toensure that all anticipated funding commitments
can be met as and when due whilst maintaining
the business profile. It is designed to be adaptable
to changing business models, market dynamics andregulations.

Limits are set for key liquidity measures which give an early warning signal of tightened liquidity positions of
the Bank. Factors such as market liquidity, exposure to interbank market, movement on loans and advancesand deposit mix are regularly monitored to ensure that asset and liability portfolios of the Bank are geared
to maintain a healthy liquidity position. Considering the challenges faced due to external market factors
during the year, the Bank strengthened the Liquidity Risk limits internally to preserve the Bank’s interest.

POLICY FRAMEWORKKey Risk Metrics

The Bank’s well-articulated Liquidity Risk
management policies and procedures provide
guidance on Liquidity Risk exposures which ensuresthat it has sufficient liquidity to meet its financial
obligations at a fair market price. The policies
were reviewed to address the internal/ external
economic factors with more clarity on the process
and mitigates for Liquidity Risk management.
The Bank also monitors key liquidity metrics on aregular basis by measurement approaches throughprudent limits, stress testing methodologies and acontingency funding arrangement.

The Bank maintained the following regulatory liquidity ratios as at the year end.

PROCESS
Liquidly Risk governance structure: The
responsibility for Liquidity Risk management
rests with the ALCO while Treasury/ALM units are
responsible for executing the day-to-day liquidity
management.

Key Indicator - Regulatory

Position as at 31
December 2023

Position as at 31
December 2022

39.02
309.61228.58142.2627.24
297.08232.68130.87

Statutory liquid asset ratio %Liquidity coverage ratio ( LCR)% -LKR currency
Liquidity coverage ratio ( LCR)% -All currency
Net stable funding ratio (NSFR )%The key ratios used for measuring liquidity under stock approach are given below.
Key Indicator - Internal

Position as at 31
December 2023

Position as at 31
December 2022

58.04
80.58
44.97
57.96

65.55
86.20
30.27
86.87

Net loans to total assets ratio (%)
Advances to deposits ratio (%)
Liquid assets to short term liabilities (%)
Commitments to liquid assets (%)
Flow approach

A statement of maturity analysis on assets and liabilities (MAL) is presented placing all cash inflows andoutflows in the time bands according to the residual time to maturity and non-maturity items as per
CBSL recommended and Bank specific behavioural assumptions. Net exposure gaps were managed withcustomer deposits which are considered to be stable source of funds based on historical behavioural
patterns and a healthy deposit roll-over rate for each time band.
Maturity Gap Analysis for Local Currency denominated Assets and Liabilities - as at 31 December 2023				

Total Assets
Total Liabilities
Net liquidity period gap

In LKR ‘000

Up to 1 month

1-3 Months

3-6 Months

6-12 Months

1-3 Years

3-5 Years

Over 5 Years

Total

58,943,675
75,772,467(16,828,792)

85,253,589
90,533,654(5,280,065)

84,707,902
101,055,166(16,347,264)

49,605,643
87,938,405(38,332,762)

122,974,526
59,947,443
63,027,083

73,687,974
36,047,200
37,640,774

122,031,324
145,909,186(23,877,861)

597,204,634
597,204,634
0Maturity Gap Analysis for Foreign Currency denominated Assets and Liabilities - as at 31 December 2023			

Total Assets
Total Liabilities
Net liquidity period gap

350

In USD ‘000

Up to 1 month

1-3 Months

3-6 Months

6-12 Months

1-3 Years

3-5 Years

Over 5 Years

Total

135,047
71,79063,257

179,842
131,00748,83568,981111,996(43,015)

30,240142,303(112,063)

55,543
41,131
14,412

15,97841,710(25,732)

85,01730,71254,306570,648570,6480

National Development Bank PLC

Annual Report 2023

Risk Management

Diverse funding profile
The Bank’s funding profile is monitored to ensurethat it depends on diverse sources with cost
efficiencies to manage the liquidity and profitability
at optimum levels. Diverse funding requirements
are assessed and managed through maturity gap
analysis and cash flow reports on a regular basis.
Stress tests are performed to assess the Bank’s
ability to withstand stressed scenarios and maintaina healthy liquidity position.
The Bank benefits from a diverse funding profile,which includes low cost CASA deposits and fundinglines as a participatory financial institution. The
Bank recorded a decrease in deposit base by 8%,
while the CASA ratio improved to 22.6%. Further
the Bank successfully raised LKR.5 Bn and raised
mid-term deposits to build long term funding.

y Effective assignment of roles and responsibilities to monitor and evaluate risk exposures and theimplementation of an enterprise-wide approach to Operational Risk.
y Enables the maintenance of an adequate capital buffer required for Operational Risk losses, instituting
mechanisms to mitigate or control the risks. Mitigating actions are prioritised based on the criticality of
the risk exposures and escalation mechanisms are set to ensure that the management of the Bank is fully
aware of the sources of potential or emerging Operational Risks.

PeopleProcess/
Product

Incident/Risk/Loss
ReportingInternal Loss
Database
RCSA

RISK

KRI

Funding Diversification by Product
Scenario
Analysis

1.1%
3.6%
2.3%
4.2%
0.3%
13.8%
6.1%
68.7%

A - Term Deposits

E - Debentures

B - Demand Deposits

F - Repo Borrowing

C - Savings Deposits

G - Institutional Borrowings

D - Other Deposits

H - Other Borrowings

OPERATIONAL RISKDefinition: Operational Risk is defined as
the risk of loss resulting from inadequate or
failed internal processes, systems, people
or from external events. It includes legalrisk but excludes strategic and reputation
risk. Operational Risk may result in financial
impact, affect business continuity, damage theorganisation’s reputation, and may weaken its
regulatory compliance position.
Approach to Operational Risk Management
The Bank’s Operational Risk management is guided
by the “Sound Practices for the Management andSupervision of Operational Risk” issued by theBasel Committee and the regulations issued by
the Central Bank of Sri Lanka and is in line with theBank’s overall Risk Management Framework. Key
objectives of our Operational Risk framework are as
follows:y Designed to identify potential threats, inparticular to identify potentially large orcatastrophic losses to the Bank and its strategy
to reduce the impact of risk.
Risk Management

External
EventsSystemOperational Risk
Governance

Identification

Integrated Risk
Management Committee(IRMC)

Assessment

Breaches

Management
and Control

ANALYSIS

Monitoring andReporting

The Operational Risk Management Unit (ORMU)
as the second line of defence facilitates theprocess of identifying, measuring, managing andmonitoring of Operational risks. The past, current
and future Operational risks are assessed using
the Operational Risk Matrix which portrays theaggregate expected exposure towards the specificrisk and thus actions are prioritised according
to the criticality of risks. ORMU periodicallyreviews procedural changes and provides
recommendations for improving/ strengthening
controls.
Business Operational Risk Sounding Board(BORSB) consisting business, support function
units and ORMU staff, discuss the progress on
rectification of Operational Risk events at regularintervals. Risks that require the attention of senior
management are escalated to the Operational
Risk Management Committee (ORMC),
Integrated Risk Management Committee (IRMC)
and Board.

Operational Risk
Management Committee(ORMC)
Breaches

Business Operational Risk
Sounding Board (BORSB)

y Disciplinary action is taken on significant
Operational Risk events arising due to humanfactors and lessons learnt are discussed
at Operational Risk awareness sessions. A
mandatory eLearning module was implemented
bank-wide to enhance the knowledge on
Operational Risk among all staff
y Global Operational Risk events are being
monitored and distributed to respective
stakeholders to identify any implications within
the Bank and actions required to mitigate similarrisks
Tools and Methodologies
Operational Risk Management System (NORMS) Facilitate the automation and consistent applicationof Operational Risk management methodologies
across the organisation.
Incidents and near misses Identification of thecauses/underlying risks in a timely manner as andwhen the incidents are reported.
Operational Risk losses Maintained in a databaseand information is analysed to ascertain the criticalityof losses and the causes of the loss events.

Key Elements of the Operational Risk
Management Framework:
y The responsibility of risk identification is
assigned to all employees, and they are
considered Operational Risk Managers
accountable for Operational risks under theirscope of work. This has contributed towards
nurturing a risk conscious culture within theorganisationy Employees are encouraged to focus on
identifying deficiencies in processes andsystems, and implement solutions andremedial action with the guidance of ORMU
staff

Risk and Control Self-Assessments (RCSA) andKey Risk Indicators (KRI) Enables the effective
identification of key/ emerging risks, whenever
there is a material change to the business, structure,processes and systems or any new initiative/ productlaunch. RCSA process is continuously refined toprovide more focus on determining the risk profileof the Bank
Scenario Analysis Used to assess low- frequency/
high-severity potential Operational risks that may
have severe impact to the Bank and measures
are taken to strengthen the available controls/
implement new controls and the action plans.

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Annual Report 2023

351

Outsourcing

Risk

With the intent of focusing on the core banking
functions, the Bank has outsourced certain non-corefunctions to external vendors who are specialized intheir respective fields. The management of outsourcing
arrangements is strictly in accordance with the CBSL
Outsourcing Direction 02 of 2012 and the Outsourcing
Policy of the Bank. The Bank is committed to ensuringthat the outsourced parties uphold and extend highstandards of customer care and service excellence. All
outsourcing arrangements of the Bank are evaluatedby the Outsourcing Committee to be in line with theregulatory provisions.

Insurance Framework

General
Buildings and their contents including IT equipment are
insured at replacement value. The limits of indemnity are
decided upon assessing the likely exposure of risks to the Bank
Theft/Fraud
Fraudulent actions by an employee or by a third party acting
on its own or with the aid of an employee with the intent toobtain illicit personal gain or through malice.

The Bank has a comprehensive insurance program as a
key measure to mitigate operational risks. The insurance
program is reviewed periodically and continuously
refined on an on-going basis. The Bank has engaged
an insurance broker to source terms, evaluate themand add value using their expertise. Operational losses
which are insurable are covered by a spectrum of
insurance policies on a system wide basis.

Operational Risk Losses - 2023
(Basel Business Lines)

Fraudulent input and modification via computer systems,
electronic computer programs, electronic data andmedia, computer viruses, electronic and telefacsimile
communications, electronic transmissions, electronic
securities and voice incinerated transfers.



19%


44%

38%
33%


Trading & Sales

Retail Banking

Basel Loss Event Types

58

2

100

94

RetailBanking

Trading &
Sales

20

35
RetailBanking

40

100

100

74
26
Payment &Settlement

60

97

0

1

%
80

40
20

Trading & Sales

100

80
60

Retail Banking

Payment & Settlement

Basel Loss Event Types

7

%
100

Commercial Banking

6

Payment & Settlement

Trading &Sales

Execution, Delivery & Process Management
Business Disruption and System Failures
External Fraud

0
Commercial Payment &Banking
Settlement

Execution, Delivery & Process Management
Business Disruption and System Failures
External Fraud

Majority (99%) of Operational Risk losses were under the business lines “Payment & Settlements” and “Retail
Banking”. Out of the losses falling under high frequency / low impact bucket, 80% contained individual loss
events less than LKR 100,000.00. In 2023, the Bank was able to recover 69% of the total gross loss throughinsurance and other sources.
During the year 2023, there were no fines imposed on the Bank by the Government or any regulatory authority.

352

National Development Bank PLC

Annual Report 2023

Computer Crime Insurance Policy

Key Developments in 2023

10%

55%

Professional Indemnity Policy,
Directors & Officers Liability andPublic Liability.

Computer Crime

Operational Risk Losses - 2022
(Basel Business Lines)

1%

Banker’s Indemnity Insurance
PolicyProfessional Liability
The consequences of any legal action against staff ormanagers as a result of their professional errors or omissions.

Insurance

Fire Insurance Policy and otherinsurance policies covering plate
glass, machinery breakdowns andall electronics and computers.

Risk Management

Implemented stringent security measures toavoid cyber-attacks/security threats including
creating employee and customer awarenessto be cautious when transacting online
Implemented security solutions for theprevention of data leakage, prevention of
insecure device connectivity to corporate
network, and application specific attacks
against public web services
Identified the impact on Bank’s profitability/
liquidity and change the business model toreduce the exposure
Close monitoring of potential areas at risk
by revisiting the vulnerable processes andintroduced new /improved controls as
appropriate

Managing Cyber Risk
In an increasingly complex digital society whereinterconnected systems and innovative digital
services define the operating standards fororganisations, effectively managing cyber risks
is increasingly challenging. The rapid pace oftechnology change and increased threats fromfinancially motivated cyber adversaries has led
to further challenges. Having understood these
dynamics, the Bank strives to invest in updating
its digital defences to meet the challenges of theevolving cyber threat landscape and continue tocollaborate with financial sector threat intelligence
providers.
Key Developments in 2023








Strengthened technical controls: Firewalls withadvanced threat protection at multiple layersof defence, network segregation, intrusion
prevention systems, gateway level content
filtering, anti-malware solutions, centralised
patch updates, vulnerability remediation andmonitoring of privileged accounts activities tomitigate Cyber Risk
Increased monitoring of online channels andthe use of strict controls to protect against
unauthorised access, data leakages and virus/
malware attacks
Ongoing investments to upgrade digital
defences and collaborations with financial
sector threat intelligence providers
The Bank has also subscribed to the services
provided by Financial Sector Computer
Security Incident Response Team (FINCSIRT),
where intelligence on the latest threats to the
Banking industry is provided to the IT security
teamStrong policy framework complying with theBaseline Security Standards Guidelines issued
by the Central Bank of Sri Lanka

Internal and external penetration tests byemploying external service providers fromtime to time to ensure the systems are resilient
to such attacks.

Technology Risk
With the evolving technological and digitaltransformation, the banking industry grapples witha multitude of technological challenges arisingfrom cyber-attacks, service disruptions, frauds
or data leakages. Technology Risk management
provides diligent and adaptable approach tofortify systems and to protect sensitive data. The
Technology Risk Management unit of the Bank has
instituted a series of measures to strengthen its
technological defences through a technologicalrisk framework with continuous improvements tocombat emerging technological threats.

Risk Management

The Bank has demonstrated its commitment tointernational standards by obtaining ISO 27001:2013
certification in 2023 for the IT Department whichsignifies the implementation and maintenance ofcontrols, processes, and measures to safeguard
sensitive information while ensuring theconfidentiality, integrity, and availability of data. IT
Security has made significant strides in enhancing
Data Loss Prevention (DLP) rules, representing aproactive approach in addressing technologicalchallenges in handling sensitive data and dataclassification. Technology Risk management
includes the strategies, policies, processes,
systems, and people used to manage potential
Technological risks by supporting the security
posture of the Bank. The CISO function plays apivotal role in formulating, implementing, andenforcing security policies to protect critical datawith stakeholder engagement.
Technology Risk Management unit within the
Bank’s Risk Management department ensuresprudent management of Technology risks and has
oversight on the Technology Risk Management
Framework. Bank has established the Information
Security Committee as the apex managementlevel body responsible for Information Technology
resilience of the Bank.
Further the Technology Risk is assessed as part ofthe comprehensive assessment of risks in the Bank’s
Internal Capital Adequacy Assessment Process(ICAAP) to ensure adequate level of capital is held.
Risk and Control Self-Assessment (RCSA), Key Risk
Indicators (KRI) and risk dashboards are used to
identify and mitigate potential Technological risks
and to strengthen the IT/IS risk culture within theBank.
A significant emphasis is placed on user training
and mandatory awareness programs, recognising
the pivotal role of employees in maintaining
a secure Information Security culture withheightened sense of awareness and understandingon Technological risks exposed by the Bank.
By combining strategic leadership, ongoingevaluation, and a holistic approach to Technological
Risk management, the Bank ensures that its
technological assets remain secure and resilient in
the face of evolving technological challenges.
Business Continuity Management
The Bank’s Business Continuity Management (BCM)
Policy requires comprehensive and timely plans to
be in place encompassing a minimum of a BusinessContinuity Plan (BCP) and IT Disaster Recovery
Plan (IT DRP). This BCM Framework is designed
to comply with the requirements of the Central
Bank of Sri Lanka and is approved by the Board of
Directors. These plans are formulated following
the integration of Enterprise Risk Management(ERM) Framework with effective Business Impact

Analysis (BIA) processes and methodologies whichanticipate all forms of threats, crisis and disasters
that are inherent in the ever-changing businessenvironment.
The Bank has a fully equipped Disaster Recovery(DR) Site and BCP facility to ensure resilience tobusiness disruption. The Governance of BusinessContinuity management is steered throughThe Leadership Team (TLT) comprising of senior
management and coordinated by the Bank’s
Business Continuity Manager. The staff is allowed
to operate from split locations, on roster/shift basis
and work from home. The DR site ensures business
continuity and operational readiness.
During the year the Bank achieved a historic
milestone by becoming the first commercial bankin Sri Lanka to attain the ISO 22301 certification for
Business Continuity Management.
OTHER RISKSSTRATEGIC RISKStrategic Risk can be defined as the current andprospective risk to earnings and viability arisingfrom,y Adverse changes in business environment withrespect to the economy, political landscape,regulations, technology, actions of competitorsy Adverse business decisions
y Improper implementation of decisionsy Lack of responsiveness to changes in thebusiness environment
Strategic Risk for a bank can manifest itself throughlack of well-defined long-term strategy but more
importantly because of failure to appropriately
communicate and implement the strategy or due
to unforeseen changes in the external environment.
Formulating appropriate response plans to refine
the strategy to suit the changes in the businessenvironment is essential to management ofStrategic Risk.
The strategic plans are drawn at various level of
granularity (e.g. branch level/department level) andthe implementation is reviewed through periodic
meetings where variances from the growth targets
are analysed and corrective actions recommended.
The Strategic Plan is also linked to individual
employee performance through the performance
management system and periodic performance
reviews are carried out to motivate employees andcreate a performance driven culture.
Voyage 2025 is the Bank’s five-year (2020/2025)
strategy and was developed under the guidanceof Board of Directors following extensive brain
storming by a cross functional team comprising
The Leadership Team and representation from
Assistant Vice Presidents and Chief Managers of theBank. Strategy formulation was also supported by
an external subject matter expert. With approval

National Development Bank PLC

Annual Report 2023

353

of Board, Voyage 2025 was officially launched on
31 August 2020. Given the rapidly evolving market
conditions locally and globally, The Leadership
Team engaged in a critical evaluation of theStrategic Plan during the year 2023 and developed
a medium term strategic plan to be implemented
during FY24 & FY25 period, covering the latter halfof Voyage 2025 Strategy horizon. This mid-term
strategy aims to closely align the Bank’s businessstrategy to the current operating environment andaddress the key concerns with regard to earnings
and balance sheet to better position the Bank toface new challenges. These changes and thinking
are being cascaded down to all staff to ensurealignment of the Bank as a whole with the updated
Strategic Plan.

manage the exposures within the Board approved
limits. These limits are reviewed at least annually
and approved by the Board, thus mitigating the
Cross-border Risk.

Whilst the Bank’s strategy continues to be agile,
Bank has taken proactive tactical and operational
actions in response to changes to the economic
landscape.

y Deficiencies in the security, property, defects intitle and the related documentation

LEGAL RISK
Legal Risk is understood more from its
consequences, which is incurrence of liquidated
damages, penalties, fines, imposing of certain
conditions and sometimes loss of reputation.
Legal Risk may vary from institution to institution
depending on the manner in which it conducts its
business and the documentation it follows and isclosely related to Compliance and Regulatory Risk.

y Deficiencies in the documentation of the
product or a transaction with an underlying
contracty Mis-selling of products, services

Cross-border Risk arises when the Bank is unable toobtain payments from customers or third parties on
their contractual obligations as a result of actions
taken by foreign governments, mainly relating toconvertibility and transferability of foreign currency& geo-political factors.

y Deficiencies in employee contracts

To effectively control the risk associated with
Cross-border Risk, cross-border exposure/ country
exposure limits are set based on the Sovereign
Ratings issued by International Rating agencies
such as Fitch, Standard & Poor’s and Moody’s
Corporation and also linked to the Bank’s capitalbase. Exposures are captured based on the
country in which the counterpart/ counterparty
bank’s main Head Office is domiciled. If a branchof the counterpart/ counterpart bank has been
incorporated in a particular country, then exposures
are to be captured in that country.
The Bank will also undertake a detailed due
diligence covering the economic indicators &outlook, country rating, political risk, exchange
rate risk (convertibility & transferability), banking& financial sector etc. The business lines need to354

National Development Bank PLC

A model is a quantitative method, system, orapproach that applies statistical, economic,
financial, or mathematical theories, techniques, andassumptions to process input data into quantitative
estimates. Since models are a simplified depictionof the complex real world phenomenon which
describes the relationship among observed
variables based on assumptions, the use ofmodels comes along with Model Risk. The Board
has in place a risk model validation policy and agovernance framework to mitigate Model Risk. The
risk models are validated in line with policy.
SETTLEMENT RISK

Legal Risk in the Bank can manifest itself through,

CROSS BORDER RISKCorrespondent Banking Unit and Risk Management
Department are responsible for the Bank’s
cross-border exposures and management of
exposure limits. Cross-border assets comprise ofloans and advances, interest-bearing deposits withother banks, trade and other bills, acceptances,foreign exchange contracts, certificates of deposit
and other negotiable paper, investment securities
and formal commitments where the counterparty
is resident in a country other than where the assets
are recorded. Cross-border exposure also includes
the assets owned by the Bank/ Group that are held
in a given country.

MODEL RISKy Act of the counterparty (Customers,
Shareholders, Consortium Bankers, Service
Providers, and Regulators etc.)
y Change in domestic and international legal
environment due to legislative changes andacquisitionsy Non-adherence to laws and regulationsy Procedural failures in parate actions andlitigation
Specific risks relating to Legal Risk are reported on aquarterly basis to the IRMC.
REGULATORY AND COMPLIANCE RISK
Compliance and Regulatory Risk is defined as therisk of legal or regulatory sanctions/ enforcements,
material financial losses, or reputational damage
and integrity an institution may suffer as a result of
its failure to comply with laws, regulations, rules,
related self-regulatory organisational standards,
and codes of conduct applicable to its businessactivities.
A compliance function, reporting directly to theBoard of Directors is in place to assess the Bank’s
compliance with external and internal regulations
on an ongoing basis in order to minimise theCompliance Risk.
The Bank has a clearly defined Board-approved
Compliance Charter, which defines thefundamental principles, roles and responsibilities of
the compliance function within the organisation as
well as its relationship with senior management, theBoard of Directors and the business and operational
functions.

Annual Report 2023

Risk Management

Settlement Risk refers to the risk arising on accountof failed trades with counterparty banks in theforeign currency transactions. Settlement Risk
arises from possible losses when the Bank is in aforeign exchange transaction pays the currency itsold but does not receive the currency it bought.
Forward contract settlement failures can arise fromcounterparty default, operational problems, andother factors. Settlement Risk exists for any tradedproduct. Currently, the Bank has a procedure formonitoring limit utilisation, failed trades and excess
monitoring. Settlement Risk is currently controlled
by way of prudent allocation and monitoring ofcounterparty limits including Maximum Daily
Delivery Risks (MDDR) limits for counterparties. Dueto the current foreign currency liquidity stresses
faced by the banking sector the bank cautiously
monitor and manage the counterparty settlements.
GOVERNANCE RISKThe Board of Directors is responsible for the overall
governance of the Bank which includes formulating
the strategic direction, leadership to operationalisesame, supervising the management of the businessand reporting to shareholders on their stewardship.
Bank’s Corporate Governance framework has beendeveloped with the objective of balancing theattainment of corporate objectives while ensuring
the highest standards of corporate conduct andtransparency.
Several policies and codes have been developedand implemented to manage Governance Risk
at the Bank. The Internal Code of Corporate
Governance which applies to all Directors andKey Management Personnel of the Bank sets out
policies and processes for implementing the
Corporate Governance Directions issued by the
Monetary Board of the Central Bank of Sri Lanka, theCompanies Act No. 7 of 2007 and the Best Practices
on Corporate Governance issued jointly by theInstitute of Chartered Accountants of Sri Lanka andthe Securities and Exchange Commission of SriLanka. The Bank has in place a Code of Conduct for
Employees governing all employees which outlines
standards of professional and ethical conduct that
all employees of the Bank are expected to conformto including areas such as general conduct andcompetence, confidentiality and misuse of material
confidential information, managing conflicts ofinterest situations gifts and inducements andinsider dealing provisions.
The Bank recognises the importance of soundmanagement of Governance Risk.
Following is a summary of activities undertaken by
the Bank for management of Governance Risk.
y Annual declarations obtained from Directors
y Implementation of the Internal Code ofCorporate Governance and training Directors in
the areas of Governancey Code of Conduct for Employees which
incorporates several policies of the Bank
including the Confidentiality policy, Insider
Trading prohibitions, Securities Trading policy,
Gift Policy, Anti-bribery and Corruption policy,
Information Security policy, approval from CEOprior to staff taking up any outside position,
conflicts of interest provisions etc.
y Monitoring of transactions carried out by the
Bank with related parties in terms of the Bank’s
related party transactions policyy Handling complaints of customers of the Bankas per agreed service standards in accordancewith the Complaint Handling Procedurey Robust framework of communication related
policies including Whistleblowing, Disclosure
and Communications Policyy Document Retention and Destruction Policy,
Staff Transaction Policy
REPUTATIONAL RISK
Reputational Risk is risk of indirect loss (current orprospective) arising from stakeholders’ negative
experience while dealing with the institution or
negative publicity regarding the Bank’s businesspractices which could lead to implications onmarket share, costly litigation expenses andrevenue impacts over the long term. Reputational
Risk can be triggered by a risk event in any or all of
the above risk categories hitherto described.
Reputational Risk management and mitigation
aspects are embedded in the Bank’s policies
and procedures, training programs, the BusinessContinuity Plan and through the Audit and Board
Risk Management Committees.
The Bank monitors its Reputational Risk profile
through a set of early warning indicators basedon the Reputational Risk drivers within the

Risk Management

Reputational Risk scorecard. The risk mitigationand control processes for Reputational Risk aredesigned to consider appropriate response actions
to address the risks identified. Based on Customer
Charter and FCPR of CBSL, the Bank has facilitated
the following channels for customers to raise theirexpression of dissatisfaction and complaints to
the Bank. Complaints could be made, verbally orin any form of written options, such as throughthe-island wide branch network by contacting
the Branch Manager or the QR option at branches,
Relationship Managers, 24/7 Contact Centre, Bank’s
general email box (contact@ndbbank.com), write
to Customer Experience Officer via Post, NEOS
online/mobile banking inbox message service,
NDB Facebook page, Twitter, Instagram, LinkedIn or
Google Business Reviews. All complaints received
through these channels are directly entered into
the “Customer Service Request Management(CSRM)” workflow for immediate processing. The
Customer Experience team investigates the issues
and liaise with the responsible units for resolution
and revert to the customers in a timely manner.
The Customer Experience team follows up withthe customers to ensure satisfaction and gather
feedback for improvement.
The Bank’s reputation and brand value has
strengthened in recent years, as it has enhanced its
customer value proposition and sought aggressive
growth in selected segments. Bank acquired
numerous awards in 2023 for various aspectsof performance including digital technologies,
customer-centric solutions, innovation, womenfriendly workplace, investor relations, corporate
citizen sustainability and corporate reporting. The
Bank was named the Retail Bank of the Year (SriLanka) at Asian Banking & Finance Retail Banking
Awards 2023 and the Best Corporate Bank 2023
by Asiamoney and the Bank was ranked 15th at theBusiness Today’s Top 40 Corporates for 2022-2023.
The Bank was crowned the Most Innovative Digital
Banking Brand Sri Lanka 2023 by the prestigious
Global Brands Magazine UK.
ENVIRONMENT & SOCIAL RISK MANAGEMENT(ESRM)The Environmental and Social Risk Management
plays a vital role in effectively managing theenvironmental and social risks stemming from debt
and equity financing and strategic investments inbusinesses, which in turn will strengthen the Bank’s
resilience. Environmental and Social (E&S) risks of
the Bank’s customers are inherent and dynamic,
given increasing complexities in the operatinglandscape. Accordingly, the Risk Management
Department and the Finance Department
proactively sought to strengthen the Bank’s E&S
risk assessments by revising the Environmental andSocial Management System (ESMS) in 2023 to alignwith international best ESG practices.

Key Developments in 2023














Revised ESRM Policy and the ESRM Manual of
the Bank based on annual review to ensure
the relevance of the Policy and Manual in a
rapidly evolving ESG landscapeThe 2023 revision introduced new processes
around credit facilities appraisal and approval
which further strengthened the scrutiny onenvironmental and social aspects linked toBank’s lending
The function continued to cover theoperations of the Bank as well as the Group
Companies
Increased internal stakeholder engagement
by introducing added ESG responsibilities toencourage dynamic contribution towards E&S
function
The IRMC was updated on a quarterly basis on
ESMS related matters
Conducted several capacity building
programs to the staff members involved inlending, credit process and ESRM related
process of the Bank with the external resource
contribution of eminent professionals in thefield and internal resources contributors
Continued allocation of a dedicated resourceat the Associate Manager grade to oversee theprocesses related to ESMS covering the Bankand the group

The Bank is consistent and conscious in its
approach to mitigate and/ or manage adverse
impacts to the environment and the community
through its ESRM Framework/ ESMS and continues
to set an example of responsible corporate
behaviour in an increasingly ESG conscious
business environment.
Key aspects of the ESRM Framework

ESRM Framework, Policy and Manual
has been developed in line with theinternational best practices
Dedicated coordinator to monitor andadminister the ESMS/ ESRM operations of
the network and the group of companies
A specific learning and development
curriculum is in place in order to effectively
develop the capacities of the relevant staff
members
Ongoing capacity building on ESMS/ ESRM
including the addition of a special session into the Bank’s orientation programme

National Development Bank PLC

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355

GROUP RISKy Interest Rate Risk

The NDB Group Companies are engaged in Unit
Trust Management, fee and fund based Investment
Banking, Private equity fund management andproperty management activities. Based on these
activities, the Group Companies are confronted
with an array of financial and non-financial risks
such as credit, interest rate, foreign exchange rate,liquidity, equity price, commodity price, legal,
regulatory, reputational, operational, etc. These risks
are highly interdependent and events that affectone area of risk can have consequences on a rangeof other risk categories. Considering the diverse
nature of business models & risk profiles each groupcompany remains responsible for the managementof their risks, including associated controls and on–going monitoring processes.
The following measures ensure that Group Risk is
proactively monitored and mitigated;y Bank’s capital at risk is limited to the amount ofequity invested in these companies at the time
the companies were incorporated
y There is representation by the Bank’s Directors/
Key Management Personnel on the Boards of
Directors/ Board Audit, Risk and Compliance
Committee of its subsidiaries, thereby ensuring
full and sufficient knowledge of subsidiaries’
operations and risk profilesy Due to the governance structure mandated by
the laws governing banking and limited liability
companies, all inter-company transactions
are at arms-length and full disclosure of suchtransactions is madey Natural mitigation from the fact that the Bankis the ultimate parent company and owns thelargest balance sheet in the Groupy NDB Securities is licensed as a Stock Brokers
and NDBW is licensed as a managing company
and investment manager and NDB Investment
Bank is licensed as a Corporate Finance Advisor
respectively and are regulated by the SEC
y Risk Reporting framework by the Group
Companies includes reviews by the Risk
Management Department of the Bank/ IRMC
and Board
Risks identified by Group Companies are reported
to Risk Management department periodically,
through appropriate risk indicators (using a Risk
Dashboard) and management information forreview and escalation. Top risks and associatedmitigants are also highlighted. The main risk
categories being reviewed are as follows:y Investment/ Credit Risky Operational Risky Concentration Risky Regulatory/ Compliance Risky Legal/ Reputational Risky Strategic Risky Any other risks relevant to the specific line ofbusiness of the Group Company
All Group Companies are required to have relevant
policies and limits for monitoring purposes andto ensure that risks are within acceptable levels inline with internal policies and risk appetite. All risk
related policies and risk appetite statements of theGroup Companies are vetted by Risk Management
department.
SOVEREIGN RISK
Sovereign Risk is the potential that the Government
will default on its sovereign debt by failing to meet
its interest and/ or principal payments.
The consequences of a default by sovereign
include:y A rating downgradey A loss of reputation along with an increased
difficulty in raising funds for several years
y A lack of investors willing to buy the debt andequity of corporations based on the countryy An economic downturny Political instability
A default negatively affects GDP growth, thecountry’s credit rating for many years, can hurt
exports, and can make the defaulting country’s
banking systems more fragile. It can seriously
impede the economic development and growth ofthe country.
The Bank is exposed to Sovereign Risk throughinvestments on Government Bills/ Bonds,
International Sovereign Bonds (ISBs) and Sri
Lanka Development Bonds (SLDBs). Neverthelessbanks hold a reasonable amount in Government
Securities due to the nature of its role played in
the financial system. Local currency Government
bills and bonds form a significant portion of liquid
assets for all commercial banks. The Bank closely
monitors the Sovereign Risk through ratio analysis,
portfolio limits, duration analysis, stop loss limits,
Mark to Market exercises etc. and is guided by
the Board approved limit framework and theInvestment policy. Investment decisions andportfolio exposures are discussed at ALCO/ Treasury
Committee in line with the market vulnerabilities
for prudential action.

y Market Risk
y Liquidity Risk

356

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Annual Report 2023

Risk Management

Bank is exposed directly to Sovereign Risk throughits lending portfolio. Credit exposure to state
sector including state sector exposure for funding
infrastructure projects is monitored and presented
at Credit and Market Risk Policy Committee and alsoat Integrated Risk Management Committee.
With the country rating downgrade and debt standstill announcement made by the Government of Sri
Lanka in April 2022, Bank increased its impairment
on the foreign currency investment portfolio of ISBs
and SLDBs.
FUTURE OF RISK MANAGEMENT
The dynamic nature of the operating environment
has prompted banks to continuously monitor
emerging trends and enhance risk management
frameworks to align with strategic goals
effectively. Our commitment lies in surpassing
mere compliance standards by adopting global
best practices in risk management and actively
addressing emerging risks to navigate the intricate
risk landscape ahead.

BASEL III - PILLAR III MARKET DISCIPLINE DISCLOSURES
Pillar III Market Discipline disclosures of the Bank and the Group for the year ended 31 December as required by the Banking Act Direction No. 01 of 2016 on
capital requirements under Basel III for Licensed Commercial Banks and Licensed Specialised Banks are given below.

1. REGULATORY REQUIREMENTS ON CAPITAL & LIQUIDITYTEMPLATE I - Key Regulatory Ratios - Capital and Liquidity
BANK
As at 31 December

GROUP

2023

2022

2023

2022

Common Equity Tier 1 Capital

54,699,450

49,187,072

58,524,995

52,968,361

Tier 1 Capital

54,699,450

49,187,072

58,524,995

52,968,361

Total Capital

74,523,602

70,341,919

78,313,241

74,119,273

Common Equity Tier 1 Capital Ratio (Minimum Requirement - 7% )

11.67

9.34

12.22

9.87

Tier 1 Capital Ratio (Minimum Requirement - 8.5%)

11.67

9.34

12.22

9.87

Total Capital Ratio (Minimum Requirement - 12.5%)

15.90

13.35

16.35

13.81

Leverage Ratio (Minimum Requirement - 3%)

6.74

5.56

7.15

5.94

270,066,127

205,530,328

NA

NA

39.02

27.24

NA

NA

Total stock of high quality liquid assets (LKR ' 000) - Rupee

199,940,490

140,737,325

NANA

Total stock of high quality liquid assets (LKR ' 000) - All currency

223,342,569

159,365,882

NANA

Liquidity Coverage Ratio (%) – Rupee (Minimum Requirement 100% (2022 - 90%))309.61297.08NA

NA

Liquidity Coverage Ratio (%) – All Currency (Minimum Requirement 100% (2022 - 90%))228.58232.68NANA

Net Stable Funding Ratio (%) – (Minimum Requirement 100% (2022 - 90%))142.26130.87

NA

NA

Regulatory Capital (LKR ’000)

Regulatory Capital Ratios (%)

Regulatory Liquidity
Statutory Liquid Assets (LKR’000)
Statutory Liquid Assets Ratio - Bank (%) (Minimum Requirement - 20%)**Commencing from December 2022 the Banks are required to maintain liquid assets on total adjusted liabilities on a consolidated basis for the overall Bankas per the Banking Act Direction No.08 of 2022 on Regulatory Requirements on Liquidity Ratios.

Risk Management

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Annual Report 2023

357

TEMPLATE II - Basel III Computation of Capital Ratios		BANKAs at 31 December

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Common Equity Tier 1 (CET1) Capital after Adjustments

54,699,450

49,187,072

58,524,995

52,968,361

Common Equity Tier 1 (CET1) Capital

67,626,138

61,364,587

71,498,744

64,923,963

Equity Capital (Stated Capital/Assigned Capital)

20,738,231

19,870,665

20,738,231

19,870,665

Reserve Fund

3,046,479

2,746,479

3,046,479

2,746,479

Published Retained Earnings/(Accumulated Retained Losses)

40,243,875

36,597,418

44,014,416

39,995,758

Published Accumulated Other Comprehensive Income (OCI)

3,597,553

2,150,025

3,699,618

2,311,061

-

-

-

-

Total Adjustments to CET1 Capital

12,926,688

12,177,515

12,973,749

11,955,602

Intangible Assets (net)1,883,447

1,804,321

1,898,270

1,813,213

Deferred tax assets (net)

9,648,118

9,004,747

9,717,805

9,048,896

Defined benefit pension fund assets

388,838

584,432

388,838

584,432

General and other Disclosed Reserves

Shortfall of the cumulative impairment to specific provisions

-

-

-

-

Investments in the capital of banking and financial institutions where the bank does not
own more than 10 per cent of the issued ordinary share capital of the entity

583,656

284,715

847,371364,201

Significant investments in the capital of financial institutions where the bank owns morethan 10 per cent of the issued ordinary share capital of the entity

330,324

391,855--

Shortfall of capital in financial subsidiaries

92,305

107,445

121,465

144,860

Additional Tier 1 (AT1) Capital after Adjustments

-

-

-

-

Additional Tier 1 (AT1) Capital

-

-

-

-

Total Adjustments to AT1 Capital

-

-

-

-

Tier 2 Capital after Adjustments

19,824,152

21,154,847

19,788,246

21,150,912

Tier 2 Capital

19,824,152

21,154,847

19,824,152

21,154,847

Qualifying Tier 2 Capital Instruments

13,835,632

14,270,354

13,835,632

14,270,354

Revaluation Gains

876,672876,672876,672876,672

Loan Loss Provisions

5,111,848

6,007,821

5,111,848

6,007,821

Total Adjustments to Tier 2--

35,906

3,935

Others- Investments in the capital of financial institutions and where the bank does not
own more than 10 per cent of the issued capital carrying voting rights of the issuingentity--35,906

3,935

CET1 Capital

54,699,450

49,187,072

58,524,995

52,968,361

Total Tier 1 Capital

54,699,450

49,187,072

58,524,995

52,968,361

Total Capital

74,523,602

70,341,919

78,313,241

74,119,273

Total Risk Weighted Assets (RWA)

468,619,668

526,907,094

478,972,317

536,578,937

RWAs for Credit Risk

408,947,802

480,625,719

413,186,455

485,485,541

RWAs for Market Risk

12,186,245

7,185,265

15,920,717

10,109,240

RWAs for Operational Risk

47,485,621

39,096,110

49,865,145

40,984,156

CET1 Capital Ratio (including Capital Conservation Buffer, Countercyclical Capital
Buffer & Surcharge on D-SIBs) (%)

11.67

9.34

12.22

9.87

of which: Capital Conservation Buffer (%)

2.50

2.50

2.50

2.50

of which: Countercyclical Buffer (%)

-

-

-

-

of which: Capital Surcharge on D-SIBs (%)

-

-

-

-

Total Tier 1 Capital Ratio (%)

11.67

9.34

12.22

9.87

Total Capital Ratio (including Capital Conservation Buffer, Countercyclical Capital
Buffer & Surcharge on D-SIBs) (%)

15.90

13.35

16.35

13.81

of which: Capital Conservation Buffer (%)

2.50

2.50

2.50

2.50

of which: Countercyclical Buffer (%)

-

-

-

-

of which: Capital Surcharge on D-SIBs (%)

-

-

-

-

358

National Development Bank PLC

Annual Report 2023

Risk Management

TEMPLATE III (a) - Basel III Computation of Leverage Ratios				BANK
As at 31 December

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000

Tier 1 Capital

54,699,450

49,187,072

58,524,995

52,968,361

Total Exposures

811,015,116

884,300,644

818,318,629

891,258,702

On-Balance Sheet Items (excluding Derivatives and Securities Financing Transactions,but including Collateral)

763,792,802

812,519,141

770,805,457

819,166,699

Derivative Exposures

6,171,115

16,567,757

6,171,115

16,567,757

Securities Financing Transactions Exposures

1,150,029

181,2121,150,029

181,212

Other Off-Balance Sheet Exposures

39,901,170

55,032,534

40,192,028

55,343,034

6.74%

5.56%

7.15%

5.94%

Basel III Leverage Ratio (%) (Minimum Requirement - 3%)
TEMPLATE III (b) - Basel III Computation of Net Stable Funding Ratios (NSFR)		

BANK
As at 31 December

2023

2022

LKR ’000

LKR ’000

Total Available Stable Funding

560,209,208

618,506,530

Required Stable Funding - On Balance Sheet Assets

392,505,607

471,009,118

Required Stable Funding - Off Balance Sheet Items
Total Required Stable Funding

1,279,714

1,599,083

393,785,321

472,608,201

142.26%130.87%

Net Stable Funding Ratio (%) (Minimum Requirement 100% (2022 - 90%))
TEMPLATE IV - Basel III Computation of Liquidity Coverage Ratio - All Currency Liquidity Requirement		
BANK
As at 31 December

2023

2022

Total
Un-weighted
Value

Total
Weighted
Value

Total
Un-weighted
Value

Total
Weighted
Value

LKR '000

LKR '000

LKR '000

LKR '000

Total Stock of High-Quality Liquid Assets (HQLA)

227,415,675

223,342,569

162,601,173

159,365,882

Total Adjusted Level 1A Assets

201,193,563

201,193,563

141,044,367

141,044,367

Level 1 Assets

200,261,635

200,261,635

141,032,571

141,032,571

Total Adjusted Level 2A Assets

27,154,040

23,080,934

21,568,602

18,333,311

Level 2A Assets

27,154,040

23,080,934

21,568,602

18,333,311

Total Adjusted Level 2B Assets

-

-

-

-

Level 2B Assets

-

-

-

-

Total Cash Outflows

807,000,935

155,236,158

863,310,596

134,513,353

Deposits

429,317,334

33,320,324

461,625,705

33,721,153

Unsecured Wholesale Funding

191,879,789

109,217,641

211,310,277

98,200,460

Secured Funding Transactions
Undrawn Portion of Committed (Irrevocable) Facilities and Other Contingent Funding
Obligations
Additional Requirements

8,533,639-

114,563-

176,247,557

11,675,577

190,260,052

2,591,739

1,022,616

1,022,616--

Total Cash Inflows

107,428,680

57,527,332

137,953,357

66,021,946

Maturing Secured Lending Transactions Backed by Collateral

46,347,880

30,179,481

61,573,989

37,014,485

Other Inflows by Counterparty which are maturing within 30 days

43,023,992

27,290,037

55,947,669

29,007,462

Operational Deposits

17,998,994-

20,431,700-

57,813-

Other Cash Inflows
Liquidity Coverage Ratio (%) (Stock of High Quality Liquid Assets/Total Net Cash
Outflows over the Next 30 Calendar Days) * 100
Risk Management

57,813228.58%National Development Bank PLC

232.68%Annual Report 2023

359

360

National Development Bank PLC

Annual Report 2023

Risk Management

CET 1 Capital

EquityAccounting Classification (Equity/
Liability)

NA

Subsequent Call Dates, if Applicable

NA

NA

NA

NA

If Convertible, Fully or PartiallyIf Convertible, Mandatory or
Optional

If Convertible, Conversion RateNA

If Convertible, Conversion Trigger (s)Convertible or Non-Convertible

NA

NA

NA

Non-Convertible

Non-CumulativeNA

Coupon Rate and any Related Index

Non-Cumulative or Cumulative

Type D - 14.0% p.a

Dividend declared as decided
by the Board

Fixed coupon

NA

NA

Liability

1,436,172

Type D - 19 Dec 2025

19-Dec-2013

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka Act

Fixed or Floating Dividend/Coupon

Coupons/Dividends

NA

Optional Call Date, Contingent Call
Dates and Redemption Amount(LKR ‘000)

Issuer Call Subject to Prior Supervisory Approval

20,738,231

Amount Recognised in Regulatory
Capital (in LKR ‘000 as at 31
December 2023)

Dated

Perpetual

NA

Perpetual or Dated

Date listed 26-Apr-1993

NA

Original Date of Issuance

Par Value of Instrument

Original Maturity Date, if Applicable

LKR 100/-

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka Act

Governing Law(s) of the Instrument

National Development Bank PLC
Type D - LK0207D21053

National Development Bank PLC

NDB. N0000
ISIN -LK0207N00007

Debenture Issue - December
2013

IssuerStated Capital

Unique Identifier (e.g., ISIN or
Bloomberg Identifier for Private
Placement)

Description of the Capital
Instrument

TEMPLATE V - Main Features of Regulatory Capital Instruments - Bank and Group

Based on the simple averageof the daily Volume Weighted
Average Price (VWAP) of an
Ordinary Voting Share during
the three months (03) period,
immediately preceding the dateof the Trigger Event.

Mandatory

Fully

Determined by and at the sole
discretion of the Monetary
Board of the Central Bank of
Sri Lanka, and is defined in the
Banking Act Direction No. 1
of 2016

Non-Cumulative

Type A - 13.50% p.a
Type B - 13.95% p.a

Fixed coupon

NA

NA

Liability

278,060

Type A - 30 Mar 2024
Type B - 30 Mar 2024

Dated

LKR 100/-

31-Mar-2019

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka Act

Type A - LK0207D24198
Type B - LK0207D24206

National Development Bank PLC

Debenture Issue - March 2019Tier 2 Instruments

Based on the simple averageof the daily Volume Weighted
Average Price (VWAP) of an
Ordinary Voting Share during
the three months (03) period,
immediately preceding the dateof the Trigger Event.

Mandatory

Fully

Determined by and at the sole
discretion of the Monetary
Board of the Central Bank of
Sri Lanka, and is defined in the
Banking Act Direction No. 1
of 2016

Non-Cumulative

9.5% p.aFixed coupon

NA

NA

Liability

2,275,000

24-Sep-2025

Dated

LKR 100/-

25-Sep-2020

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka ActISIN - LK0207D24529

National Development Bank PLC

Debenture Issue - September
2020

Based on the simple averageof the daily Volume Weighted
Average Price (VWAP) of an
Ordinary Voting Share during
the three months (03) period,
immediately preceding the dateof the Trigger Event.

Mandatory

Fully

Determined by and at the sole
discretion of the Monetary
Board of the Central Bank of
Sri Lanka, and is defined in the
Banking Act Direction No. 1
of 2016

Non-Cumulative

Type A - 11.90% p.a
Type B - 12.00% p.a

Fixed coupon

NA

NA

Liability

4,846,400

Type A - 23 Nov 2026
Type B - 23 Nov 2028

Dated

LKR 100/-

24-Nov-2021

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka Act

Type A - LK0207D24941
Type B - LK0207D24958

National Development Bank PLC

Debenture Issue - November
2021

Based on the simple averageof the daily Volume Weighted
Average Price (VWAP) of an
Ordinary Voting Share during
the three months (03) period,
immediately preceding the dateof the Trigger Event.

Mandatory

Fully

Determined by and at the sole
discretion of the Monetary
Board of the Central Bank of
Sri Lanka, and is defined in the
Banking Act Direction No. 1
of 2016

Non-Cumulative

Type A - 15.00% p.a
Type B - 14.22% p.a

Fixed coupon

NA

NA

Liability

5,000,000

Type A - 11 Dec 2028
Type B - 11 Dec 2028

Dated

LKR 100/-

12-Dec-2023

Companies Act No. 07 of 2007,
Listing rules of the Colombo
Stock Exchange, Securities andExchange Commission of Sri
Lanka Act

Type A - LK0207D25146
Type B - LKJ0207D25153

National Development Bank PLC

Debenture Issue - December2023

2. RISK WEIGHTED ASSETS (RWA)
TEMPLATE VI - Summary discussion on adequacy/ meeting current and future capital requirements.
Please refer page 339 for the Capital Management section.
TEMPLATE VII - Credit Risk under Standardised Approach - Credit Risk Exposures and Credit Risk Mitigation (CRM) Effects
BANK
Amount (LKR’000) as at 31 December 2023
Exposures before Credit
Conversion Factor (CCF) and CRM

Exposures post
CCF and CRM

RWA and RWA
Density (%)

Asset Class

On-Balance
Sheet
AmountOff-Balance
Sheet
Amount

On-Balance
Sheet
AmountOff-Balance
Sheet
AmountRWA

RWA
Density(ii)Claims on Central Government and Central Bank of Sri
Lanka

172,613,548

10,692,000

172,613,548

3,414,239

5,109,141

2.90%

Claims on Public Sector Entities

27,836,271

4,301,277

1,599,883-

1,599,883

100%

Claims on Banks’ Exposures

56,130,004

6,180,761

56,130,004

1,603,920

28,331,525

49.07%

Claims on Financial Institutions

23,738,030

10,418,683

18,666,926

423,686

11,146,998

58.39%

Claims on Corporates

162,953,633

209,351,532

136,483,998

24,719,426

156,960,944

97.37%

Retail Claims

185,408,260

30,295,842

158,365,787

11,013,819

129,721,898

76.59%

Claims Secured by Residential Property

15,706,253

108,282

15,706,253

25,351

7,049,423

44.81%

Non-Performing Assets (NPAs)(i)48,566,050-

48,566,050-

59,370,118

122.25%Higher-risk Categories

457,991-

457,991-

1,144,978250.00%Cash Items and Other Assets

18,704,202-

18,704,202-

8,512,894

45.51%

Total

712,114,242

271,348,377

627,294,642

41,200,441

408,947,802

GROUP
Amount (LKR’000) as at 31 December 2023
Exposures before Credit
Conversion Factor (CCF) and CRM

Exposures post
CCF and CRM

RWA and RWA
Density (%)

Asset Class

On-Balance
Sheet
AmountOff-Balance
Sheet
Amount

On-Balance
Sheet
AmountOff-Balance
Sheet
AmountRWA

RWA
Density(ii)Claims on Central Government and Central Bank of Sri
Lanka

173,359,695

10,692,000

173,359,695

3,414,239

5,109,141

2.89%

Claims on Public Sector Entities

27,836,271

4,301,277

1,599,883-

1,599,883

100%

Claims on Banks’ Exposures

56,327,866

6,180,761

56,327,866

1,603,920

28,519,917

49.23%

Claims on Financial Institutions

23,738,030

10,418,683

18,666,926

423,686

11,146,998

58.39%

Claims on Corporates

162,991,035

208,707,217

136,521,401

24,607,174

156,886,095

97.37%

Retail Claims

185,408,260

30,295,842

158,365,787

11,013,819

129,721,898

76.59%

Claims Secured by Residential Property

15,706,253

108,282

15,706,253

25,351

7,049,423

44.81%

Non-Performing Assets (NPAs)(i)48,566,050-

48,566,050-

59,370,118

122.25%Higher-risk Categories-

805,941-

402,970

604,455

150.00%Cash Items and Other Assets

23,370,052-

23,370,052-

13,178,527

56.39%

Total

717,303,512

271,510,003

632,483,913

41,491,159

413,186,455

Note:
(i)

NPAs – As per Banking Act Direction on classification of loans and advances, income recognition and provisioning.

(ii)

RWA Density – Total RWA/Exposures post CCF and CRM.

Risk Management

National Development Bank PLC

Annual Report 2023

361

TEMPLATE VIII - Credit Risk under Standardised Approach: Exposures by Asset Classes and Risk Weights
BANK
Amount (LKR’000) as at 31 December 2023 (Post CCF & CRM)
Risk Weight

0%

20%

35%

50%

60%

75%

100%

150%

Claims on Central Government 150,482,079
and Central Bank of Sri Lanka

25,545,707

-

-

-

-

-

-

-

176,027,786

-

-

-

-

1,599,883--

1,599,883

Asset Classes>150% Total Credit
Exposures
AmountClaims on Public Sector
Entities--

Claims on Bank's Exposures-

22,006,725-

23,780,625--

11,759,988

186,586-

57,733,924

Claims on Financial Institutions

-

-

-

15,887,227--

3,203,384--

19,090,611

Claims on Corporates-

2,130,632-

5,075,954--

153,996,838-- 161,203,424

9,687,740

3,254,950--

9,261,239

94,646,051

52,529,627--

169,379,607

Claims Secured by Residential
Property--

13,357,201

-

-

-

2,374,403--

15,731,604

Non-Performing Assets (NPAs)

-

-

-

631,150--

25,695,614

22,239,286-

48,566,050

Retail Claims

Higher-risk Categories
Cash Items and Other Assets
Total

-

-

-

-

-

-

-

-

457,991

457,991

9,780,585

513,404

-

-

-

-

8,410,213--

18,704,202

169,950,404

53,451,418

13,357,201

45,374,956

9,261,239

94,646,051

259,569,950

22,425,872

457,991 668,495,082

GROUP
Amount (LKR’000) as at 31 Dec 2023 (Post CCF & CRM)
Risk Weight

0%

20%

35%

50%

60%

75%

100%

150%

>150% Total Credit
Exposures
AmountAsset Classes
Claims on Central Government 151,228,226
and Central Bank of Sri Lanka

25,545,707

-

-

-

-

-

-

-

176,773,933-

1,599,883

Claims on Public Sector
Entities

-

-

-

-

-

-

1,599,883-

Claims on Bank's Exposures-

22,078,554-

23,684,637--

11,982,009

186,586-

57,931,786

Claims on Financial Institutions

-

-

-

15,887,227--

3,203,384--

19,090,611

Claims on Corporates-

2,130,632-

5,075,954--

153,921,988--

161,128,574

9,687,740

3,254,950--

9,261,239

94,646,051

52,529,627--

169,379,607

Claims Secured by Residential
Property--

13,357,201

-

-

-

2,374,403--

15,731,604

Non-Performing Assets (NPAs)

-

-

-

631,150--

25,695,614

22,239,286-

48,566,050

Higher-risk Categories

-

-

-

-

-

-

-

402,970-

402,970

9,780,750

513,469

-

-

-

-

13,075,833--

23,370,052

Total

170,696,716

53,523,312

13,357,201

45,278,968

9,261,239

94,646,051

264,382,741

22,828,842

362

National Development Bank PLC

Retail Claims

Cash Items and Other Assets

Annual Report 2023

Risk Management- 673,975,070

TEMPLATE IX - Market Risk under Standardised Measurement Method 			
BANK
Item

GROUP

2023

2022

2023

2022

LKR ’000

LKR ’000

LKR ’000

LKR ’000(a) Capital Charge for Interest Rate Risk

1,354,567

590,582

1,362,576

599,549

General Interest Rate Risk

1,354,567

590,582

1,356,779

593,230(i)

Net Long or Short Position

1,354,567

590,582

1,356,779

593,230(ii)

Horizontal Disallowance

-

-

-

-

(iii)

Vertical Disallowance

-

-

-

-

(iv)

Options

-

-

-

-

Specific Interest Rate Risk

-

-

5,797

6,318

(b) Capital Charge for Equity--

458,800

356,531(i)

General Equity Risk--

231,372

178,018(ii)

Specific Equity Risk--

227,429

178,513

168,713

307,576

168,713

307,576

12,186,245

7,185,265

15,920,717

10,109,240(c) Capital charge for Foreign Exchange & Gold
Total Risk Weighted Amount for Market Risk [(a) + (b) + (c)] * CARTEMPLATE X - Operational Risk under Basic Indicator Approach

BANK
Business Lines

The Basic Indicator Approach

Capital Charge
FactorFixed Factor

15%

Gross Income (LKR’000) as at 31 December 2023
1st Year

2nd Year

3rd Year

30,814,162

43,009,895

44,889,995

-

-

-

The Standardised Approach
Corporate Finance18%

Trading and Sales

18%

Payment and Settlement

18%

Agency Services

15%

Asset Management

12%

Retail Brokerage

12%

Retail Banking

12%

Commercial Banking

15%

The Alternative Standardised Approach
Corporate Finance18%

Trading and Sales

18%

Payment and Settlement

18%

Agency Services

15%

Asset Management

12%

Retail Brokerage

12%

Retail Banking

12%

0.035

Commercial Banking

15%

0.035

Capital Charges for Operational Risk (LKR’000)
The Basic Indicator Approach

5,935,703

The Standardised Approach-

The Alternative Standardised Approach-

Risk Weighted Amount for Operational Risk (LKR’000)
The Basic Indicator Approach

47,485,621

The Standardised Approach-

The Alternative Standardised Approach-

Risk Management

National Development Bank PLC

Annual Report 2023

363

TEMPLATE X - Operational Risk under Basic Indicator Approach
GROUP
Capital Charge
FactorBusiness Lines

The Basic Indicator Approach

Fixed Factor

15%

Gross Income (LKR’000) as at 31 December 2023
1st Year

2nd Year

3rd Year

32,796,440

44,746,152

47,120,270

-

-

-

The Standardised Approach
Corporate Finance18%

Trading and Sales

18%

Payment and Settlement

18%

Agency Services

15%

Asset Management

12%

Retail Brokerage

12%

Retail Banking

12%

Commercial Banking

15%

The Alternative Standardised Approach
Corporate Finance18%

Trading and Sales

18%

Payment and Settlement

18%

Agency Services

15%

Asset Management

12%

Retail Brokerage

12%

Retail Banking

12%

0.035

Commercial Banking

15%

0.035

Capital Charges for Operational Risk (LKR’000)
The Basic Indicator Approach

6,233,143

The Standardised Approach-

The Alternative Standardised Approach-

Risk Weighted Amount for Operational Risk (LKR’000)
The Basic Indicator Approach

49,865,145

The Standardised Approach-

The Alternative Standardised Approach-

364

National Development Bank PLC

Annual Report 2023

Risk Management

TEMPLATE XI & XII - Differences between Accounting and Regulatory Scopes and Mapping of Financial Statement Categories with Regulatory
Risk Categories – BANKAs at 31 December 2023

LKR ‘000ab

Carrying Values
as Reported
in PublishedFinancial
Statements

Carrying Values
under Scopeof Regulatory
Reporting*Subject toCredit Risk
Frameworkc

Subject toMarket Risk
Frameworkd

Not subject
to Capital
Requirements
or Subject toDeductionfrom Capitale

88,321,264

Assets779,899,160

779,899,160

627,294,642

64,283,254

Cash and cash equivalents

28,100,515

28,100,515

28,100,515--

Balances with the Central Banks of Sri Lanka

7,040,421

7,040,421

7,040,421--

Placements with banks

33,743,602

33,743,602

33,743,602--

Derivative financial instruments

3,083,815

3,083,815

3,083,815--

Financial assets recognised through profit or loss measured at fairvalue

24,021,340

24,021,340-

24,021,340-

Financial assets at amortised cost - loans and receivables to othercustomers

452,660,461

452,660,461

377,265,886-

75,394,575

Financial assets at amortised cost - debt and other instruments

125,672,370

125,672,370

125,672,370--

Financial assets measured at fair value through other comprehensive
income83,805,398

83,805,398

42,959,828

40,261,914

583,656

Investments in subsidiary companies

1,108,772

1,108,772

686,142-422,630

Intangible assets

1,883,447

1,883,447--

1,883,447

Property, plant and equipment

3,141,117

3,141,117

3,141,117--

Right of Use Assets

1,145,601

1,145,601

1,145,601--

Deferred tax assets

9,648,118

9,648,118--

9,648,118

Other assets

4,844,183

4,844,183

4,455,345-

388,838

Liabilities

709,751,283

709,751,283

-

-

-

Due to banks

7,679,195

7,679,195---

93,361

93,361---

Financial liabilities at amortised cost - due to depositors

615,643,999

615,643,999

-

-

-

Financial Liabilities at amortised cost - due to debt securities holders

15,632,569

15,632,569

-

-

-

Derivative financial instruments

Financial Liabilities at amortised cost - due to other borrowers

24,636,539

24,636,539

-

-

-

Debt securities issued

29,388,875

29,388,875

-

-

-

Current tax liabilities

7,265,070

7,265,070---

Retirement benefit obligations

1,299,909

1,299,909---

Other liabilities
Off-Balance Sheet Liabilities

8,111,766

8,111,766---

277,965,419

277,965,419

270,764,167-

509,110

Guarantees

42,963,032

42,963,032

36,758,249-

Performance Bonds

14,024,918

14,024,918

13,962,050-

62,868Letters of Credit

9,283,417

9,283,417

9,271,184-

12,233

Other Contingent Items

6,513,947

6,513,947

6,513,947--

Undrawn Commitments

162,572,666

162,572,666

162,572,666--

Other Commitments

42,607,440

42,607,440

41,686,071--

Shareholders' Equity--

Equity capital (Stated capital /Assigned capital)

20,738,231

20,738,231

of which Amount eligible for CET1

20,738,231

20,738,231

-

-

-

of which Amount eligible for AT1

-

-

-

-

-

Retained earnings

41,027,500

41,027,500

-

-

-

Accumulated Other comprehensive income

5,335,667

5,335,667

-

-

-

-

-

-

Other reserves

3,046,479

3,046,479

Total Shareholders' Equity

70,147,877

70,147,877

-

-

-

-

-

*Carrying Values under the Scope of Regulatory Reporting is same as the Carrying Values as Reported in Published Financial Statements according to the
Banking Act Direction No. 13 of 2021 & No. 14 of 2021 issued on 14th September 2021.

Risk Management

National Development Bank PLC

Annual Report 2023

365

DSIB ASSESSMENT AS PER THE BANKING ACT DIRECTION NO. 10 OF 2019 ON FRAMEWORK FOR DEALING WITH DOMESTICSYSTEMATICALLY IMPORTANT BANKS
GROUP
2023

2022

LKR Mn

LKR MnSIZE INDICATOR
Section 1 - Total Exposures
Total exposures measure

818,319

891,259

INTERCONNECTEDNESS INDICATORS
Section 2 - Intra-Financial System Assets
a. Funds deposited with or lent to other financial institutions (including unused portion of committed lines extended)(i) Funds deposited(ii) Lendingb. Holdings of securities issued by other financial institutions
c. Net positive current exposure of securities financing transactions (SFTs) with other financial institutions
d. Over-the-counter (OTC) derivatives with other financial institutions that have a net positive mark to market value
Intra-financial system assets

18,20840,5585,963
14591
65,33430,76946,127
5,587
92
82,575

Section 3 - Intra-Financial System Liabilities
a. Funds deposited by or borrowed from other financial institutions (including unused portion of committed lines
obtained)(i) Funds deposited(ii) Borrowings
b. Net negative current exposure of securities financing transactions with other financial institutions
c. Over-the-counter derivatives with other financial institutions that have a net negative mark to market value
Intra-financial system liabilities

24,21525,071
13
49,29933,86542,920976,794

Section 4 - Securities Outstanding
Securities outstanding

28,652

27,2907,701,592

7,175,784

31,04914,592--

27,043

26,58942,607

27,740Section 10 - Level 2 Assets
Level 2 assets

27,154

21,569Section 11 - Trading and available for sale (AFS) securities
Trading and AFS securities

113,769

74,152

Section 12 - Cross-Jurisdictional Liabilities
Cross-jurisdictional liabilities (excluding derivatives and intragroup liabilities)

14,26551,746

Section 13 - Cross-Jurisdictional Claims
Cross-jurisdictional claims (excluding derivatives and intragroup claims)

50,093

68,129SUBSTITUTABILITY/FINANCIAL INSTITUTION INFRASTRUCTURE INDICATORS
Section 5 - Payments made in the reporting year (excluding intragroup payments)
Payments activity
Section 6 - Assets Under Custody
Assets under custody
Section 7 - Underwritten Transactions in Debt and Equity Markets
Underwriting activity
Section 8 - Trading Volume
Trading volume (Number Mn)
COMPLEXITY INDICATORS
Section 9 - Notional Amount of Over-the-Counter (OTC) Derivatives
OTC derivatives

366

National Development Bank PLC

Annual Report 2023

Risk Management

Investor Relations
As the year was laden with many uncertainties, we continued clear, regular and unbiased dialogue
with our shareholders and other connected stakeholders. Our quarterly investor webinars initiatedin 2014 continued undisrupted, affording a much looked forward to platform for stakeholders.
Corporate Milestones since 1979

CONSTITUENTS OF THE INVESTOR RELATIONSECOSYSTEM OF THE BANK

1979

Under and by virtue of the National Development Bank of Sri Lanka Act No. 2 of 1979
a bank was established with an authorised capital of LKR 2,000 Mn comprising 20
million ordinary shares of LKR 100.00 each. (which was subsequently subdivided into
200 million ordinary shares of LKR 10.00 each)

1993

61% of the share capital of the National Development Bank of Sri Lanka (NDBSL) wastransferred to private ownership through an IPO at LKR 50.00 per share.

1997

NDBSL was privatised further by the early conversion of its convertible debentures,
reducing the Governments direct shareholding to 12.2%. A further 2.56% of theissued shares were purchased by NDBSL for an Employees Share Ownership Plan.

2001

As a part of its long term plans, NDBSL incorporated a commercial bank under theCompanies Act No. 17 of 1982 under the name ‘NDB Bank Limited’ (NBL) to take overthe business and operations of ABN Amro NV Colombo Branch.

» Shareholders» Debenture holders» Potential investors including development
financing institutions» Investment analysts» Stock brokers» Credit rating agencies» Financial press

UNDERLYING PRINCIPLES OF OUR INVESTORRELATIONS» Quality and timeliness of disclosures» Transparency» Fairness in disclosures» Avoidance of selective disclosures» Maintaining same levels of engagements at all
times consistently, irrespective of the Group’s
performance

INVESTOR SUPPORTInvestor support is extended via a wide range ofengagement activities as listed below.
» Annual General Meeting» One-to-one investor meetings» Financial statements released to the CSE» Press releases

Pursuant to the provisions of the National Development Bank of Sri Lanka(Consequential Provisions) Act No. 1 of 2005 a company by the name of National
Development Bank Limited (NDBL) was incorporated in terms of the Companies
Act No. 17 of 1982 (and was accorded with the Registration No. N (PBS) 1252) for the
purposes of taking over the business of NDBSL on 15 June 2005 and the National
Development Bank of Sri Lanka Act No. 2 of 1979 was repealed except for certain
provisions contained therein.

» Investor presentations» Investor transcripts» Email notifications» Local and foreign investor fora
» Online investor webinars» Earnings calls» Road shows» Investor relations web page within the Bank’s
corporate website

2005

NDBL acquired the business and operations of NBL. In view of this, the shareholders of
NBL were issued with shares of NDBL at the ratio of 1 NDBL share for every 5.6 shares
of NBL held by them. This resulted in the increase of the issued capital of NDBL to
54,570,257 shares. In order to facilitate this transition, on the date of such acquisition,
the Central Bank of Sri Lanka granted a commercial banking license to NDBL whilst
withdrawing the specialised banking license that was held by it.

2007
2021

NDBL was re-registered as National Development Bank PLC (‘Bank’) in terms of the
new Companies Act No. 7 of 2007 and accorded with the Registration No. PQ 27.

2021

Successful completion of a Rights Issue together with a Private Placement with
Norfund - The Norwegian Investment Fund for Developing Countries, leading to a
9.99% shareholding of the Bank as NDB’s anchor shareholder» Dedicated communication methods to reach us» Financial results calendars shared well in advancefor quarterly results releases

Investor Relations

National Development Bank PLC

Annual Report 2023

367

SECURITIES IN ISSUE - NDB
Ordinary shares
Debenturesy Basel II compliant Listed rated unsecured subordinated redeemabledebentures issued in 2013y Basel III compliant Listed rated unsecured subordinated redeemabledebentures with a non-viability conversion issued in 2019, 2020, 2021 and2023
New securities issued during 2023
y Ordinary shares as scrip dividend - Refer page 241
y Basel III compliant debentures - Refer page 374

2.2 Performance of the Colombo Stock Exchange

ORDINARY SHARES

1. FEATURES OF ORDINARY SHARES
Security type

Quoted Ordinary Shares

Listed exchange

Colombo Stock Exchange (CSE) – Main
Board

Featured stock indices

All Share Price Index (ASPI) Standard &Poor’s Sri Lanka 20 (S&P SL20)

GICS sector classification

Banks (SPCSEBP)CSE stock symbol

NDB.N0000

ISIN

LK0207N00007

Bloomberg newswire code

NDB SL

Reuters newswire code

NDB.CM

2. ANALYSIS OF EQUITY MARKET PERFORMANCE AND NDBSHARE PERFORMANCE - 2023
Global equity markets witnessed their biggest annual rise in 2023 since2019, where major global equity benchmarks recorded double-digit
returns. This was led by the cooling off in global inflation, drop in dollar
index and declining oil prices. Further, global equities rose sharply inthe last two months of the year as bond yields fell on expectationsof central bank rate cuts in 2024. The US stock market saw impressive
performance where the S&P 500 Index, gained over 24% in 2023,
notching up a record high and Dow Jones Industrial Average moving
up by 13.7%. This was mainly driven by the massive rally in mega techstocks including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia
and Tesla as evidenced by the 43.4% gain in the Nasdaq Composite.
However, the banking sector underwent challenges such as the failuresof US crypto-focused lender Silvergate and Silicon Valley Bank, which
followed a bank run. European markets also reported gains as they

National Development Bank PLC

Annual Report 2023

In 2023, the Sri Lankan equity market recorded a 25% gain recoveringfrom the losses the market experienced in 2022. However, the total
number of trades subdued during the year, dropping to 3.7 Mn tradesfrom 6.1 Mn trades in 2022. In the second half of the year, the market
showed positive momentum by reaching 11,700 levels. The market
returns were driven by successful domestic debt restructuring, theInternational Monetary Fund Extended Fund Facility, the downward
movement of interest rates and inflation and other macro variables
normalising. The tourism sector saw a significant improvement with
the increasing number of tourist arrivals, although the arrivals were yet
to reach the pre-pandemic levels. Foreign investors continued to be
net buyers during the year (a net foreign inflow of LKR 4 Bn in 2023 vs.
LKR 31 Bn in 2022), and the foreign participation marginally improved
to 10% in 2023, from 8% in 2022. The average daily market turnover
dropped by 43% to LKR 2 Bn in 2023 compared to LKR 3 Bn in 2022.
Stocks in the Banking and Real Estate sectors emerged as top gainers in
2023.
2.3 Performance of the NDB share

2.1 Performance of global equity markets

368

bounced back from a loss making 2022, where Germany’s DAX increased
by 20.3% and Italy’s FTSE MIB increased by around 30%. UK stocks
fluctuated during the year, with the Bank of England raising the baserate five times in 2023 and the FTSE 100 closed the year at 7,733 points
increasing by 3.8%. Chinese markets underperformed in 2023, despite
the optimism in the beginning of the year when Beijing ended its zero
Covid policy, where both Hong Kong’s Hang Seng Index and CSI 300 lost
more than 10%. However, other Asian markets such as Japan reported
gains as the Nikkei 225 Index gained 28.2% during the year. Overall, theglobal equity market recorded significant growth in 2023, as indicatedby the MSCI World Index, which gained by 24.4%. The MSCI All Country
World Index gained 22.8%, while the MSCI Emerging Markets Index
gained 10.3% in 2023.

The banking sector outperformed the broader market index
significantly in 2023 (108% return vs. 25% ASPI return). NDB’s shareclosed the year 113% higher (based on the adjusted stock price forscrip dividends) compared to 2022, at LKR 64.90. During the year, theadjusted stock price reached a high of LKR 85.00 in August, and a low
of LKR 29.88 in January. The stock recorded a total turnover of LKR 5.7
Bn during the year, and the total number of trades was 32,060. A totalof 88 Mn NDB shares were traded during the year.
During the year the Bank raised LKR 5 Bn Tier 2 capital from the capital
market to improve and further strengthen the Capital Adequacy Ratioin line with the Basel III guidelines and to facilitate future expansion ofbusiness activities of the Bank.

Investor Relations

3

ANALYSIS OF ORDINARY SHAREHOLDERS AS AT 31 DECEMBER 2023 AS PER RULE 7.6(X) OF THE LISTING RULES OF THE COLOMBO
STOCK EXCHANGE

3.1 Distribution of Shareholders
As at 31 December 2023
Shareholding Range

As at 31 December 2022

Number ofshareholders%

Number ofshares%Number ofshareholders%

Number ofshares%1-1,000

6,808

60.13

1,921,860

0.48

6,797

59.96

1,893,741

0.50

1,001-10,000

3,490

30.82

11,566,508

2.90

3,568

31.47

11,169,772

2.94

10,001-100,000

881

7.78

25,061,759

6.27

829

7.31

22,070,489

5.81

100,001-1,000,000

107

0.95

30,873,308

7.73

106

0.94

30,221,489

7.95

36

0.32

330,040,927

82.62

36

0.32

314,739,231

82.80

11,322

100

399,464,362 *100.0011,336100.00380,094,722 **100.00Over 1,000,000
Total

3.2 Resident/Non-Resident Shareholding
As at 31 December 2023
Shareholding Range

Resident%

Number ofshares%Number ofshareholders%

Number ofshares%

11,191

98.84

320,284,422

80.18

11,20698.85

317,772,895

83.60

131

1.16

79,179,940

19.82

130

1.15

62,321,827

16.40

11,322100.00399,464,362 *100.0011,336100.00380,094,722 **100.00Non-resident
Total

As at 31 December 2022

Number ofshareholders

3.3 Individual/Institutional Shareholding
As at 31 December 2023
Shareholding Range

Number ofshareholders%

Individual

10,737

Institutional

585

Total

11,322

Number ofshares%Number ofshareholders

%

94.83

67,399,913

16.87

10,7835.17

332,064,449

83.13

553

100.00399,464,362 ** Out of the 399,464,362 shares in issue, 179,755 shares amounting to 0.04%
held by two shareholders are not registered in the shareholder register of
NDB/held in suspense pending registration, in line with the provisions of
the Banking Act No. 30 of 1988.

Investor Relations

As at 31 December 2022

100.0011,336

Number ofshares%95.12

63,730,583

16.77

4.88

316,364,139

83.23

100.00380,094,722 **100.00** Out of the 380,094,722 shares in issue, 36,507 shares amounting
to 0.0096% held by one shareholder is not registered in theshareholder register of NDB/held in suspense pending registration,in line with the provisions of the Banking Act No. 30 of 1988.

National Development Bank PLC

Annual Report 2023

369

4. 20 LARGEST REGISTERED SHAREHOLDERS OF THE BANK AS AT 31 DECEMBER 2023 AS PER RULE NO 7.6(III) OF THE LISTING RULESOF THE COLOMBO STOCK EXCHANGE
2023

1

2022

Name

Number ofshares%Standard Chartered Bank Mauritius S/A
Norfund39,906,488

9.99

Name

Number ofshares%Standard Chartered Bank Mauritius S/A
Norfund37,971,462

9.99

2

Employees Provident Fund

37,966,343

9.50

Employees Provident Fund

36,125,392

9.50

3

Bank of Ceylon No. 1 Account

31,749,539

7.95

Bank of Ceylon No. 1 Account30,210,035

7.95

4

Richard Pieris and Co Ltd - Account No. 01

24,745,230

6.19

Richard Pieris and Co Ltd - Account No. 01

23,545,358

6.19

5

Sri Lanka Insurance Corporation Ltd-GeneralFund

24,276,976

6.08

Sri Lanka Insurance Corporation Ltd-GeneralFund

23,099,809

6.08

6

Sri Lanka Insurance Corporation Ltd-Life
Fund

20,183,453

5.05

Sri Lanka Insurance Corporation Ltd-Life
Fund

19,204,777

5.05

7

Softlogic Life Insurance PLC AccountNumber 03/Life Shareholders Fund

15,834,583

3.96

Softlogic Life Insurance PLC AccountNumber 03/Life Shareholders Fund

15,066,780

3.96

8

Employees Trust Fund Board

13,549,618

3.39

Employees’ Trust Fund Board

12,892,611

3.39

9

BNYM Re-Terra Global Opportunity Fund, L.P

12,800,000

3.20

Dr. S. Yaddehige

10,814,195

2.85

10

Dr. S. Yaddehige

11,257,242

2.82

Hatton National Bank PLC A/C No 1

10,536,091

2.77

11

Hatton National Bank PLC A/C No 1

11,073,010

2.77

Perpetual Treasuries Limited

9,298,864

2.45

12

Perpetual Treasuries Limited

9,772,734

2.45

SBI Ven Holdings Pte Ltd

9,226,644

2.43

13

SBI Ven Holdings Pte Ltd

9,696,834

2.43

Commercial Bank of Ceylon PLC/Metrocorp(Pvt) Ltd7,963,839

2.10

14

Commercial Bank of Ceylon PLC/Metrocorp(Pvt) Ltd8,369,676

2.10

People's Leasing & Finance PLC/Mr. D.
Schaffter

7,066,635

1.86

15

Mr. A.K. Pathirage

5,759,918

1.44

Phoenix Ventures Private Limited

6,151,153

1.62

16

Asiri Surgical Hospital PLC

5,663,666

1.42

Akbar Brothers Pvt Ltd A/C No 1

5,795,780

1.52

17

Akbar Brothers Pvt Ltd A/C No 1

5,565,653

1.39

Mr. A.K. Pathirage

5,480,626

1.44

18

Arpico Insurance PLC - Share Holders

3,797,512

0.95

Asiri Surgical Hospital PLC

5,389,041

1.42

19

DFCC Bank PLC A/C 1

3,628,595

0.91

Arpico Insurance PLC - Share Holders

3,613,375

0.95

20

Softlogic Life Insurance PLC-A/C No. 04(Participating Fund)

3,394,757

0.85

DFCC Bank PLC A/C 1

3,372,735

0.89

298,991,827

74.85

282,825,202

74.41

100,292,780

25.11

97,233,013

25.58

36,5070.01

Others - registered- unregisteredTotal

179,755

0.04

399,464,362 *100.00* Out of the 399,464,362 shares in issue, 179,755 shares amounting to 0.04%
held by two shareholders are not registered in the shareholder register of
NDB/held in suspense pending registration, in line with the provisions of
the Banking Act No. 30 of 1988.

Others - registered
Others - unregistered

380,094,722 ** 100.00

Total** Out of the 380,094,722 shares in issue, 36,507 shares amounting to0.0096% held by one shareholder is not registered in the shareholder
register of NDB/held in suspense pending registration, in line with theprovisions of the Banking Act No. 30 of 1988.

All shares issued by the Bank are denominated only in LKR as at 31 December 2023.

5. PERCENTAGE OF THE SHARES HELD BY THE PUBLIC
As at 31 December
2023

As at 31 December
2022

Float adjusted Market Capitalisation (LKR Mn)

21,103

8,748

Parentage of the shares held by the public

81.40%

71.92%

Number of public shareholders

11,304

11,3081*

1*

Option under which the Bank complies with the minimum Public Holding requirement*As set out in the Listing Rules of the Colombo Stock Exchange

370

National Development Bank PLC

Annual Report 2023

Investor Relations

6. DIRECTORS’ INTEREST IN SHARES OF THE BANKAs at 31 December
2023

As at 31 December
2022

Number of shares

Number of shares

Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
79,216
Nil

Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
75,375Nil

Mr. Sriyan Cooray - Chair
Mr. Bernard Sinniah
Mr. Sujeewa Mudalige
Mr. Kushan D’Alwis, PC
Ms. (Fay) Piyachatr Chetnakarnkul
Ms. Chandima Dilrukshi
Ms. Kasturi Chellaraja
Ms. Shweta Pandey (Appointed w.e.f. 28 April 2023)
Mr. Hasitha Premaratne (Appointed w.e.f. 15 June 2023)
Mr. Dimantha Seneviratne (Ceased to be a Director w.e.f. 31January 2024)
Mr. Hiran Perera (Resigned w.e.f. 14 February 2023)

All shares issued to Directors including the CEO are denominated only in LKR.

7

INFORMATION ON SHARE TRADING

7.1 Share price movement trend over the past five years
2023

Year

Highest price (LKR)
Highest price adjusted for scrip dividends (LKR)
Date/s highest price was recorded
Lowest price (LKR)
Lowest price adjusted for scrip dividends (LKR)
Date/s lowest price was recorded

2022

2021

2020

2019

73.10
103.59
99.16
65.35
92.61
86.84
11 January 2022 29 January 2021 02 January 2020
31.30
67.90
56.80
29.78
60.70
49.74
22 November
21, 28 and 29
15 May 20202022 December 2021
64.90
32.00
68.90
78.10
64.90
30.45
61.60
68.40
399,464,362*
380,094,722**
357,123,647
232,637,231

113.1099.78
29 July 2019
85.80
71.56
27 May 2019

85.00
85.00
10 August 2023
31.40
29.88
05 January 2023

Price as at 31 December/last trading date of the year (LKR)
Price as at 31 December adjusted for scrip dividends (LKR)
Total number of shares in issue

100.0083.50
221,799,756* Note: Out of the 399,464,362 shares in issue, 179,755 shares amounting to 0.04% held by two shareholders are not registered in the shareholder
register of NDB/held in suspense pending registration, in line with the provisions of the Banking Act No. 30 of 1988.			
** Note : Out of the 380,094,722 shares in issue, 36,507 shares amounting to 0.0096% held by one shareholder is not registered in the shareholder
register of NDB/held in suspense pending registration, in line with the provisions of the Banking Act No. 30 of 1988.
Source: Bloomberg, CSE Reports
Share Price Movement
LKR
125
113.10100.00

100

85.80

85.00

78.10

75

68.90
67.90

56.80

50

73.10

32.00
31.30

25
0

Highest price103.59

99.16

2019

2020

2021

Price as at 31 December/last trading date of the year

64.90

Lowest price
31.40

2021

2023

NDB share price on the date of approval of the Annual
Report, 20 February 2024 - LKR 65.60

7.1.1 Share Price Movement Over the Year
Month

Highest price ( LKR )Lowest price ( LKR )Price as at monthend ( LKR )Jan-23

Feb-23Mar-23Apr-23May-23Jun-23

Jul-23Aug-23

Sep-23Oct-23

Nov-23

Dec-23

36.16
29.88

41.39
30.83

52.81
38.82

44.25
40.92

50.00
39.96

51.00
41.80

78.60
54.00

85.00
69.00

77.20
66.30

69.00
59.00

69.00
62.00

71.50
63.60

35.49

38.54

42.72

41.58

41.80

50.00

76.50

69.50

68.70

62.00

68.00

64.90

Note: Prices have been adjusted for scrip dividends
Investor Relations

Source: Bloomberg
National Development Bank PLC

Annual Report 2023

371

7.2 Share trading details
2023

2023
Q3

Q4

Year

Q2

2022

2021

2020

2019

Q1

Number of trades - NDB

32,0605,930

15,789

3,102

7,239

13,29531,141

27,4908,728

Percentage of total market trades

0.89%

1.06%

1.21%

0.47%

0.66%

0.22%

0.38%

0.90%

0.73%

Number of NDB shares traded ('000)

88,232

7,707

53,637

7,622

19,266

21,26037,19731,71011,742

Percentage of total shares traded in the market

0.52%

0.29%

0.90%

0.27%

0.35%

0.07%

0.06%

0.15%

0.12%

Turnover - NDB (LKR Mn)

5,709

508

4,021

342

839

1,281

3,050

2,484

1,209

24

8

67

6

14

6

13

12

5

1.39%

0.77%

2.38%

0.58%

0.72%

0.19%

0.26%

0.63%

0.71%

Average daily turnover (LKR Mn)
Percentage of total market turnoverSource: CSE Quarterly reports
Share Trading Details
No.

5,709

LKR Mn
6,000

88,232

1,000

31,71011,742

37,19727,49031,141

2019

2020

Turnover in LKR Mn - NDB

32,06021,26080,000

2021

0

2022

Number of shares traded '000 - NDB

40,00020,00013,2958,728

0100,000

60,000

1,281

2,000

2,484

3,000

1,209

4,000

3,050

5,000

2023

Number of trades - NDB

7.3 Shareholder funds and market capitalisation
Year

2023

2022

2021

2020

2019

Shareholder funds (NDB Group) in LKR Mn

74,471

67,50562,72747,97643,383

10%

8%

31%

11%

11%

Market capitalisation (NDB) in LKR Mn

25,925

12,16324,60618,16922,180Percentage increase/decrease in NDB market capitalisation
over the prior year

113%

-51%

35%

-18%

-1%

Percentage increase/decrease in shareholder funds over theprior year

4,248,935

3,847,150

5,489,168

2,960,648

2,851,313

Percentage increase/decrease in CSE market capitalisation overthe prior year

Market capitalisation (CSE) in LKR Mn

10%

-30%

85%

4%

0%

NDB's market capitalisation as a percentage of CSE market
capitalisation

0.6%

0.3%

0.4%

0.6%

0.8%

41

63

44

42

27

Market capitalisation rank of NDB in the CSE
Market capitalisation (Banks sector within CSE) in LKR Mn

455,380

219,848

343,541

318,887

368,903

NDB's market capitalisation as a percentage of Banks sector
capitalisation

5.7%

5.5%

7.2%

5.7%

6.0%

Beta value of NDB share against ASPI

2.44

0.63

0.53

1.37

1.53

Beta value of NDB share against S&P SL20

1.84

0.47

0.54

1.09

1.15

372

National Development Bank PLC

Annual Report 2023

Investor Relations

Shareholder funds and market capitalization
LKR Mn80,00070,00010,000
0

2019

2020

2021

Shareholder funds (NDB Group)

25,92574,471

12,16367,50562,72720,00018,16943,38330,00047,97640,00022,18050,00024,60660,0002023

2022

Market capitalisation (NDB)

7.4 NDB Share Performance in Comparison to Selected Local Indices
NDB Group vs Indices
LKR
200
150
100
50

06/30/23

08/31/23

10/31/23

12/31/23

08/31/23

10/31/23

12/31/23

02/28/23
02/28/23

06/30/23

12/31/22
12/31/22

04/30/23

10/31/22
10/31/22

04/30/23

08/31/22

04/30/22
04/30/22

08/31/22

02/28/22
02/28/22

06/30/22

12/31/21
12/31/21

06/30/22

10/31/21

08/31/21

06/31/21

04/31/21

02/28/21

12/31/20

10/31/20

08/31/20

06/30/20

04/30/20

02/29/20

ASPI Indexed to NDB

10/31/21

NDB

12/31/19

10/31/19

08/31/19

06/30/19

04/30/19

02/28/19

0

S&P SL Indexed to NDB

Source: Bloomberg
7.5 NDB Share Performance in Comparison to Key Regional Indices
NDB Group vs Indices
LKR
250
200
150
100
50

NDB

SENSEXFBMKLCI

STI

SET

08/31/21

06/31/21

04/31/21

02/28/21

12/31/20

10/31/20

08/31/20

06/30/20

04/30/20

02/29/20

12/31/19

10/31/19

08/31/19

06/30/19

04/30/19

02/28/19

0

VNINDEXDSEXMSCI Asia Pacific

MSCI EM ASIA INDEX

Source: Bloomberg

8. KEY SHAREHOLDER RETURN INDICATORS - NDB GROUP
Please refer Financial Capital on page 59 for a full set of key shareholder returns indicators.

9. EMPLOYEE SHARE OWNERSHIP SCHEMES
Please refer Note Number 46.3 Employee Share Option Scheme (ESOS) under Notes to the Financial Statements (page 243).

10. CAPITAL RAISING INITIATIVES 2023
Please refer Note Number 56.5 Capital Management under Notes to the Financial Statements (page 290).

Investor Relations

National Development Bank PLC

Annual Report 2023

373

374

National Development Bank PLC

Annual Report 2023

Investor Relations

100

Par value LKR

HighestMaturity

Yield toInterest Yield
N/A

N/A

Type A
NDB-BD-

N/A

N/A

14.52%

14.05%

14.22%

N/A

1,674

Listed11 December

N/A

N/A

11.14%

11.66%

11.90%

N/A

7,961

Listed23 May and
23 November

11 September,

23 November 2026

21 November 2021

12.25%

Semi-Annually

11.90%

100

100

LK0207D24941

11 March, 11 June,

11 December 2028

12 December 2023

15.00%

Quarterly

14.22%

100

100

LKJ0207D25153

Type B

N/A

N/A

11.61%

11.73%

12.00%

N/A

117

Listed23 November

23 May and

23 November 2028

21 November 2021

12.36%

Semi-Annually

12.00%

100

100

LK0207D24958

23/11/28-C2495-12

NDB-BD-

N/A

N/A

6.57%

9.16%

9.50%

N/A

6,651

Listed

24 September

60 months (5 years)

25 September 2020

9.50%

Annually

9.50%

100

100

LK0207D24529

24/09/25-C2452-9.5

NDB-BD-One Type

a convertible option

Basel III compliant with2020 September**Type C of the Debentures Issued in 2013 carrying a capital value of Rs. 3,637,980,000 was redeemed on 19 December 2023

* Issued via an Initial Public Offering in December 2023

trade

Other Ratios as at last

Government security

Yield
14.52%

14.05%

Annual15.00%

Effective

Year end

N/A

Coupon Rate

Interest Rate of comparable

Interest Rate

Market Value

Lowest3,352

Balance as at 31 December 2023

(LKR Mn)

ListedCSE Listing

December 2023

Trading Details for the year ended 31

Interest payment dates

11 December

11 December 2028

Redemption (from the date ofallotment)

12 December 2023

15.00%

Annually

Date of allotment

Annual Effective Rate per annum

Interest payment frequency

15.00%

100

LK0207D25146

Issue price LKRInterest rate per annum

Type B
NDB-BD-

Basel III compliant with a convertible option

2021 November

BD/11/12/28-C2514-15 11/12/28-C2515-14.22 23/11/26-C2494-11.9

NDB/

ISIN

Type A

Debenture CodeBasel III compliant with a convertible option

Types of Debentures

the debentures

Key features and trading details of2023 December*

11 (I) Key features and trading details of the debentures		

11. LISTED DEBENTURES IN ISSUE

N/A

N/A

11.04%

13.16%

13.50%

N/A

1,284

Listed30 March

30 September and

60 months (5 years)

31 March 201913.96%

Semi-Annually

13.50%

100

100

LK0207D24198

30/03/24-C2419-13.5

NDB-BD-

Type A

Type C**

Basel II compliant2013 December

Type D

19 December 201313.90%

Annually

13.90%

100

100

LK0207D21038

19 December 2013

14.00%

Annually

14.00%

100

100

LK0207D21053

N/A

N/A

11.04%

13.15%

13.95%

N/A

4,765

Listed30 March

N/A

N/A

11.80%

13.17%

13.90%

N/A-

Listed31 December

N/A

N/A

12.09%

13.26%

14.00%

N/A

3,585

Listed31 December

60 months (5 years) 120 months (10 years) 144 months (12 years)

31 March 201913.95%

Annually

13.95%

100

100

LK0207D24206

30/03/24-C2420-13.95

NDB-BD- NDB/BC/19/12/23C13.9 NDB/BC/19/12/25D14

Type B

Basel III compliant with a convertible option

2019 March11 (II) Disclosures regarding the utilisation of funds as per the objectives stated in the Debenture Prospectus for rated unsecured
subordinated redeemable debentures - December 2023
Objective
numberObjective
as per
Prospectus

Amountallocated
as per
Prospectus
in LKR Mn

Proposed dateof utilisation
as per
Prospectus

Amountallocatedfrom proceeds
in LKR Mn (A)% of total
proceeds

Amount% ofutilised utilisationin LKR Mn (B)againstallocation(B/A)

Clarification if
not fully utilised
including where thefunds are invested

1

Improve and further
strengthen the
Capital Adequacy
Ratio (CAR) in linewith the Basel III
guidelines

5,000

Within 12
months fromthe date ofallotment(i.e. by 12
December 2024)

5,000

100%

5,000

100%

-

2

Facilitate future
expansion ofbusiness activities of
the Bank

5,000

Within 12
months fromthe date ofallotment(i.e. by 12
December 2024)

5,000

100%

<5,000<100%

Unutilised funds were
invested in Government
securities at available
market rate.

12 INFORMATION ON DEBENTURES OF THE BANK (AS PER RULE NO. 7.6 X (I) OF THE LISTING RULES OF THE COLOMBO STOCKEXCHANGE) - BANK
2023

2022

Debt Equity Ratio (%)

9.88

11.85

Interest cover (Times)

1.37

1.46

Statutory Liquid Assets Ratio - Bank (%) (Minimum Requirement -20%)

39.02

27.24

Liquidity Coverage Ratio (%) - Rupee (Minimum Requirement - 100% (2022 - 90%))309.61297.08Liquidity Coverage Ratio (%) - All Currency (Minimum Requirement - 100% (2022 - 90%))228.58232.68

13 OTHER INFORMATION ON DEBENTURES OF THE BANKy Registrar to the rated unsecured subordinated redeemable debentures issued - For all issuances of the Bank (2013, 2019, 2020, 2021 and 2023) - S S P
Corporate Services (Pvt) Limited, No. 101 Inner Flower Road, Colombo 03
y Trustees to the rated unsecured subordinated redeemable debentures issued
y For issuances in 2013, 2019, 2020 and 2021 - Bank of Ceylon, Investment Banking Division No.1, BOC Square, Bank of Ceylon Mawatha, Colombo 01
y For issuance in 2023 - Treasury Operations, Treasury Back Office, 13th Floor, People’s Bank - Head Office, No.75, Sri Chittampalam A.Gardiner Mawatha,
Colombo 02

14 DIRECTORS’ INTEREST IN LISTED DEBENTURES AS AT 31 DECEMBER 2023
None of the Directors of the Bank had any interest in any listed debentures of the Bank as at 31 December 2023 as issued in December 2023, November
2021, September 2020, March 2019 and December 2013.

15 CREDIT RATINGS SUMMARYNDB at present engages the services of Fitch Ratings Lanka Limited for local credit ratings and the Bank’s ratings are as follows.
As per rating action on 05 October 2023
y National long term rating/Outlook: A-(lka) (Affirmed), Stable outlook assignedy Basel III compliant subordinated term debt: BBB (lka) (Affirmed) - RWN removed
y Basel II compliant subordinated term debt: BBB(lka) (Affirmed) - RWN removed

RWN – Rating Watch Negative
Please refer our Investor Relations web page within the NDB corporate website on http://www.ndbbank.com/to read the full rating reports.

Investor Relations

National Development Bank PLC

Annual Report 2023

375

OTHER INFORMATION
16 FINANCIAL STATEMENTS IN USD - BANK & GROUP
16.1 Statement of Profit or Loss
BANK
For the year ended 31 December

GROUP

2023

2022

2023

USD ’000

USD ’000

2022%

USD ’000

USD ’000%

Gross income

405,433

Interest income

365,745

332,93322

412,011

337,92822

296,62723

366,817

297,534

Less: Interest expenses

23

267,863

203,49432

267,606

203,230

32

Net interest income

97,882

93,133

5

99,211

94,304

5

Fee and commission income

21,952

19,00815

26,246

22,535

16

22

51

(57)

22

51

(57)

Net Fee and commission income

21,93018,95716

26,224

22,48317

Net gains/(losses) from trading

8,903(1,031)

(964)

8,903

(1,031)(964)

Net gains/(losses) from financial assets at fair value
through profit or loss

5,350

(1,181)

(553)

5,966

(1,031)(679)

Net gains/(losses) from derecognition of financial assets

12,431

46

26,924

12,58846

27,265(143)

Less: Fee and commission expenses

Other operating income(8,948)19,463(146)(8,509)19,876

Total operating income

137,548

129,3886

144,383

134,647

7

Less: Impairment charges

64,78388,735(27)

64,762

88,689(27)

Net operating income
Less: Operating expenses
Personnel expenses

72,76540,65379

79,62145,95973

20,324

17,11619

22,60919,01519

Depreciation and amortisation expenses

3,016

2,565

18

3,231

2,805

15

Other expenses

18,49314,80425

20,372

16,04427

Total operating expenses

41,833

34,48521

46,21237,86422

Operating profit before Tax on financial services

30,932

6,168

401

33,4098,094

313

Less: Tax on financial services

8,425

3,645

131

8,425

3,645

131

Operating profit after Tax on financial services

22,5072,523

792

24,984

4,450

461

-

-

-

-

-

-

Profit before taxation
Less: Income tax expenses
Profit for the year
Profit attributable to equity holders of the parent
Non-controlling interests

22,507
6,053
16,454
16,454-

2,523(6,289)
8,813
8,813
-

792
(196)
87
87
-

24,984
7,035
17,94917,646303

4,450(4,868)
9,318
9,115
203

461
(245)
93
94
49

Profit for the year

16,454

8,813

87

17,949

9,318

93

0.04

0.02

85

0.04

0.02

91

-

0.01

Share of associate companies’ profits/(losses)

Basic/Diluted Earnings per share (USD)
Dividend per share (USD)

376

National Development Bank PLC

Annual Report 2023

Investor Relations

16.2 Statement of Comprehensive Income
BANK

GROUP

2023

2022

2023

2022

USD ’000

USD ’000%

USD ’000

USD ’000%

16,454

8,812

87

17,949

9,318

93

-

-

-

(207)

579

(136)

16,115

7,334

120

16,141

7,335

120

-

(549)

100

-

(549)

100

Deferred tax effect on gains/ (losses) in above financial
instruments(4,835)(2,046)(136)(4,835)(2,046)(136)

Net gains/(losses) on investments

11,2804,739

138

11,306

4,740

139

Gains/(losses) on cash flow hedge reserve(9,779)13,284(174)(9,779)13,284(174)

Deferred tax effect on gains/ (losses) cash flow hedge
reserve

2,934(3,985)

174

2,934

(3,985)174

Net gains/(losses) on cash flow hedge reserve(6,845)

9,299

(174)

(6,845)

9,299

(174)

Net other comprehensive income that will bereclassified to the Statement of Profit or Loss (a)4,435

14,038

(68)

4,254

14,618(71)

Net gains/(losses) on investments in equity instruments fair value through other comprehensive income

966

(922)

205

966

(922)

205

Revaluation of freehold land and buildings

155

756

(79)

284

960

(70)

Deferred tax effect on revaluation gains/(losses)

(46)

(562)

92

(85)

(659)

87

Net gains/(losses) on revaluation of freehold land andbuildings

109

194

(44)

199

301

(34)

(1,781)

206

(965)

(1,855)176(1,154)

Profit for the year
Other comprehensive income items that will bereclassified to the Statement of Profit or Loss
Exchange differences on translation of foreign operations
Gains/(losses) on investments in debt instruments - fairvalue through other comprehensive income Net change in fair value during the year
Changes in allowance for expected credit losses

Items that will not be reclassified to the Statement ofProfit or Loss

Actuarial gains/(losses) on defined benefit plans
Deferred tax effect on actuarial gains/(losses)

268

127

111

291

136

114

(1,513)

333

(554)

(1,564)

312

(601)

Deferred tax effect on tax rate change on day one
adjustment of impairment allowance

-

-

-

-

-

-

Net other comprehensive income that will not bereclassified to the Statement of Profit or Loss (b)

(438)

(395)

(11)

(399)

(309)

(29)

Total other comprehensive income for the year, net oftaxes (a+b)

3,997

13,643

(71)

3,855

14,309(73)

Total comprehensive income for the year

20,451

22,455(9)21,804

23,627(8)

20,451

22,455(9)21,53823,280

(7)

-

-

-

266

347

(23)

20,451

22,455(9)21,804

23,627(8)

Annual Report 2023

377

Net actuarial gains/(losses) on defined benefit plans

Attributable to:Equity holders of the parent
Non-controlling interests
Total comprehensive income for the year

Investor Relations

National Development Bank PLC

16.3 Statement of Financial Position
BANK
As at 31 December

GROUP

2023

2022

USD ’000

USD ’000

2023

2022

%

USD ’000

USD ’000

Cash and cash equivalents

86,730

Balances with the Central Bank of Sri Lanka

21,73094,958(9)88,212

97,351(9)49,557(56)

21,73049,557(56)

Placements with banks

104,147

11,196830

104,147

11,196830

Derivative financial instruments

9,518

21,551

(56)

9,518

21,551(56)

Financial assets recognised through profit or loss measured at fair value

74,14052,63941

80,371

56,64442

Financial assets at amortised cost - loans and receivables
to other customers

1,397,100

1,487,392(6)

1,397,345

1,487,520(6)

Financial assets at amortised cost - debt and other
instruments

387,878

367,9785

387,878

367,978

5

Financial assets measured at fair value through othercomprehensive income

258,659

121,758112

261,251

123,854

111

Investments in subsidiary companies

3,422

3,040

13

-

-

-

Investments in associate companies

-

-

-

-

-

-

Investment property

-

-

-

9,606

7,845

22

Property, plant & equipment

9,695

8,887

9

11,781

10,648

11

Right of use assets

3,536

3,190

11

3,889

3,606

8

Intangible assets

5,813

4,916

18

5,859

4,941

19
13

%

AssetsCurrent tax receivables

-

-

-

133

118

Deferred tax assets

29,77824,53621

29,99324,65622

Other assets

14,951

17,535(15)

17,172

19,176(10)

Total assets

2,407,097

2,269,133

6

2,428,885

2,286,643

6

23,701

55,182(57)

23,701

55,310

(57)

288

262

10

288

262

10

Liabilities
Due to banks
Derivative financial instruments
Financial liabilities at amortised cost
Due to depositors

1,900,136

1,831,918

4

1,898,866

1,830,282

4

Due to debt securities holders

48,249356

13,45348,249356

13,453Due to other borrowers

76,03988,208(14)

76,03988,208(14)

Debt securities issued

90,70676,23919

90,70676,23919

Current tax liabilities

22,423

17,63027

22,93418,08027

Deferred tax liabilities

-

-

-

2,843

2,380

19

Retirement benefit obligations

4,012

2,496

61

4,443

2,777

60

Other liabilities

25,037

23,721

6

26,56825,022

6

Total liabilities

2,190,591

2,096,012

5

2,194,637

2,098,914

5

Stated capital

64,00754,14418

64,00754,14418

Statutory reserve fund

9,403

7,484

26

9,403

7,484

26

126,628

101,856

24

139,133

112,033

24

EquityRetained earnings
Other reserves

16,4689,639

71

17,307

10,277

68

Total equity to equity holders of the Bank
Non-controlling interests
Total equity

216,506
216,506

173,122173,12225
25

229,850
4,398
234,248

183,938
3,791
187,729

25
16
25

Total liabilities and equity

2,407,097

2,269,134

6

2,428,885

2,286,643

6

Contingent liabilities and commitments

857,918

800,0277

858,417

802,116

7

0.54

0.46

19

0.58

0.48

19

Net asset value per share (USD)

378

National Development Bank PLC

Annual Report 2023

Investor Relations

17. INTERIM FINANCIAL PERFORMANCE - BANK & GROUP
17.1 Statement of Profit or Loss
BANK

Quarter 4

Quarter 3

Quarter 2

Quarter 1

Quarter 2

Quarter 1

LKR ‘000

31/12/2023

30/09/2023

30/06/2023

31/03/2023 31/12/2022 30/09/2022 30/06/2022

Quarter 4

Quarter 3

31/03/2022

Net interest income
Other operating income
Total operating income
Impairment charges
Net operating income
Total operating expenses
Profit from operations
Profit before taxation
Taxation
Profit for the period
Profit attributable to:Equity holders of the parent
Basic earnings per share (LKR)

7,543,215
3,734,282
11,277,497
7,218,255
4,059,242
3,510,494
548,748548,748
391,049
157,699

9,375,614
5,699,478
15,075,093
6,054,987
9,020,105
3,626,516
5,393,590
5,393,590
2,517,822
2,875,768

6,483,594
2,752,097
9,235,691
3,520,612
3,060,085
3,421,823
2,753,783
2,753,783
1,222,220
1,531,563

8,544,706
760,498
9,305,204
4,810,712
4,494,492
3,094,858
1,399,634
1,399,634
594,339805,295

8,556,456
2,653,541
11,209,997
7,066,861
4,143,136
2,896,666
1,246,470
1,246,470(1,101,354)
2,347,824

7,198,416
1,944,273
9,142,690
8,297,113
845,576
2,733,905(1,888,329)(1,888,329)(744,356)(1,143,973)

8,782,134
3,580,891
12,363,025
7,560,284
4,802,741
3,087,118
1,715,623
1,715,623
615,828
1,099,795

6,206,651
3,789,022
9,995,673
6,367,402
3,628,271
2,665,957
962,315
962,315
356,916
605,399

157,700
0.39

2,875,768
7.20

1,531,563
3.83

805,295
2.02

2,347,824
5.88(1,143,973)(2.86)

1,099,795
2.75

605,399
1.52

Quarter 4

Quarter 3

GROUP

Quarter 4

Quarter 3

Quarter 2

Quarter 1

Quarter 2

Quarter 1

LKR ‘000

31/12/2023

30/09/2023

30/06/2023

31/03/2023 31/12/2022 30/09/2022 30/06/2022

31/03/2022

Net interest income
7,546,727
Other operating income
4,491,739
Total operating income
12,038,466
Impairment charges
7,181,912
Net operating income
4,856,554
Total operating expenses
3,934,038
Profit from operations
922,517
Share of associate companies' profit
Profit before taxation
922,517
Taxation
499,490
Profit for the period
423,027
Profit attributable to:Equity holders of the parent
338,540
Non-controlling interests
84,487423,027
Basic earnings per share (LKR)
0.85

9,500,880
6,192,538
15,693,418
6,062,195
9,631,223
3,993,120
5,638,104
5,638,104
2,599,622
3,038,482

6,637,703
3,004,458
9,642,161
3,062,413
6,579,748
3,737,402
2,842,345
2,842,345
1,290,481
1,551,864

8,695,172
1,054,542
9,749,714
4,830,496
4,919,218
3,418,104
1,501,113
1,501,113
656,276
844,837

8,717,337
3,068,570
11,785,907
7,060,304
4,725,603
3,210,237
1,515,366
1,515,366(869,071)
2,384,437

7,322,583
2,284,879
9,607,462
8,294,539
1,312,923
3,033,875(1,720,952)(1,720,952)(655,457)(1,065,495)

8,845,864
3,903,194
12,749,058
7,555,179
5,193,879
3,324,181
1,869,698
1,869,698
668,535
1,201,163

6,244,586
4,060,629
10,305,215
6,366,516
3,938,699
2,930,873
1,007,826
1,007,826
452,128555,698

3,029,940
8,542
3,038,482
7.59

1,536,880
14,984
1,551,864
3.85

854,076(9,239)844,8372.14

2,367,435
17,002
2,384,437
5.93(1,083,460)
17,965(1,065,495)(2.71)

1,185,442
15,721
1,201,163
2.97

539,320
16,378555,698
1.35

17.2 Statement of Financial Position
As at

BANK

As at

LKR ‘000

31/12/2023

30/09/2023

30/06/2023

31/03/2023 31/12/2022 30/09/2022 30/06/2022

31/03/2022

Cash and cash equivalents
Net loans and receivables
Investments
Other assets
Total assets
Customer deposits
Borrowings
Other liabilities
Shareholders’ funds
Total liabilities and equity
Net asset value per share (LKR)

68,884,538
452,660,461
233,499,108
24,855,053
779,899,160
615,643,999
77,337,178
16,770,106
70,147,877
779,899,160
175.6068,876,859
473,205,473
221,263,963
25,892,912
789,239,207
627,688,289
72,827,012
16,839,901
71,884,006
789,239,207
179.9554,296,152
469,659,202
241,206,547
28,029,037
793,190,938
627,800,141
79,480,267
18,525,134
67,385,395
793,190,938
168.6944,972,729
496,658,580
210,278,357
29,964,956
781,874,622
628,744,373
71,513,285
16,231,702
65,385,262
781,874,622
172.0235,429,965
556,434,648
146,903,024
26,091,739
764,859,376
600,085,167
83,523,014
25,877,110
55,374,085
764,859,376
155.06

Investor Relations

57,146,057
545,873,027
199,051,599
30,701,567
832,772,250
672,314,023
80,734,094
16,188,270
63,535,863
832,772,250
167.1645,913,584
569,400,426
176,327,566
27,213,821
818,855,396
649,316,357
94,011,260
13,889,414
61,638,365
818,855,396
162.17National Development Bank PLC

39,609,183
582,433,468
164,174,949
29,655,102
815,872,702
644,670,581
89,721,532
17,767,697
63,712,892
815,872,702
167.62

Annual Report 2023

379

17.2 Statement of Financial Position (Contd.)
As at

GROUP

LKR ‘000

As at

31/12/2023

30/09/2023

30/06/2023

31/03/2023 31/12/2022 30/09/2022 30/06/2022

69,497,558

55,077,669

45,581,596

58,024,201

46,722,889

31/03/2022

Cash and cash equivalents

69,364,699

40,056,392

35,947,080

Net loans and receivables

452,739,928 473,299,159 469,746,333 496,721,284 545,919,824 569,468,616 582,503,302

556,368,101
148,784,211

Investments

236,357,839 224,062,880 243,651,741 212,837,880 201,290,899 178,439,088 166,340,621

Other assets

28,496,411

32,937,127

29,476,303

Total assets

786,958,877 796,046,780 799,750,741 788,447,801 839,197,897 824,789,469 821,837,442

770,575,695
598,957,958

29,187,183

31,274,998

33,307,041

33,962,973

30,158,876

Customer deposits

615,232,470 627,260,491 627,345,458 628,257,477 671,713,337 648,156,560 643,510,784

Borrowings

77,337,178

72,827,289

79,501,483

71,554,217

80,781,281

94,082,986

89,779,769

83,598,173

Other liabilities

18,492,906

18,544,128

20,227,943

17,896,767

17,807,123

15,617,079

19,557,968

27,400,588

Shareholders’ funds

74,471,394

76,073,906

71,344,888

69,366,648

67,504,898

65,559,750

67,591,768

59,230,222

1,424,929

1,340,966

1,330,969

1,372,692

1,391,258

1,373,094

1,397,153

1,388,754

786,958,877 796,046,780 799,750,741 788,447,801 839,197,897 824,789,469 821,837,442

770,575,695

Non-controlling interests
Total liabilities and equity
Net asset value per share (LKR)

186.43190.44178.60182.50177.60172.48177.83165.85

18. TEN YEARS AT A GLANCE (GROUP PERFORMANCE)
18.1 Statement of Profit or Loss - GroupLKR Mn

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

IncomeNet interest income
Other operating income
Total operating income
Impairment charges
Net operating income

7,913
5,053
12,966529
12,437

7,807
5,484
13,291746
12,545

8,861
4,816
13,677
1,425
12,252

11,086
5,597
16,683
1,290
15,393

15,1037,450
22,553
3,764
18,78917,971
6,835
24,806
4,405
20,401

17,9258,479
26,404
6,794
19,61021,741
11,25532,996
10,25322,74331,13013,31844,44829,277
15,171

32,381
14,74347,124
21,13725,987Less operating expenses
Personnel costs
Other operating costs
Total operating expenses
Operating profit before share of
Associate co's profit before tax

3,172
2,738
5,911
6,527

3,634
3,196
6,830
5,715

3,793
3,366
7,159
5,094

4,025
4,176
8,201
7,192

4,899
4,468
9,367
9,422

5,460
4,949
10,409
9,992

5,748
4,653
10,401
9,209

6,323
5,192
11,515
11,2286,277
6,222
12,499
2,672

7,379
7,704
15,083
10,904

Share of Associate co's profit
Profit before taxation
Taxation
Profit after taxation
Minority interest
Profit attributable to Group

97
6,624
2,378
4,246
112
4,134

78
5,793
2,123
3,670
128
3,542

5,094
2,279
2,815
124
2,691

7,192
3,797
3,395
57
3,453

9,422
4,146
5,276
140
5,136

9,992
5,107
4,885
109
4,776

9,209
3,992
5,217
101
5,117

11,228
4,166
7,062
158
6,904

2,672
(404)
3,076
67
3,009

10,904
5,046
5,858
99
5,758

380

National Development Bank PLC

Annual Report 2023

Investor Relations

18.2 Statement of Financial Position - Group
2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

12,737
72,971
175,547-

20,002
77,257
209,768-

20,25284,437
227,717-

21,54983,062
274,079-

37,85582,715344,276-

26,25999,405
396,672-

29,993
161,188425,682-

38,468
148,744504,374-

58,024201,291
545,920-

69,365236,358
452,740
-

2,550
1,546
3,780
269,130

2,730
1,672
3,925
315,354

2,913
1,776
3,637
340,732

3,314
1,895
4,747
388,645

3,541
2,111
7,930
478,428

4,266
2,273
6,725
535,600

4,603
2,362
8,305
632,132

4,952
2,528
11,765710,832

5,721
2,879
25,363
839,198

5,715
3,112
19,669786,959

Liabilities
Borrowings
Deposits with customers
Taxation
Other liabilities
Total liabilities

80,768151,485
1,416
6,662
240,331

92,331
184,152
1,237
8,233
285,953

96,279203,516
1,597
8,326
309,718

68,617
273,0413,372
9,637
354,667

78,189347,170
3,618
9,340
438,317

72,958404,668
2,909
10,527491,062

79,837
489,659
3,159
10,273582,928

79,350551,257
3,155
13,003646,765

80,781
671,713
7,508
10,300770,30277,338615,233
8,351
10,141
711,063

Shareholders’ funds
Stated capital
Statutory reserves
Other reserves
Retained earnings
Total shareholders' funds
Minority interest
Total equity
Total liabilities and equity

1,145
1,011
1,474
24,24627,876923
28,799269,130

1,163
1,243
1,000
24,97628,382
1,019
29,401
315,354

1,246
1,246
497
26,94629,9371,077
31,013
340,732

2,209
1,336
923
28,54433,012966
33,978388,645

6,469
1,636
239
30,66839,012
1,099
40,111
478,428

7,685
1,896
579
33,23343,383
1,155
44,538535,600

8,794
2,196
842
36,14347,976
1,227
49,203
632,132

18,264
2,571(839)
42,73162,7271,339
64,066
710,832

19,871
2,746
3,772
41,11667,505
1,391
68,896
839,198

20,7383,046
5,608
45,07974,471
1,425
75,896786,959

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Market price per share (LKR)

250.00194.10156.00136.40106.80100.00

78.10

68.90

32.00

64.90

Basic earnings per share (LKR)

25.14

21.51

15.69

19.66

26.33

20.53

21.99

20.88

7.53

14.42

Interim dividends per share (LKR)*

7.00

7.00

-

2.00

-

-

1.50

-

-

-

Final dividends per share (LKR)*

4.00

4.00

8.00

7.00

8.00

7.00

-

5.50

2.50

-

Total dividends per share (LKR)*

11.00

11.00

8.00

9.00

8.00

7.00

1.50

5.50

2.50

-

Dividend cover (Times)*

2.29

1.96

1.96

2.18

3.29

2.93

14.66

3.80

3.01

-

Price earnings ratio (Times)

9.94

9.02

9.94

6.94

4.06

4.87

3.55

3.30

4.25

4.50

Net asset value per share (LKR)

169.35172.35181.23

192.51

185.49195.60206.23175.65

177.60186.43

LKR MnAssetsLiquid assets
Investments
Loans & receivables
Investments in associatecompanies
Property, plant & equipment
Investment property
Other assets
Total assets

18.3 Share Information - Group* The Board of Directors will consider a declaration of dividends for the year 2023 in due course. The Bank paid a total scrip dividend of LKR 2.50 per
share for the year 2022.

Investor Relations

National Development Bank PLC

Annual Report 2023

381

19. COMPLIANCE REPORT IN TERMS OF SECTION 7.6 - CONTENTS OF THE ANNUAL REPORT IN TERMS OF THE LISTING RULES OF THE
COLOMBO STOCK EXCHANGE		
Tabulated below is how we complied with the contents of the Annual Report as specified in Section 7.6 of the Listing Rules issued by the Colombo
Stock Exchange. The table provides the disclosure requirements of Section 7.6, the compliance level of the Bank and where you will find the respective
disclosures within this Annual Report.
Rule No:

Disclosure Requirement

Cross Reference/ within theReport (page/s)

7.6 (i)Names of persons who during the financial year were Directors of the Entity

7.6 (ii)

Principal activities of the Entity and its subsidiaries during the year and any changes therein10

7.6 (iii)

The names and the number of shares held by the 20 largest holders of voting and non-voting sharesdenominated in LKR or any other class of shares denominated in Foreign Currency and the percentage ofsuch shares held.

370

7.6 (iv)(a) In respect of a Local Entity which has its LKR denominated shares listed on the Exchange, such Entity
shall disclose the float adjusted market capitalisation, public holding percentage (%), number of public
shareholders and under which option the Listed Entity complies with the Minimum Public Holding
requirement, in respect of voting ordinary shares.

370

The public holding percentage (%) in respect of non-voting ordinary shares (where applicable).

22 - 29, 111

Not Applicable

Provided however, this Rule shall not be applicable to Entities whose Securities are listed on the Empower
Board in the Alternate Market Segment.
(b) In respect of a Local Entity which has its Foreign Currency denominated shares listed on the Exchange,such Entity shall disclose the public holding percentage (%) and the number of public shareholders.
7.6 (v)

A statement of each director’s holding and Chief Executive Officer’s holding in each class of shares of the
Entity denominated in LKR and in Foreign Currency (as applicable).

371

7.6 (vi)

Information pertaining to material foreseeable risk factors of the Entity337

7.6 (vii)

Details of material issues pertaining to employees and industrial relations of the Entity80

7.6 (viii)

Extents, locations, valuations and the number of buildings of the Entity’s land holdings and investment
properties222

7.6 (ix)

Number of shares representing the Entity’s stated capital241

7.6 (x)A distribution schedule of the number of holders in each class of equity securities, and the percentage of
their total holdings in the following categories:

369

Number of Holders |7.6 (xi)

Holdings
1-1,000 shares
1,001-10,000 shares
10,001-100,000 shares
100,001-1,000,000 sharesOver 1,000,000 shares| Total Holdings %The following ratios and market price information:
EQUITY
1. Dividend per share
2. Dividend pay out
3. Net asset value per share
4. Market value per share (highest and lowest values recorded during the financial year, value as at theend of financial year)
DEBT (only if listed)
1. Interest rate of comparable government security
2. Debt/equity ratio
3. Interest cover
4. Quick asset ratio
5. Debt Service Coverage Ratio (where applicable)
6. The market prices and yield during the year (ex interest) (Highest price, Lowest price, Last traded price(as at dd/mm/yy))
7. Any changes in credit rating (for the Entity or any other instrument issued by the Entity), if applicable382

Not Applicable

National Development Bank PLC

Annual Report 2023

Investor Relations

59, 371, 374

Rule No:

Disclosure Requirement

Cross Reference/ within theReport (page/s)

7.6 (xii)

Significant changes in the Entity’s or its subsidiaries’ fixed assets and the market value of land, if the value
differs substantially from the book value;

7.6 (xiii)

If during the financial year the Entity has raised funds through an Initial Public Offering and/or a further issueof Securities (as applicable);

Not Applicable
241, 374-375

a. the manner in which the funds of such issue/s have been utilised in conformity with the format
provided by the Exchange from time to time;b. if any shares or debentures have been issued, the number, class and consideration received and thereason for the issue; andc. any material change in the use of funds raised through an issue of Securities
In the event the funds raised through the Initial Public Offering and/or the further issue of Securities (asapplicable) have been fully utilised by the Listed Entity as disclosed in the Prospectus and/or Circular toshareholders between two financial periods, the Entity shall disclose such fact in the immediate succeeding
Annual Report or the Interim Financial Statement, whichever is published first
7.6 (xiv)a. Employee share option schemes243
Not Applicable

7.6 (xv)

Disclosures pertaining to Corporate Governance practices in terms of Section 9 of the Rules

7.6 (xvi)

Related Party transactions exceeding 10% of the Equity or 5% of the total assets of the Entity as per Audited
Financial Statements, whichever is lower

7.6 (xvii)

In the event a Listed Entity has its Foreign Currency denominated Securities listed on the Exchange, theEntity shall additionally disclose the following in its Annual Report:b. Employee share purchase schemes

130-133, 330-336
313
Not Applicable(a) The Trading Currency of such Securities(b) A detailed description of the utilisation of the proceeds held in the SFCA of the Entity for any capitaltransaction/s outside Sri Lanka, including the amount of proceeds utilised, as a percentage (%) of thetotal proceeds credited to the SFCA of the Entity pursuant to the Initial Public Offering.
(c) A Statement of compliance by the Listed Entity vis-à-vis the Applicable Foreign Exchange Regulations
including but not limited to the following:i) Maintenance of foreign exchange earnings at a minimum level of fifty per centum (50%) of its
total annual revenue which is equivalent to a minimum of USD 5 Mn (5,000,000) or a negative
statement;ii) The amount of proceeds held in the SFCA, which have been utilised by the Entity for any capitaltransactions outside Sri Lanka;iii) Repatriation of income of the investments made through the SFCA into Sri Lanka; and,iv) The amount of capital gains of the proceeds utilised for any capital transactions outside Sri Lanka.
(d) A status update on the residual of the proceeds which are not utilised for capital transactions outside
Sri Lanka.
7.6
In the event a Listed Entity has listed sustainable bonds on the Exchange and other disclosures as stated(xviii - xxi) therein

Not Applicable

20. SHAREHOLDER ENQUIRIES AND COMMUNICATIONS
Please refer Corporate Information (page 404).

Investor Relations

National Development Bank PLC

Annual Report 2023

383

Branch Network
No

Branch CodeBranch Name

Contact No

Address

Region NameDistrict

Province

1

094

Akkaraipattu

067 7448000/1

No. 487, Main Street, Akkaraipattu

North East Region

AmparaEastern

2065

Akuressa

041 7448000/1

No. 21, Main Street, Akuressa

Southern Region

MataraSouthern

3059

Aluthgama0347448010/1

No. 267, Galle Road, Aluthgama

Southern Region

Kalutara

Western

4047

Ambalangoda

0917448000/1

No : 333 , Galle Road, Ambalangoda

Southern Region

Galle

Southern

5048

Ambalantota

047 7448000/1

No. 127 , Main Street, Ambalantota

Southern Region

Hambanthota

Southern

6040

Ampara063 7448000/1

No 75, D S Sennanayake Street, Ampara

Uva- Sabaragamuwa
RegionAmparaEastern

7019

Anuradhapura

025 7448000/1

522/C, Maithreepala Senanayake Mw, New
Town, Anuradhapura

North Central Region

Anuradhapura

North Central

8071

Athurugiriya

011 7448060/1

70/15A, Borella Road, Athurugiriya

Greater Colombo
RegionColomboWestern

9

034

Avissawella036 7448000/1

No. 93, Ratnapura Road, AvissawellaUva- Sabaragamuwa
RegionColomboWestern

10018

Badulla055 7448000/1

242, Lower Street, Badulla

Central Region

Badulla

Uva

11

077

Balangoda

0457448000/1

No 24 A, Barns Ratwatte Mawatha,
Balangoda

Uva- Sabaragamuwa
RegionRatnapura

Sabaragamuwa

12

051

Bandarawela

057 7448000/1

No : 317 , Main Street, Bandarawela

Central Region

Badulla

Uva

13

090

Battaramulla

011 7448090/1

No 245,Main Street, Battaramulla

Greater Colombo
RegionColomboWestern

14039

Batticaloa

065 7448000/1

No 16, Liyods Avenue, Batticaloa.

North East Region

Batticaloa

Eastern

15

072

Boralesgamuwa

0117448063/4

No 39, Kesbawa Road, Boralesgamuwa

Greater Colombo
RegionColomboWestern

16052

Borella0117 448078/9

No: 31/5, Dr. N M Perera Mawatha, Borella

Colombo Region

ColomboWestern

17099

Chavakachcheri

0217448013/4

No. 1,3,5, Kandy Road, Chavakachcheri

North East Region

JaffnaNorthern18093

Chenkalady065 7448003/4

Trincomalee Road, ChenkaladyNorth East Region

Batticaloa

Eastern

19010

Chilaw

032 7448000/1

50-52, Skyline Building, Colombo Road,
Chilaw

North Western Region

Puttalam

North Western

20

062

Chunnakam

021 7448018/9

No: 30, K..K.S. road, Chunnakam

North East Region

JaffnaNorthern

21100

Colombo 7

011 7448004/5

103A, Dharmapala Mawatha, Colombo 7

Colombo Region

ColomboWestern

22064

Dambulla

066 7448000/1

No: 42, Kurunegala road, Dambulla

North Central Region

MataleCentral23

114

Digana081 7448003/4

No 59/6 , Gonawala Road, Digana

Central Region

Kandy

Central24

078

Eheliyagoda

036 7448003/4

No: 302, Main street, Ehaliyagoda

Uva- Sabaragamuwa
RegionRatnapura

Sabaragamuwa

25

067

Elpitiya

091 7448003/4

No. 23, Ambalangoda Road, Elpitiya

Southern Region

Galle

Southern

26

058

Embilipitiya

047 7448003/4

No. 67, Pallegama, Embilipitiya

Uva- Sabaragamuwa
RegionRatnapura

Sabaragamuwa

27

113

Fort

011 7448111/2

No, 39 , Canal Row, Colombo 01

Colombo Region

ColomboWestern

28

021

Galle

091 7448006/7

1/A,Abeysekara Building, Wakwella Road,
Galle

Southern Region

Galle

Southern

29029

Gampaha033 7448000/1

03, Yakkala Road, Gampaha

North Western Region

GampahaWestern30050

Gampola081 7448000/1

No 11 B & 11 C, Nawalapitiya Road, Gampola Central Region

Kandy

Central31

086

Giriulla

037 7558010/1

No 86, Negombo Road Giriulla

North Central Region

Kurunegala

North Western

32

057

Hambanthota

047 7448006/7

No: 34, Wilmot street, Hambantota

Southern Region

Hambanthota

Southern

33

096

Hanwella

036 7448006/7

No 130/C , Pahala Hanwella, HanwellaUva- Sabaragamuwa
RegionColomboWestern

34003

Havelock Town

0117 448006/7

117, Havelock Road, Colombo 05

Colombo Region

ColomboWestern

35088

Hendala011 7448094/3

No 46A Hendala Road, Hendala

North Western Region

GampahaWestern

36

106

Hikkaduwa

091 7448009/10

No 245, Galle Road, Hikkaduwa

Southern Region

Galle

Southern

37

102

Hingurakgoda

027 7558010/1

No 10, Airport Road, Hingurakgoda

North Central Region

Polonnaruwa

North Central

38

030

Homagama

011 7448045/6

64A, Highlevel Road, Homagama

Greater Colombo
RegionColomboWestern

39027

Horana034 7448013/5

135, Panadura Road, Horana

Colombo Region

Kalutara

Western

40044

Ja - Ela011 7448075/6

No.121, Colombo Road, Ja-Ela

North Western Region

GampahaWestern

384

National Development Bank PLC

Annual Report 2023

No

Branch CodeBranch Name

Contact No

Address

Region NameDistrict

Province

41037

Jaffna021 7448011/24

No 62/6, Stanley Road, Jaffna

North East Region

JaffnaNorthern

42026

Kadawatha

011 7448036/7

147, Kandy Road, Kadawatha

North Western Region

GampahaWestern

43060

Kaduruwela

027 7558003/4

No 25, Batticaloa Road, Polonnaruwa

North Central Region

Polonnaruwa

North Central

44

055

Kaduwela011 7448081/2

No: 501/2, Awissawella Road, Kaduwela

Greater Colombo
RegionColomboWestern

45

084

Kahawatte

045 7448003/4

No 149, Main Street, Kahawatte

Uva- Sabaragamuwa
RegionRatnapura

Sabaragamuwa

46

053

Kalmunai

067 7448003/4

No: 165, Batticaloa Road, Kalmunai

North East Region

AmparaEastern

47

016

Kalutara

034 7448016/7

290. Galle Road, Kalutara SouthSouthern Region

Kalutara

Western

48

028

Kandana

011 7448039/40

No.677, Negombo Road, Kandana

North Western Region

GampahaWestern

49

002

Kandy

081 7448015/6

No 133, Kotugodella Veediya, Kandy

Central Region

Kandy

Central50

080

Kandy City Centre

081 7448006/7

L 1 - 3 , Level 1 , Kandy City Center, No . 05 ,Dalada weediya, Kandy

Central Region

Kandy

Central51

109

Katana031 7448000/1

No.05, Koongashandiya, Katana

North Western Region

GampahaWestern

52

110

Katugastota

081 7448009/10

No 111, Kurunegala Road, Katugastota

Central Region

Kandy

Central

53

082

Katunayake

011 7448096/7

No 745 , Baseline Road, Aweriwatta,
Katunayaka

North Western Region

GampahaWestern

54

017

Kegalle035 7448003/4

261/1, Kandy Road, Kegalle

Central Region

KegalleSabaragamuwa

55

083

Kekirawa

0257448003/4

No 61, Opposite Government Hospital, Main North Central Region
Street, Kekirawa

Anuradhapura

North Central

56

025

Kiribathgoda

011 7448033/4

No. 540, New Hunupitiya Road, Dalugama,
Kelaniya

North Western Region

GampahaWestern

57089

Kochchikade

031 7448003/4

No 96,Chilaw Road, Kochchikade

North Western Region

GampahaWestern

58

032

Kohuwela

0117 448051/2

No. 143, S De S Jayasinghe Mawatha,
Nugegoda.

Greater Colombo
RegionColomboWestern

59014

Kollupitiya

011 7448018/9

No.321, Galle Road, Colombo 3

Colombo Region

ColomboWestern

60

024

Kotahena

0117 448030/1

295, George R De Silva Mw, Co -13

Colombo Region

ColomboWestern

61

111

Kottawa

011 7448099/100 365/1 A, High Level Road, Kottawa

Greater Colombo
RegionColomboWestern

62

042

Kuliyapitiya

037 7558003/4

No 133, Main Street, Kuliyapitiya

North Central Region

Kurunegala

North Western

63

007

Kurunegala

037 7558006/7

6, Rajapihilla Mw, Kurunegala

North Central Region

Kurunegala

North Western

64

012

Maharagama

011 7448015/6

108 A, Highlevel Road, Maharagama

Greater Colombo
RegionColomboWestern

65

105

Mahawewa

032 7448003/4

Chilaw Road, Mahawewa

North Western Region

Puttalam

North Western

66

075

Mahiyanganaya

055 7448003/4

No: 02,New Town, Mahiyanganaya

Central Region

Badulla

Uva

67

031

Malabe0117448049/8

760, New Kandy Road, MalabeGreater Colombo
RegionColomboWestern

68

097

Manipay

021 7448021/2

No.260, Manipay Road, Manipay

North East Region

JaffnaNorthern

69

103

Marine Drive

011 7448102/3

42, Sagara Road, Marine Drive, Colombo 4

Colombo Region

ColomboWestern

70046

Matale066 7448003/4

No : 144 , Main Street, Matale

Central Region

MataleCentral

71

006

Matara041 7448003/4

60, Uyanwatte Rd,Matara

Southern Region

MataraSouthern

72

045

Mathugama034 7448022/3

No. 98, Agalawatta Road, Mathugama

Southern Region

Kalutara

Western

73063

Minuwangoda

011 7448084/5

No: 49, Negombo Road, Minuwangoda

North Western Region

GampahaWestern

74070

Monaragala

055 7448006/7

No: 29, Pothuwil Road, Monaragala

Uva- Sabaragamuwa
RegionMonaragala

Uva

75

015

Moratuwa

011 7448021/2

255, Galle Road, Idama, Moratuwa

Colombo Region

ColomboWestern

76

020

Mount Lavinia

011 7448024/5

No 431/433, Galle Road, Mount Lavinia

Colombo Region

ColomboWestern

77074

Narahenpita

011 7448105/6

92 , Kirula Road , Narahenpita, Colombo 5

Colombo Region

ColomboWestern

78

091

Narammala037 7558013/4

No 144, Kurunegala Road, Narammala

North Central Region

Kurunegala

North Western

79

095

Nattandiya

032 7448006/7

No 82, Marawila Road, Nattandiya

North Western Region

Puttalam

North Western

80

061

Nawalapitiya

054 7448000/1

No 70B, Gampola Road, Nawalapitiya

Central Region

Kandy

Central81

001

Nawam Mawatha

011 7448000/1

No 40, Nawam Mw, Colombo 02

Colombo Region

ColomboWestern

82009

Negombo

031 7448006/7

No. 121, St.Joseph Street, Negombo

North Western Region

GampahaWestern

83

066

Nelliady

021 7448012/27

109,Jaffna Road, Nelliady

North East Region

JaffnaNorthern

84069

Nikaweratiya

037 7558016/7

No:65, Puttalam Road, Nikaweratiya

North Central Region

Kurunegala

North Western

Branch Network

National Development Bank PLC

Annual Report 2023

385

No

Branch CodeBranch Name

Contact No

Address

Region NameDistrict

Province

85054

Nittambuwa

033 7448003/4

No 496, Kandy Road, Nittambuwa

North Western Region

GampahaWestern

86004

Nugegoda

011 7448009/10

152,Nawala Rd, Nugegoda

Greater Colombo
RegionColomboWestern87

076

Nuwara Eliya

052 7448000/1

No 50/2 ,Siva Complex, Block C,Lawson
Street, Nuwaraeliya

Central Region

Nuwara Eliya

Central

88079

Old Moor Street

011 7448108/9

No : 311, Old Moor Street, Colombo 12

Colombo Region

ColomboWestern

89035

Panadura

038 7448000/1

No. 319, Galle Road, Panadura

Colombo Region

Kalutara

Western

90022

Pelawatte

011 7448027/8

301, Pannipitiya Road, Battaramulla

Greater Colombo
RegionColomboWestern

91

043

Pettah011 7448072/3

No, 137,133/1, Main Street, Colombo 11

Colombo Region

ColomboWestern

92049

Pilimathalawa

081 7448012/3

No: 240, Colombo Road, Pilimathalawa

Central Region

Kandy

Central

93

023

Piliyandala011 7448057/8

No 120 , Horana Road, PiliyandalaGreater Colombo
RegionColomboWestern

94

087

Pitakotte

011 7448114/5

No 322B, Kotte Road, Pitakotte

Greater Colombo
RegionColomboWestern

95

112

Private WealthCentre011 7448087/8

No 135, Rainbow Business Centre,
Bauddhaloka Mawatha, Colombo 04

Colombo Region

ColomboWestern

96033

Puttalam032 7448009/10

104, Kurunegala Road, Puttalam

North Central Region

Puttalam

North Western

97

005

Rajagiriya

011 7448012/3

505, Srijayawardenapura Etul Kotte, Kotte

Greater Colombo
RegionColomboWestern

98073

Ratmalana

011 7448066/7

No 151, Galle Road, Ratmalana

Colombo Region

ColomboWestern

99

013

Ratnapura045 7448006/7

No 211, Main Street, Rathnapura

Uva- Sabaragamuwa
RegionRatnapura

Sabaragamuwa

100

115

Shangri-la

011 7448117/8

One Galle Face Mall, Premises no L 1 - 77, No Colombo Region
1 A, Colombo 02

ColomboWestern

101

116

Tangalle

047 7448009/10

No 90A , Matara Road, Tangalle

Southern Region

Hambanthota

Southern

102

104

Thambuttegama

025 7448006/7

No 255A, Main Street, Thambuttegama

North Central Region

Anuradhapura

North Central

103

098

Thirunelveli

021 7448016/17

No, M102 , Palaly Road, Jaffna

North East Region

JaffnaNorthern

104092

Tissamaharama

047 7448012/3

No. 133 E , New Town, TissamaharamaSouthern Region

Hambanthota

Southern

105

038

Trincomalee

026 7448000/1

No 91& 93, North Coast Road, Trincomalee

North East Region

Trincomalee

Eastern

106

081

Uragasmanhandiya 091 7448012/3

No 131 , Main Street, UragasmanhandiyaSouthern Region

Galle

Southern

107

041

Vauniya

024 7448000/1

188, 190, 192 & 190/1, Kandy Road, Vavuniya North East Region

Vavuniya

Northern

108

101

Warakapola

035 7448000/1

No. 96 & 98 , Main Street, Warakapola

Central Region

KegalleSabaragamuwa

109

056

Wariyapola

037 7558019/20

Navinna Bldg, Puttlam Road, Wariyapola

North Central Region

Kurunegala

North Western

110

011

Wattala011 7448042/3

378A, Negombo Road, Wattala

North Western Region

GampahaWestern

111008

Wellawatte

011 7448120/1

302, Galle Road, Colombo 6

Colombo Region

ColomboWestern

112

036

Wennappuwa

031 7448009/10

No 204, Chilaw Road, Wennappuwa

North Western Region

Puttalam

North Western

113

068

Yakkala033 7448006/7 65/5 B,Kandy Road,Yakkala

North Western Region

GampahaWestern

Regional Offices Network
Region nameRegional Office Address

Contact No

Regional Manager

Number of branches in the Region

Colombo Region

No: 31/5, Dr. N M Perera Mawatha, Borella

011 2 685 711 / 2Sydney Downall

19

Greater Colombo Region

No. 143, S De S Jayasinghe
Mawatha,Nugegoda

011 2 812 564

Chandima Alwis

14

Southern Region

60, Uyanwatte Rd,Matara

041 2 227 161 / 3

Vinjaya Jayasinghe

14

North Western Region

No.677, Negombo Road,Kandana

011 2 071 493

Nalin Abeyratne

18

North Central Region

6, Rajapihilla Mw, Kurunegala

037 4 692 421

Sisira Herath

13

Central Region

No 133, Kotugodella Veediya, Kandy

081 2 238 786

Thilina Hewage

14

Uva - Sabaragamuwa Region

No 211, Main Street, Rathnapura

045 2 223 839

Devapriya De Silva

9

North East Region

No 62/6, Stanley Road, Jaffna

021 2 217 395

Brinthapan Selvanayakam

12

More information on the Bank’s branches, such as address, location on Google Maps and Operating Hours are accessible in the Bank’s corporate web sitewww.ndbbank.com, NDB NEOS mobile banking app and NDB NEOS online banking platform.

386

National Development Bank PLC

Annual Report 2023

Branch Network

Network of Group Companies
Company

Postal address

Address of registeredofficeContact person

NDB Capital
Holdings Limited
NDB Investment
Bank Limited
NDB WealthManagement
LimitedNDB Securities(Pvt) Limited
NDB Capital
Limited[Bangladesh]

Level 01, NDB Capital Building, No: 135,
Bauddhaloka Mawatha, Colombo 04
Level 01, NDB Capital Building, No: 135,
Bauddhaloka Mawatha, Colombo 04
Level G, NDB Capital Building, 135 Bauddhaloka
Mawatha, Colombo 04

No: 40, Nawam Mawatha,
Colombo 02
No: 40, Nawam Mawatha,
Colombo 02
No 40, Nawam Mawatha,
Colombo 02

Level 02, NDB Capital Building, No: 135,
Bauddhaloka Mawatha, Colombo 04
Uday Tower, 6th Floor, (South - West Side) 57& 57/A, Gulshan Avenue, Circle 1 Dhaka 1212,
Bangladesh

Mr. Gihan R. Cooray 011 2 131 000

NDB ZephyrPartners Lanka(Pvt)Limited
NDB ZephyrPartners Limited

Level 01, NDB Capital Building, No.135,
Bauddhaloka Mawatha, Colombo 04

No: 40, Nawam Mawatha,
Colombo 02
Uday Tower, 6th Floor,(South - West Side) 57 & 57/A,
Gulshan Avenue, Circle 1
Dhaka 1212, Bangladesh
No.40, Nawam Mawatha,
Colombo 02

Apex House, Bank Street, TwentyEight,
Cybercity, Ebene 72201, Mauritius

Development
No. 42, Nawam Mawatha, Colombo 02
Holdings (Pvt) Ltd

Telephone

Fax

Email

Mr. Senaka
011 2 300 385
Kakiriwaragodage
Mr. Darshan Perera 011 2 300 385

011 2 300 393

senaka@ndbch.com

011 2 300 393

Mr. Ruwan Perera

0112 303 237

darshan@ndbib.
com
contact@
ndbinvestors.com

0112 303 232-

gihan@ndbs.com

Mr. Md Maroof
Ur Rahman
Mazumder+88029888626+88029888906

info@ndbcapital.
com

Mr. Girish Patil

011 2 303 810

011 2 307 155

gp@emeraldfundsl.
com+230 467 3000

+230 467 4000

sk@emeraldfundsl.
com

011 2 300 174

011 2 3001 74

info@dhpl.lk

Mr. Senaka
Apex House, Bank Street,
TwentyEight, Cybercity, Ebene Kakiriwaragodage
72201, Mauritius
No. 40, Nawam Mawatha,
Mr. Kumudu
Colombo 02
Priyanga

Correspondent Relationships
ASIA• Bahrain• Bangladesh• Cambodia• China• Hong Kong
• India• Indonesia• Israel• Japan• Jordan• Kazakhstan• Kuwait• Lebanon• Macao• Malaysia• Maldives• Nepal• Oman• Pakistan• Philippines• Qatar• Russian Federation• Saudi Arabia• Singapore• South Korea• Sri Lanka• Taiwan• Thailand• Turkey• United ArabEmirates• Vietnam
EUROPE• Austria• Belgium• Bulgaria• Cyprus• Czech Republic• Denmark• Estonia• Finland• France• Germany

North
America• Greece• Guernsey Ci• Ireland• Hungary• Italy• Latvia• Luxembourg• Moldova• Monaco• Netherlands• Norway• Poland• Portugal• Romania• Slovakia• Slovenia• Spain• Sweden• Switzerland• Ukraine• United Kingdom
AFRICA• Algeria• Cameroon• Congo• Côte d’Ivoire• Egypt• Gabon• Kenya• Madagascar• Mauritania• Mauritius• Morocco• Nigeria• Senegal• Seychelles• South Africa• Tanzania• Tunisia• Zambia
OCEANIA• New Zealand• Australia

SOUTH AMERICA• Bolivia• Brazil• Chile• Colombia• Peru• Uruguay
NORTH AMERICA• Bahamas• Canada• Mexico• United States

Asia
EuropeAfricaSouth
America

Network of Group Companies, Correspondent Relationships

Oceania

National Development Bank PLC

Annual Report 2023

387

GRI Content Index
Statement of use

National Development Bank PLC has reported in accordance with the GRI Standards for the period from 1st January2023 to 31st December 2023

GRI 1 used

GRI 1: Foundation 2021

Applicable GRI Sector Standard(s)Not applicable

GRI Standard/
Other Source

Disclosure

Location

Omission
Requirement (s)omittedReasonExplanation

General disclosures
GRI 2: General

2-1 Organisational details

10, 404

Disclosures 2021
7.6 (xiv)

A gray cell indicates that reasons for omission are not permitted for thedisclosure or that a GRI Sector Standard reference number is not available.

2-2 Entities included in the organisation’s

10sustainability reporting
2-3 Reporting period, frequency and contact

7, 8

point
2-4 Restatements of information

7

2-5 External assurance

7, 8, 105, 106

2-6 Activities, value chain and other business

10, 52, 60-70,

relationships

79, 942-7 Employees

81

2-8 Workers who are not employees

2-9 Governance structure and composition

114

2-10 Nomination and selection of the highest

116

2-8 a, b, c

Not applicable

Workers who are not
employees of the Bank
comprise of those
providing auxiliary
services such as security
and janitorial, engaged
based on contracts. As
these do not form core
operations of the Bank,
information pertaining
to this indicators is nottracked.

2-21 a,b,c

Confidentiality

Constraints in disclosing

constraints

total compensation ratio

governance body
2-11 Chair of the highest governance body115

2-12 Role of the highest governance body in

115

overseeing the management of impacts
2-13 Delegation of responsibility for managing

115

impacts
2-14 Role of the highest governance body in

119sustainability reporting
2-15 Conflicts of interest

117

2-16 Communication of critical concerns

118

2-17 Collective knowledge of the highest

112

governance body
2-18 Evaluation of the performance of thehighest governance body116

2-19 Remuneration policies

126

2-20 Process to determine remuneration

127

2-21 Annual total compensation ratio

388

National Development Bank PLC

Annual Report 2023

GRI Content Index

GRI Standard/
Other Source

Disclosure2-22 Statement on sustainable development

Location

Omission
Requirement (s)omittedReasonExplanation

2-30 a,b

Not applicable

The Bank does not have

18-20

strategy
2-23 Policy commitments
2-24 Embedding policy commitments

102, 117-118
119

2-25 Processes to remediate negative impacts

1192-26 Mechanisms for seeking advice and raising

119, 125concerns
2-27 Compliance with laws and regulations
2-28 Membership associations
2-29 Approach to stakeholder engagement

90
95
47-49

2-30 Collective bargaining agreements

collective agreementswith its employees
Material topics
GRI 3: Material

3-1 Process to determine material topics

50 A gray cell indicates that reasons for omission are not permitted for the disclosure

Topics 2021

3-2 List of material topics

51 or that a GRI Sector Standard reference number is not available.

Economic performance
GRI 3: Material

3-3 Management of material topics

50

Topics 2021
GRI 201: Economic

201-1 Direct economic value generated andPerformance 2016

distributed

201-1

Not applicable

The economic value
generated was negative
during the year as
impacted by highimpairment charges,
an industry-wide
phenomena.

201-2 Financial implications and other risks and97

opportunities due to climate change
201-3 Defined benefit plan obligations and other234-236

retirement plans
201-4 Financial assistance received from201-4 a,b,c

Not applicable

NDB does not receive any
financial assistance fromthe government202-1

Not applicable

The Bank does not track
this information. There is
no statutory minimum
wage for entry level staff
in the banking sector.

government
Market Presence
GRI 3: Material

3-3 Management of material topics

80

Topics 2021
GRI 202: Market

202-1 Ratio of standard entry level wage byPresence 2016

gender compared to local minimum wage

202-2 Proportion of senior management hired

81

from the local community

GRI Content Index

National Development Bank PLC

Annual Report 2023

389

GRI Standard/
Other Source

Disclosure

Location

Omission
Requirement (s)omittedReasonExplanation

207-4 a,b,c

Not applicable

The Bank has a subsidiary
in Bangladesh - NDB
Capital Limited, thefinancial performanceof which is presented
in the consolidated
financial statements of
the Group prepared inaccordance with SLFRSs
and other applicablemandatory guidelines
for the preparation andpresentation of financial
statements.

301-2 Recycled input materials used

301-2 aNot applicable

NDB does not use
recycled input materials
in its processes

301-3 Reclaimed products and their packaging
materials

301-3 a,b

Not applicable

NDB does not use
packaging material

302-2 Energy consumption outside of theorganisation

302-2,a,b,c

Not available

The Bank does not trackthis

302-3 Energy intensity

302-2,a,b,c

Not available

The Bank does not trackthis

302-5,a,b,c

Not applicable

Our products andservices do not consume
energy305-6 Emissions of ozone-depleting substances(ODS)

305-6 a,b,c,d

Not applicable

The Bank’s operations do
not generate ODS

305-7 Nitrogen oxides (NOx), sulphur oxides(SOx), and other significant air emissions

305-7 a,b,c

Not available

The Bank does not
currently track NOx andSOx emissions

Tax
GRI 3: Material
Topics 2021

3-3 Management of material topics

57, 195-196,
196-198,232-234, 246

GRI 207: Tax 2019

207-1 Approach to tax

57, 195-196,
196-198,232-234, 246

207-2 Tax governance, control, and risk
management

57, 195-196,
196-198,232-234, 246

207-3 Stakeholder engagement andmanagement of concerns related to tax

57, 195-196,
196-198,232-234, 246

207-4 Country-by-country reporting

Materials
GRI 3: Material
Topics 2021

3-3 Management of material topics

101

GRI 301: Materials
2016

301-1 Materials used by weight or volume101

EnergyGRI 3: Material
Topics 2021

3-3 Management of material topics

98

GRI 302: Energy
2016302-1 Energy consumption within theorganisation

98

302-4 Reduction of energy consumption

98

302-5 Reductions in energy requirements ofproducts and services
Emissions
GRI 3: Material
Topics 2021
GRI 305: Emissions
2016

390

3-3 Management of material topics

98

305-1 Direct (Scope 1) GHG emissions98

305-2 Energy indirect (Scope 2) GHG emissions98

305-3 Other indirect (Scope 3) GHG emissions

98

305-4 GHG emissions intensity

103

305-5 Reduction of GHG emissions

98

National Development Bank PLC

Annual Report 2023

GRI Content Index

GRI Standard/
Other Source

Disclosure

Location

Omission
Requirement (s)omittedReasonExplanation

Employment
GRI 3: Material
Topics 2021

3-3 Management of material topics

80-83

GRI 401:
Employment 2016

401-1 New employee hires and employee
turnover82

401-2 Benefits provided to full-time employeesthat are not provided to temporary or part-time
employees

83401-3 Parental leave

86

Labour/management relations
GRI 3: Material
Topics 2021

3-3 Management of material topics

85

GRI 402: Labour/
Management
Relations 2016402-1 Minimum notice periods regarding
operational changes

85

Training and education
GRI 3: Material
Topics 2021

3-3 Management of material topics

83

GRI 404: Training
and Education
2016404-1 Average hours of training per year per
employee84404-2 Programmes for upgrading employee skills
and transition assistance Programmes

83-84

404-3 Percentage of employees receiving regularperformance and career development reviews

83

Diversity and equal opportunity
GRI 3: Material
Topics 2021

3-3 Management of material topics

GRI 405: Diversity
Disclosure 405-1 Diversity of governance bodies
and Equal
and employees
Opportunity (2016) Disclosure 405-2 Ratio of basic salary andremuneration of women to men

85
81, 11286

Local communities
GRI 3: Material
Topics 2021

3-3 Management of material topics

GRI 413: Local
413-1 Operations with local community
Communities 2016 engagement, impact assessments, anddevelopment Programmes
413-2 Operations with significant actual andpotential negative impacts on local communities

95
95-96

95

Marketing and labelling
GRI 3: Material
Topics 2021

3-3 Management of material topics

GRI 417: Marketing 417-1 Requirements for product and service
and Labelling 2016 information and labelling9090417-2 Incidents of non-compliance concerning
product and service information and labelling90417-3 Incidents of non-compliance concerningmarketing communications

90

GRI 3: Material
Topics 2021

3-3 Management of material topics

77

GRI 418: Customer
Privacy

418-1 Substantiated complaints concerning
breaches of customer privacy and losses ofcustomer data

77

Customer privacy

GRI Content Index

National Development Bank PLC

Annual Report 2023

391

SASB IndicesIn this year’s reporting, we extended the scope of reporting under the Sustainability Accounting Standards Board (SASB) standards, wherein, in addition to
Sustainability Accounting Standard applicable to Commercial Banking, we also adopted the Sustainability Accounting Standard for Investment Banking &Brokerage. Given the NDB Group having two distinct legal entities engaged in investment banking and brokerage vis. NDB Investment Bank Limited and
NDB Securities Pvt Limited, we have presented two sets of disclosures for the companies respectively.

SASB Standards - Commercial BanksNational Development Bank PLC
Topic

Accounting Metric

Category

Data Security(1) Number of data breaches, (2) percentage
involving personally identifiable information(PII), (3) number of account holders affected
Description of approach to identifying and addressing
data security risks(1) Number and (2) amount of loans outstanding
qualified to programs designed to promote small
business and community development

Unit of Measure Code

Page No.

Quantitative

Number,
Percentage (%FN-CB-230a.1-

Discussion andAnalysis
Quantitative

Not Applicable

FN-CB-230a.2

75-77

Number,Reportingcurrency

FN-CB-240a.1(2) Amount of loansin percentage

Quantitative

Number,Reportingcurrency

FN-CB-240a.2

64-

Quantitative

NumberFN-CB-240a.3-

Quantitative

NumberFN-CB-240a.4

63-65

Quantitative

Reportingcurrency

FN-CB-410a.1

208

Discussion andAnalysis

Not Applicable

FN-CB-410a.2

99

Quantitative

Reportingcurrency

FN-CB-510a.1

352

Discussion andAnalysis

Not Applicable

FN-CB-510a.2

118

Global Systemically Important Bank (G-SIB)
score, by category

Quantitative

Basis points(bps)

FN-CB-550a.1

Not Applicable

Description of approach to incorporation of resultsof mandatory and voluntary stress tests into capital
adequacy planning, long-term corporate strategy, andother business activities

Discussion andAnalysis

Not Applicable

FN-CB-550a.2

337-356

Accounting Metric

Category

Unit of Measure

Code

Page No.

(1) Number and (2) value of checking and savings accounts bysegment: (a) personal and (b) small business

Quantitative

FN-CB-000.A-(1) Number and (2) value of loans by segment: (a) personal, (b)small business, and (c) corporate

Quantitative

Number,Presentation
currency
Number,Presentation
currency

FN-CB-000.B(2) only 208

Financial
Inclusion &Capacity
Building(1) Number and (2) amount of past due andnonaccrual loans qualified to programs
designed to promote small business andcommunity development
Number of no-cost retail checking accounts
provided to previously unbanked orunderbanked customers
Number of participants in financial literacy
initiatives for unbanked, underbanked, or
underserved customers
Incorporation of Commercial and industrial credit exposure, by industry
Environmental,
Social, andGovernance
Description of approach to incorporation of
Factors In Credit environmental, social, and governance (ESG)
Analysisfactors in credit analysis
Business Ethics

Systemic Risk
Management392

Total amount of monetary losses as a result oflegal proceedings associated with fraud,insider trading, anti-trust, anti-competitive
behaviour, market manipulation, malpractice, orother related financial industry laws or
regulations
Description of whistleblower policies andprocedures

National Development Bank PLC

Annual Report 2023

SASB Standards - Investment Banking & Brokerage
NDB Investment Bank Limited (NDBIB)
Topic

Accounting Metric

Employee
Diversity &Inclusion

Percentage of gender and racial/ethnic
group representation for (1) executive
management, (2) non-executive
management, (3) professionals, and (4) allother employees
Incorporation of Revenue from (1) underwriting, (2)Environmental, advisory and (3) securitisation transactions
incorporating integration of environmental,
Social, andsocial and governance (ESG) factors, by
Governanceindustry
Factors in
Investment(1) Number and (2) total value ofBanking &investments and loans incorporating
Brokerage
integration of environmental, social andActivities
governance (ESG) factors, by industry
Description of approach to incorporationof environmental, social and governance(ESG) factors in investment banking andbrokerage activities
Business Ethics
Total amount of monetary losses as a resultof legal proceedings associated with fraud,insider trading, anti-trust, anti-competitive
behaviour, market manipulation,
malpractice, or other related financial
industry laws or regulations
Description of whistleblower policies andprocedures

Professional
Integrity

SASB Indices(1) Number and (2) percentage of covered
employees with a record of investmentrelated investigations, consumer-initiatedcomplaints, private civil litigations, or otherregulatory proceedings
Number of mediation and arbitration cases
associated with professional integrity,
including duty of care, by party
Total amount of monetary losses as aresult of legal proceedings associated withprofessional integrity, including duty ofcare

Category

Unit of Measure

Code

Related Disclosure

Quantitative

Percentage (%)

FN-IB-330a.1

Refer Note 1 below

Quantitative

Presentation
currency

FN-IB-410a.1

Discussion andAnalysis

Number,Presentation
currency

FN-IB-410a.2(1) Not a licensed underwriter
therefore Not Applicable(2) and (3) - Not Applicable asthese are outside the scope of
ESMS Policy for NDBIB
Not Applicable

Discussion andAnalysis

Not Applicable

FN-IB-410a.3

N/A as this is outside the scope of
ESMS Policy for NDBIB

Quantitative

Presentation
currency

FN-IB-510a.1

NilDiscussion andAnalysis

Not Applicable

FN-IB-510a.2

Quantitative

Number,
Percentage (%)

FN-IB-510b.1

The Group Whistleblowing
Policy of NDB Capital
Holdings Limited provides for
employees as defined therein
including employees within
one year of resignation toreport malpractices, unethicalbehaviour, corruption, bribery
and blackmail to designatedindividuals for investigationand necessary action. The
policy assures confidentialityof identity and protection
from adverse personal action
against the whistleblower fordisclosures made in good faith
Nil

Quantitative

NumberFN-IB-510b.2

Nil

Quantitative

Presentation
currency

FN-IB-510b.3

Nil

National Development Bank PLC

Annual Report 2023

393

TopicAccounting Metric
Description of approach to ensuring
professional integrity, including duty ofcare

Systemic Risk
Management

Global Systemically Important Bank (G-SIB)
score, by category5
Description of approach to incorporationof results of mandatory and voluntarystress tests into capital adequacy planning,
long-term corporate strategy, and otherbusiness activities
Employee
Percentage of total remuneration that is
Incentives & Risk variable for Material Risk Takers (MRTs)6
TakingPercentage of variable remuneration ofMaterial Risk Takers (MRTs) to which malus
or clawback provisions were applied7
Discussion of policies around supervision,
control, and validation of traders’ pricing ofLevel 3 assets and liabilities

Category

Unit of Measure

Code

Related Disclosure

Discussion andAnalysis

Not Applicable

FN-IB-510b.4

Quantitative

Basis points(bps)
Not Applicable

FN-IB-550a.1

As an entity licensed as a
Corporate Finance Advisor
by Securities and Exchange
Commission of Sri Lanka(SEC), NDBIB has policies andprocedures in place to ensure
professional integrity, including
duty of care
Not Applicable

FN-IB-550a.2

Not Applicable

Quantitative

Percentage (%)

FN-IB-550b.1

Not Applicable

Quantitative

Percentage (%)

FN-IB-550b.2

Not Applicable

Discussion andAnalysis

Not Applicable

FN-IB-550b.3

Not Applicable

Discussion andAnalysis

Note 01
Representation by Grade and Gender
Grade

Female

Male

43%
54%
67%

57%
46%
33%

SinhalaTamil

Muslim

96%

0%

4%

Executive Management
Professional
Other
Representation by Race
Race
Representation by Race

394

National Development Bank PLC

Annual Report 2023

SASB Indices

SASB Standards - Investment Banking & Brokerage
NDB Securities (Private) Limited
Topic

Accounting Metric

Employee
Diversity &Inclusion

Percentage of gender and racial/ethnic
group representation for (1) executive
management, (2) non-executive
management, (3) professionals, and (4) allother employees
Incorporation of Revenue from (1) underwriting, (2) advisory
Environmental, and (3) securitisation transactions
incorporating integration of environmental,
Social, andsocial and governance (ESG) factors, by
Governanceindustry
Factors in
Investment(1) Number and (2) total value ofBanking &investments and loans incorporating
Brokerage
integration of environmental, social andActivities
governance (ESG) factors, by industry
Description of approach to incorporationof environmental, social and governance(ESG) factors in investment banking andbrokerage activities

Business Ethics

SASB IndicesTotal amount of monetary losses as a resultof legal proceedings associated with fraud,insider trading, anti-trust, anti-competitive
behaviour, market manipulation,
malpractice, or other related financial
industry laws or regulations2
Description of whistleblower policies andprocedures

Category

Unit of Measure

Code

Related Disclosure

Quantitative

Percentage (%)

FN-IB-330a.1

Refer Note 1 below

Quantitative

Presentation
currency

FN-IB-410a.1(1) None (2) LKR 196 Mn (3)None

Quantitative

Number,Presentation
currency

FN-IB-410a.2

Value of investment - Money
Fund LKR 250 Mn
Value of loans taken - None

Discussion andAnalysis

Not Applicable

FN-IB-410a.3

Quantitative

Presentation
currency

FN-IB-510a.1

Not applicable. In terms of
the NDB Group ESMS Policy,
ESG compliance is carriedout in respect of investmentsin own funds of the Group
Companies and it does notextend to client funds
None

Discussion andAnalysis

Not Applicable

FN-IB-510a.2

National Development Bank PLC

The Group Whistleblowing
Policy of NDB Capital
Holdings Limited provides for
employees as defined therein
including employees within
one year of resignation toreport malpractices, unethicalbehaviour, corruption, bribery
and blackmail to designatedindividuals for investigationand necessary action. The
policy assures confidentialityof identity and protection
from adverse personal action
against the whistleblower fordisclosures made in good faith.

Annual Report 2023

395

TopicAccounting Metric

Category

Unit of Measure

Code

Related Disclosure

Professional
Integrity(1) Number and (2) percentage of covered
employees with a record of investmentrelated investigations, consumer-initiatedcomplaints, private civil litigations, or otherregulatory proceedings3
Number of mediation and arbitration cases
associated with professional integrity,
including duty of care, by party
Total amount of monetary losses as aresult of legal proceedings associated withprofessional integrity, including duty ofcare4
Description of approach to ensuring
professional integrity, including duty ofcare

Quantitative

Number,
Percentage (%)

FN-IB-510b.1

None

Quantitative

NumberFN-IB-510b.2

One which was duly resolved
during the year

Quantitative

Presentation
currency

FN-IB-510b.3

None

Discussion andAnalysis

Not Applicable

FN-IB-510b.4

Global Systemically Important Bank (G-SIB)
score, by category5

Quantitative

Basis points(bps)

FN-IB-550a.1

NDBS ensure strict compliancewith applicable laws, rules
and regulations governing
professional integrity andduty of care. There is closemonitoring and monthly
reporting of any violations
to the relevant regulatory
authority. Further, internal
policies and procedures suchas the Compliance Manualencompassing professional
integrity and duty of care arein place to guide employeeson the same.
-

Description of approach to incorporationof results of mandatory and voluntarystress tests into capital adequacy planning,
long-term corporate strategy, and otherbusiness activities
Percentage of total remuneration that is
Employee
Incentives & Risk variable for Material Risk Takers (MRTs)6
TakingPercentage of variable remuneration of

Discussion andAnalysis

Not Applicable

FN-IB-550a.2-

Quantitative

Percentage (%)

FN-IB-550b.1-

Quantitative

Percentage (%)

FN-IB-550b.2-

Discussion andAnalysis

Not Applicable

FN-IB-550b.3

Valuation method of level 3
Financial Assets - Deposits
Debtors and Staff Loans

Systemic Risk
Management

Material Risk Takers (MRTs) to which malus
or clawback provisions were applied7
Discussion of policies around supervision,
control, and validation of traders’ pricing ofLevel 3 assets and liabilities

Note 01
Representation by Grade and Gender
Grade

Female

Male

12%
33%
29%
32%

88%
67%
71%
68%

SinhalaMuslim

Tamil

75%
67%
87%
67%

25%
33%
0%
14%

0%
0%
13%
19%

Executive Management
Non-Executive Management
Professionals
All Other Employees
Representation by Grade and Race
Grade
Executive Management
Non-Executive Management
Professionals
All Other Employees

396

National Development Bank PLC

Annual Report 2023

SASB IndicesGlossary of Financial and Banking Terms
A
Acceptances
Promise to pay, created when the drawee of atime draft, stamps or writes the word ‘accepted’
above his signature and a designated payment
date.

Accounting Policies
The specific principles, bases, conventions, rules
and practices adopted by an entity in preparing
and presenting Financial Statements.

Accrual Basis
Recognising the effects of transaction and otherevents when they occur without waiting forreceipt or payment of cash or its equivalent.

Actuarial Gain/Loss
Gains or losses arising from the difference
between estimates and actual experience in theentity’s pension plan and retirement gratuity.

Actuarial Assumptions
An entity’s unbiased and mutually compatible
best estimates of the demographic and financial
variable that will determine the ultimate cost ofproviding post-employment benefits.

Amortisation
The systematic allocation of the depreciable
amount of an intangible asset over its useful life.

Associate

Cash flows

An entity, including an unincorporated entity
such as a partnership, over which the investor
has significant influence and that is neither asubsidiary nor an interest in a joint venture.

Cash flows are inflows and outflows of cash
and cash equivalents.

Average Weighted Deposit Rate (AWDR)AWDR is calculated by the Central Bank weekly,
based on Commercial bank’s deposit rates
offered to their prime customers during theweek.
Average Weighted PRIME Lending Rate (AWPLR)AWPLR is calculated by the Central Bank weekly
based on commercial banks’ lending rates
offered to their prime customers during the
week.

B

Collectively Assessed Impairment Allowance
Provisions Also known as portfolio impairment
provisions. Impairment assessment on a collective
basis for homogeneous groups of loans that are
not considered individually significant and tocover losses that has been incurred but has not
yet been identified at the reporting date. Typicallyassets within the Retail Banking business (housing,
personal, leasing, credit cards etc.) are assessed ona portfolio basis.

Commitments

The Basel Committee on Banking Supervision’s
details of strengthened global regulatory
standards on Bank capital adequacy andliquidity.

Credit facilities approved but not yet utilisedby the clients at the date of the Statement of
Financial Position.

Contract
Basis point (BP)One hundredth of a percentage point, i.e. 100bp
equals 1%, used in quoting movements ininterest rates, security yields, etc.

C
Capital Adequacy Ratios

The amount at which the financial asset or
financial liability is measured at initial recognition
minus principal prepayments, plus or minus
the cumulative amortisation using the effective
interest rate method of any difference between
that initial amount and the maturity amount,and minus any reduction (directly or through theuse of an allowance account) for impairment or
uncollectability.

The relationship between capital and risk
weighted assets as defined in the framework
developed by the Bank for International
Settlements (BIS) and as modified by the Central
Bank of Sri Lanka to suit local requirements.

A risk-management committee in a bank thatgenerally comprises the Senior Managementof the institution. The ALCO’s primary goal is toevaluate, monitor and approve practices relating
to risk due to imbalances in the capital structure.
Among the factors considered are liquidity risk,interest rate risk, operational risk and external
events that may affect the Bank’s forecast andstrategic balance sheet allocations.

The smallest identifiable group of assetsthat generates cash inflows that are largely
independent of the cash inflows from other assets
or groups of assets.

Basel III

Amortised Cost

Asset and Liability Committee (ALCO)Cash Generating Unit (CGU)

Capitals
Refer to any stock of value such as customer
base, staff strength, relationships with thecommunity, etc. that will increase, decreaseor transform through the activities of anorganisation and that will help it generateearnings in the future.

Cash Equivalents
Short term highly liquid investments that arereadily convertible to known amounts of cash
and which are subject to an insignificant risk ofchanges in value.

An agreement between two or more parties thatcreates enforceable rights and obligations.

Consolidated Financial Statements
Consolidated Financial Statements are the
Financial Statements of a group in which theassets, liabilities, equity, income, expenses andcash flows of the parent and its subsidiaries arepresented as those of a single economic activity.

Contingencies
A condition or situation existing at the date of
the Statement of Financial Position where theoutcome will be confirmed only by occurrence or
non-occurrence of one or more future events.

Contractual Maturity
Contractual Maturity refers to the final payment
date of a loan or other financial instrument,
at which point all the remaining outstanding
principal will be repaid and interest is due to be
paid.

Control
Control is the power over an investee, exposure,or rights, to variable returns from its involvementwith the investee, and the ability to use its powers
over the investee to affect the amount of theinvestor’s returns.

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Annual Report 2023

397

Corporate Governance
The process by which corporate entities aregoverned. It is concerned with the way in whichpower is exercised over the management anddirection of entity, the supervision of executive
actions and accountability to owners and others.

Correspondent Bank
A bank in a foreign country that offers banking
facilities to the customers of a bank in anothercountry.

Cost to Income Ratio
Operating expenses excluding impairment
for loans and receivables and other losses as apercentage of total operating income.

Country Risk

Domestic Debt Optimisation (DDO)D
Debt Restructuring/ReschedulingThis is when the terms and provisions ofoutstanding debt agreements are changed. This
is often done in order to improve cash flow andthe ability of the borrower to repay the debt. It
can involve altering the repayment schedules aswell as debt or interest charge reduction.

Deferred Taxation
Sum set aside for tax in the Financial Statementsthat may become payable/receivable in afinancial year other than the current financial
year.

Delinquency

The risk that a foreign government will not fulfil
its obligations or obstructs the remittance offunds by debtors, either for financial reasons(transfer risk) or for other reasons (political risk).

A debt or other financial obligation is considered
to be in a state of delinquency when payments
are overdue. Loans and receivables are
considered to be delinquent when consecutive
payments are missed. Also known as ‘Arrears’.

Credit Ratings

Depreciation

An evaluation of a corporate’s ability to repay its
obligations or the likelihood of not defaulting,carried out by an independent rating agency.

The systematic allocation of the depreciable
amount of an asset over its useful life.

Currency Risk

Removal of a previously recognised financial
asset or financial liability from an entity’s
Statement of Financial Position.

The risk that the fair value or future cash flows ofa financial instrument will fluctuate because ofchanges in foreign exchange rates.

Credit Risk Mitigation
A technique to reduce the credit risk associatedwith an exposure by application of credit risk
mitigates such as collateral, guarantee and credit
protection.

Credit Risk
Credit risk or default risk is most simply definedas the potential that a borrower or counterparty
will fail to meet its obligations in accordancewith agreed terms and conditions.

Currency swaps
The simultaneous purchase of an amount of
currency for spot settlement and the sale of thesame amount of the same currency for forward
settlement.

Derecognition

398

National Development Bank PLC

EEarnings per Ordinary Share (EPS)
Profit attributable to ordinary shareholders
divided by the weighted average number ofordinary shares in issue.

Economic Value Added (EVA)
A measure of productivity which takes into
consideration cost of total invested equity

Effective Interest Rate (EIR)
Rate that exactly discounts estimated future cash
payments or receipts through the expected lifeof the financial instruments or when appropriate
a shorter period to the net carrying amount of
the financial asset or financial liability.

Effective Tax Rate
Provision for taxation including deferred tax
divided by the operating profit before tax onfinancial services.

Embedded Derivatives

A derivative is a financial instrument or othercontract, the value of which changes in response
to some underlying variable (e.g., an interestrate).

An embedded derivative is a component of a
hybrid (combined) instrument that also includes
a non-derivative host contract with the effectthat some of the cash flows of the combined
instrument vary in a way similar to a stand- alone
derivative.

Discount Rate

Employee Share Option Scheme (ESOS)

A rate used to place a current value on future
cash flows. It is needed to reflect the fact thatmoney has a time value.

A method of giving employees shares in thebusiness for which they work.

Derivatives

Equity Method

Dividend CoverProfit after tax divided by gross dividends. Thisratio measures the number of times dividend iscovered by current year’s distributable profits.

Dividend Yield
Dividend earned per share as a percentage of its
market value.

Customers Deposits
Money deposited by account holders. Suchfunds are recorded as liabilities.

The extension of the maturity period of the debt
instruments, which would help the government
to reduce the annual repayment obligation andto spread it over a longer period.

Documentary Credits
Commercial letters of credit provided for
payment by a bank to the named beneficiaryusually the seller of merchandise, againstdelivery of documents specified in the credit.

Annual Report 2023

This is a method of accounting whereby theinvestment is initially recognised at cost andadjusted thereafter for the post-acquisitionchanges in the investor’s share of net assets of
the investee. The profit or loss of the investor
includes the investor’s share of the profit or lossof the investee.

Equity risk
The risk arising from positions, either long or
short, in equities or equity-based instruments,
which create exposure to a change in the market
price of the equities or equity instruments.

Glossary of Financial and Banking Terms

Equity Instrument

Finance Lease

Going Concern

Equity instrument is any contract that evidencesa residual interest in the assets of an entity after
deducting all of its liabilities.

A contract whereby a lessor conveys to thelessee the right to use an asset for rent overan agreed period of time which is sufficientto amortise the capital outlay of the lessor.
The lessor retains ownership of the asset but
transfers substantially all the risks and rewards ofownership to the lessee.

The Financial Statements are normally preparedon the assumption that an entity is a going
concern and will continue in operation for theforeseeable future. Hence, it is assumed that theentity has neither the intention nor the need toliquidate or curtail materially or the scale of its
operations.

Financial Assets

Goodwill

Any assets that is cash, equity instrument ofanother entity, a contractual right to receive cash
or contractual right to receive another financial
asset from another entity.

An asset representing the future economic
benefits arising from other assets acquired in abusiness combination that are not individually
identified and separately recognised.

Financial Instruments

Gross Dividend

A financial instrument is any contract that gives rise
to both a financial asset in one entity and a financial
liability or equity instrument in another entity.

The portion of profits distributed to theshareholders.

Financial Liabilities

A Group is a parent and all its subsidiaries andassociates.

Events after the Reporting Period
Events after the reporting period are those
events, favourable and unfavourable, that occur
between the end of the reporting period andthe date when the Financial Statements areauthorised for issue.

Ex- Dividend
Date A classification of trading shares when adeclared dividend belongs to the seller rather
than the buyer. A stock will be give ex-dividend
status if a person has been confirmed by thecompany to receive the dividend payment.
The date on or after which a security is tradedwithout a previously declared dividend or
distribution.

Expected Credit Loss
The amount expected to be lost on an exposure
over the life of the asset. ECL is calculated
by multiplying the Probability of Default (apercentage) by the Exposure at Default (anamount) and Loss Given Default (a percentage).

Exposure
A claim, contingent or position which carries arisk of financial loss.

F
Fair Value
The amount for which an asset could beexchanged or a liability settled, between
knowledgeable, willing parties in an arm’s lengthtransaction.

Fair Value Adjustment
An adjustment to the fair value of a financial
instrument which is determined using avaluation technique (level 2 and level 3) toinclude additional factors that would beconsidered by a market participant that are notincorporated within the valuation model.

Fair Value Through Profit or Loss
A financial asset/liability: Acquired/incurredprincipally for the purpose of selling or
repurchasing it in the near term, part of aportfolio of identified financial instruments thatare managed together and for which there isevidence of a recent actual pattern of a shortterm profit taking, or a derivative (except for a
derivative that is a financial guarantee contract).
Glossary of Financial and Banking Terms

A contractual obligation to deliver cash or
another financial asset to another entity or toexchange financial assets or financial liabilities
with another entity under conditions that arepotentially unfavourable to the entity.

Financial Risk
The risk of a possible future change in one
or more of a specified interest rate, financial
instrument price, commodity price, foreignexchange rate, index of prices or rates or credit
rating or credit index or other variable thatthe variable is not specific to the party to thecontract.

Foreign Exchange Income
The realised gains recorded when assets or
liabilities denominated in foreign currencies
are translated into Sri Lankan rates which differ
from those rates in force at inception or on theprevious reporting date. Foreign exchange
income also arises from trading in foreign
currencies.

Forward Exchange Contract
Agreement between two parties to exchange
one currency for another at a future date at a
rate agreed upon today

G

Group

Guarantees
Three party agreement involving a promise by
one party (the guarantor) to fulfil the obligationsof a person owing a debt if that person fails toperform.

H
Hedging
A strategy under which transactions are effectedwith the aim of providing cover against the riskof unfavourable price movements (Interest rate,
Prices and Commodities, etc.).

Held-for-Trading
Debt and equity investments that are purchasedwith the intent of selling them within a shortperiod of time (usually less than one year).

Held-to-Maturity
Investments and debt securities that a Company
has the ability and intent to hold until maturity.

High Quality Liquid Assets(HQLA) HQLA are assets that can be easily and
immediately converted into cash at little or noloss of value that can be readily sold or used
as collateral to obtain funds in a range of stressscenarios and are unencumbered, i.e. without
legal, regulatory or operational impediments.

Global Reporting Initiative (GRI)

Historical Cost

GRI is a leading organisation in the sustainability
field. GRI promotes the use of sustainability
reporting as a way for organisations to become
more sustainable and contribute to sustainable
development.

Historical cost is the original nominal value of an
economic item.

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Annual Report 2023

399

I
Impaired Loans
Loans where identified impairment allowances
have been raised and also include loans which
are collateralised or where indebtedness has
already been written down to the expected
realisable value. The impaired loan category may
include loans, which, while impaired, are still
performing.

Impairment charges for Loans andReceivables

Interest Rate Risk

Liquidity coverage ratio (LCR)

The risk that the fair value or future cash flows ofa financial instrument will fluctuate because ofchanges in market interest rates.

Ratio of stock of high quality liquid assets
available to total net cash outflows over next 30
calendar days. LCR is expected to improve thebanking sector’s ability to absorb shocks arisingfrom financial and economic stress, thus, reducing
the risk of spillover from the financial sector to thereal economy.

Interest Rate SWAP
An agreement between two parties where one
stream of future interest payments is exchanged
for another stream of future interest payments
based on a specified principal amount.

Interest Spread

Amounts set aside against possible losses onloans, receivables and other credit facilities as aresult of such facilities becoming partly or wholly
uncollectible.

Impairment
This occurs when recoverable amount of anasset is less than its carrying amount.

Impairment Allowances
Impairment allowances are provisions held on
the Statement of Financial Position as a resultof the raising of a charge against profit for the
incurred (under LKAS 39)/expected (under SLFRS
9) loss. An impairment allowance may either beidentified or unidentified and individual (specific)
or collective (portfolio).

Individually Significant Loans
Exposures which are above a certain threshold
decided by the Bank’s management whichshould be assessed for objective evidence,measurement, and recognition of impairment on
an individual basis.

Intangible Asset
An intangible asset is an identifiable nonmonetary asset without physical substance.

Integrated Reporting
A methodology of reporting an organisation’s
strategy, governance, financial performance andprospects in relation to the creation of value
over the short, medium and long term in its
economic, social and environmental context.

This represents the difference between the
average interest rate earned and the averageinterest rate paid on funds.

Investment banking
A specific division of banking related tothe creation of capital for other companies.
Investment banks underwrite new debt andequity securities for all types of corporations.
Investment banks also provide guidance toissuers regarding the issue and placement ofstock.

Investment Property
A real estate property that has been purchasedwith the intention of earning a return on theinvestment (purchase), either through rent
(income), the future resale of the property, orboth.

KKey Management Personnel are those persons
having authority and responsibility for planning,
directing and controlling the activities of theentity, directly or indirectly, including any
Director (whether Executive or otherwise) ofthat entity and key employees who are holding
directorships in subsidiary companies and otherkey employees who meet the criteria mentioned
above.

L

The loan-to-value (LTV) ratio is a financial term
used by lenders to express the ratio of a loan
to the value of an asset purchased. The term iscommonly used to represent the ratio of thefirst mortgage lien as a percentage of the total
appraised value of real property.

Loss Given Default (LGD)
The estimated ratio (percentage) of the loss on an
exposure to the amount outstanding at default(EAD) upon default of counterparty.

M
Market Capitalisation

Assets that are held in cash or in a form that canbe converted to cash readily, such as deposits
with other banks, Bills of Exchange, Treasury Bills
and Bonds.

Net interest income expressed as a percentageof average interest earning assets.

Annual Report 2023

This refers to the possibility of loss arising fromchanges in the value of a financial instrument asa result of changes in market variables such as
interest rates, exchange rates, credit spreads andother asset prices.

Materiality
The relative significance of a transaction or an
event, the omission or misstatement of which
could influence the economic decisions of usersof Financial Statements.

N

A ratio showing the number of times interest
charges is covered by earnings before interestand tax.

National Development Bank PLC

Loan-to-Value Ratio

Market Risk

Key Management Personnel

Liquid Assets

400

The risk that an entity will encounter difficulty
in meeting obligations associated with financial
liabilities.

Number of ordinary shares in issue multiplied by
the market value of a share as at a date.

Interest CoverInterest Margin

Liquidity Risk

Net Assets Value per Ordinary Share
Shareholders’ funds excluding preference shares,
if any, divided by the number of ordinary sharesin issue.

Net Assets Value per Share
Shareholders’ funds divided by the number ofordinary shares in issue.
Glossary of Financial and Banking Terms

Net Interest Income (NII)

Operational Risk

Related Party Transactions (RTP)

The difference between the amounts a bankearns on assets such as loans and securities andthe amount it pays on liabilities such as deposits,refinance funds and inter-bank borrowings.

This refers to the risk of loss resulting frominadequate or failed internal processes, people
and systems or from external events.

RPT is a transfer of resources, services or
obligations between a reporting entity anda related party, regardless whether a price ischarged.

Net Interest Margins (NIM)

RemittancesP

Net interest income expressed as a percentageof average Total Assets.

ParentNet stable funding ratio (NSFR)

A parent is an entity that has one or more
subsidiaries.

The ratio of available stable funding to required
stable funding over a one year time horizon,
assuming a stressed scenario. Available stable
funding would include items such as equity
capital, preferred stock with a maturity of over
one year and liabilities with an assessed maturityof over one year. The Basel III rules require thisratio to be over 90% with effect from 01 January
2019. The NSFR is still subject to an observation
period and review to address any unintended
consequences.

Non-Controlling Interest/Minority Interest
Equity in a subsidiary not attributable, directly or
indirectly, to a Parent.

Non-Performing Loans (NPLs)
A loan or a receivable placed on cash basis(i.e. Interest income is only recognised whencash is received) because, in the opinionof management, there is reasonable doubt
regarding the collectability of principal orinterest.

Nostro Account
A bank account held in a foreign country by adomestic bank, denominated in the currencyof that country. Nostro accounts are used tofacilitate the settlement of foreign exchange
trade transactions.

NPL Ratio
Total non-performing loans and receivables(net of interest in suspense) divided by totalloans and receivables portfolio (net of interest in
suspense).

O
Open Credit Exposure Ratio
Total net non-performing loans and receivables
expressed as a percentage of shareholders’ fund.

Repurchase Agreement
Past DueA financial asset is past due when a counterparty
has failed to make a payment when contractuallydue.

Contract to sell and subsequently repurchasesecurities at a specified date and price.

Retained Earnings

Power

Reserves that are set aside for future distribution
and investments.

The power is the existing rights that give thecurrent ability to direct the relevant activities.

Return on Average Assets (ROA)
Profit after tax divided by the average assets.

Price Earnings Ratio (P/E Ratio)
Market price of a share divided by earnings per
share.

Return on Average Equity (ROE)

Probability of default (PD)Net profit for the year, less preference share
dividends, if any, expressed as a percentage of
average ordinary shareholders’ equity.

The probability that an obligor will default on an
obligation within a given period of time.

Revaluation Reserve

Projected Unit Credit Method (PUC)
An actuarial valuation method that sees eachperiod of service as giving rise to an additional
unit of benefit entitlement and measures each
unit separately to build up the final obligation.
(sometimes known as the accrued benefit
method pro-rated on service or as the benefit/
years of service method). Prudence Inclusion ofa degree of caution in the exercise of judgment
needed in making the estimates required underconditions of uncertainty, such that assets orincome are not overstated and liabilities or
expenses are not understated.

Prudence
Inclusion of a degree of caution in the exerciseof judgment needed in making the estimates
required under conditions of uncertainty, suchthat assets or income are not overstated andliabilities or expenses are not understated.

Part of the shareholders’ equity that arises fromchanges in the current value of property, plantand equipment.

Revenue Reserve
Reserves set aside for future distribution andinvestment.

Risk-Weighted Assets
The sum total of assets as per the Statement of
Financial Position and the credit equivalent ofassets that are not on the Statement of Financial
Position multiplied by the relevant risk weighting
factors.

Rights Issue
Issue of shares to the existing shareholders at anagreed price, generally lower than market price.

S
Segment ReportingR
Related Parties
Parties where one party has the ability to control
the other party or exercise significant influence
over the other party in making financial andoperating decisions, directly or indirectly.

Glossary of Financial and Banking Terms

A remittance is a transfer of money by a foreign
worker to an individual in his or her homecountry.

Segment reporting indicates the contribution
to the revenue derived from business segments
such as banking operations, leasing operations,stock broking and securities dealing, property
and insurance.

National Development Bank PLC

Annual Report 2023

401

Segmental Analysis

Total Capital

Analysis of financial information by segmentsof an entity specifically, the different industries
and the different geographical areas in which it
operates.

Capital base is summation of the core capital(Tier I) and the supplementary capital (Tier II).

Transaction Costs

Total of stated capital and revenue reserves.

Incremental costs that is directly attributable tothe acquisition, issue or disposal of a financial
asset or financial liability.

Significant influence

Transfer Pricing Arrangement

If an entity holds, directly or indirectly (e.g.
through subsidiaries), 20 percent or more of thevoting power of the investee, it is presumed thatthe entity has significant influence, unless it can
be clearly demonstrated otherwise.

Transfer pricing involves the terms and prices atwhich related parties sell (or should sell) goods
or services to each other. When the partiesare located in different taxing jurisdictions,
opportunities exist for the movement of income
to a lower-taxing jurisdiction. A transfer pricing
arrangement is developed to combat potential
losses of income tax revenue.

Shareholders’ Funds

Single Borrower Limit (SBL)
33% of the regulatory capital base.

Statutory Reserve FundU

A capital reserve created as per the provisions of
the Banking Act, No. 30 of 1988.

Unit Trust

Subsidiary

An undertaking formed to invest in securities
under the terms of a trust deed.

An entity, including an unincorporated entity
such as a partnership, which is controlled byanother entity (known as the Parent).

Useful Life

Substance Over Form
The consideration that the accounting treatment
and the presentation in Financial Statements oftransactions and events should be governedby their substance and financial reality and not
merely by legal form.

V
Value Added

Swaps
The simultaneous purchase of an amount of acurrency for spot settlement and the sale of thesame amount of the same currency for forward
settlement.

T
Tier I CapitalCore capital representing permanent
shareholders’ equity and reserves created orincreased by appropriations of retained earnings
or other surpluses.

Tier II Capital
Supplementary capital representing revaluation
reserves, general provisions and othercapital instruments, which combine certain
characteristics of equity and debt such as hybrid
capital instruments and subordinated term
debts.

402

Useful life is the period over which an asset is
expected to be available for use by an entity
or the number of production or similar units
expected to be obtained from the asset by anentity.

National Development Bank PLC

Value of wealth created by providing banking
and other related services less the cost ofproviding such services.

Value-at-risk (VaR)
A measure of the loss that could occur on risk
positions as a result of adverse movements inmarket risk factors (e.g. rates, prices, volatilities)
over a specified time horizon and to a given levelof confidence.

Vostro Account
A local currency account maintained by a local
bank for a foreign (correspondent) bank. For theforeign bank, it is a nostro account. The domesticbank acts as custodian or manages the accountof a foreign counterpart.

Yield-to-Maturity
The discount rate at which a security’s present
value of future cash flows will be equal to thesecurity’s current price.

Annual Report 2023

Glossary of Financial and Banking Terms

Notice of Meeting
Notice is hereby given that the Nineteenth (19) Annual General Meeting (AGM) of National Development Bank PLC (the Bank) will be held at the DHPL
Training Room, 3rd Floor, NDB – EDB Tower, No 42, Nawam Mawatha, Colombo 02 at 03.00 p.m. on Thursday, the Twenty Eighth (28) day of March, Two
Thousand and Twenty Four (2024) and the business to be brought before the meeting will be:1.

To lay before the shareholders for consideration, the Annual Report for the year ended 31 December 2023.

2.

To reappoint Ms. Shweta Pandey, in terms of Article 44 (2) of the Articles of Association of the Bank.

3.

To reappoint Mr. Hasitha Premaratne, in terms of Article 44 (2) of the Articles of Association of the Bank.

4.

To re-elect Mr. Sriyan Cooray, as a Director in terms of Article 42 of the Articles of Association of the Bank.

5.

To re-elect Mr. Sujeewa Mudalige, as a Director in terms of Article 42 of the Articles of Association of the Bank.

6.

To reappoint Messrs. Ernst & Young, Chartered Accountants, as Auditors of the Bank as set out in Section 154 of the Companies Act No. 7 of 2007 andSection 39 of the Banking Act No. 30 of 1988 (as amended) and to fix the fees and expenses of such Auditors.

7.

To determine the aggregate remuneration payable to Non-Executive Directors including the Chairman in terms of Article 58 of the Articles of
Association of the Bank and to authorise the Board of Directors to approve other remuneration and benefits to the Directors (including the
remuneration of the Executive Director/s) in terms of Section 216 of the Companies Act No. 7 of 2007.

8.

To authorise the Board of Directors to determine donations for the financial year 2024 (in accordance with the provisions of the Companies Donations
Act No. 26 of 1951) through which the corporate social activities of the Bank in 2024 will be carried out (similar to the activities carried out in 2023 asdetailed in the Annual Report).

By Order of the Board,

Ms. Shehani Ranasinghe
Company Secretary
20 February 2024
ColomboNotes:
1.

A shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy holder to attend and vote in his/her stead. Please read thereverse of the Form of Proxy for further details.

2.

Shareholders/proxy holders attending the meeting are requested to bring their National Identity Cards.

3.

Voting shall be by any one of the following methods as determined by the Chairman of the meeting unless a poll is demanded;a)voting by voiceb)voting by show of hands (every member who is present in person or is represented by a proxy or attorney or an authorised representative shallhave one (01) vote).

4.

A declaration by the Chairman of the meeting that a resolution is carried by the requisite majority or lost is conclusive evidence of that fact.

5.

At a meeting of shareholders, a poll may be demanded on a particular question as provided for in the Companies Act No. 7 of 2007. If a poll is taken,
votes must be counted according to the votes attached to the shares of each shareholder present and voting. In the case of an equality of votes,
whether on a show of hands or on a poll, the Chairman of the meeting shall be entitled to a second or casting vote.

National Development Bank PLC

Annual Report 2023

403

Corporate Information
NAME

Board Sub Committees

NDB Zephyr Partners Limited (Mauritius) - 60%

National Development Bank PLC

Nominations and Governance Committee

Related Party Transactions Review Committee

Ms. Dilshaad Rajabalee
Mr. Thomas Barry
Mr. Mukul Gulati
Mr. Arjun Fernando
Mr. Ananda Atukorala
Ms. Wendy Ramakrishnan

Strategic Issues Committee

NDB Zephyr Partners Lanka (Private) Limited - 60%

Credit Committee

Mr. Sarath Wikramanayake - Chairman
Mr. Dimantha Seneviratne
Mr. Thomas Barry
Mr. Mukul Gulati
Mr. Bernard Sinniah

Human Resources & Remuneration Committee

COMPANY REGISTRATION NUMBER

Integrated Risk Management Committee

PQ 27

Audit Committee

LEGAL FORM
Established under the National Development Bankof Sri Lanka Act No. 2 of 1979 and incorporated as acompany under the Companies Act No. 17 of 1982
and re-registered under the Companies Act No. 7
of 2007 and also licensed as a Licensed Commercial
Bank in terms of the Banking Act No. 30 of 1988 as
amended from time to time.
STOCK EXCHANGE LISTING
The shares, and the rated unsecured subordinatedredeemable debentures issued in December 2013,
March 2019, September 2020, November 2021 andDecember 2023 are listed on the Colombo Stock
Exchange.
HEAD OFFICE/REGISTERED OFFICE
Address – No. 40, Nawam Mawatha, Colombo 02
Tel: +94 11 2448888
Fax: +94 11 2305031
Swift Code: NDBSLKLXWeb page: www.ndbbank.com
E-mail: contact@ndbbank.com
Accounting Year End: 31 December
VAT Registration Number: 409000266-7000

Digital Transformation Committee
Discretionary and Capital Expenditure Committee
Please refer pages 139 to 155 for Board Sub
Committee Reports

Development Holdings (Private) Limited – 58.6%
BOARD OF DIRECTORS OF SUBSIDIARYCOMPANIES AS AT 31 DECEMBER 2023
NDB Capital Holdings Limited - 99.9%
Mr. Ashok Pathirage – Chairman
Mr. Dimantha Seneviratne
Mr. Sarath Wikramanayake
Mr. Arjun Fernando
Mr. Bernard Sinniah
Mr. Ananda Atukorala
Mr. Senaka Kakiriwaragodage
NDB Wealth Management Limited - 99.9%
Mr. Sarath Wikramanayake – Chairman
Mr. Dimantha Seneviratne
Mr. Bernard Sinniah
Mr. Senaka Kakiriwaragodage
Mr. Sanjaya Perera
NDB Investment Bank Limited - 99.9%

Credit Ratings: National long-term ratings: A-(lka)Basel ll compliant & Basel lll compliant subordinateddebentures ratings: BBB (lka)BOARD OF DIRECTORS AND BOARD SUBCOMMITTEES
Board of Directors
Mr. Sriyan Cooray - Chair, Board of Directors Independent

Mr. Sarath Wikramanayake – Chairman
Mr. Dimantha Seneviratne
Mr. Bernard Sinniah		Mr. Jehan Peruma
Mr. K V Vinoj
Mr. Senaka Kakiriwaragodage
Mr. Darshan Perera
NDB Securities (Private) Limited - 99.9%
Mr. Arjun Fernando – Chairman
Mr. Dimantha Seneviratne
Mr. Deepal Akuretiyagama
Mr. Ananda Atukorala
Mr. Bernard Sinniah
Mr. Senaka Kakiriwaragodage

Mr. Bernard Sinniah - Non-Independent
Mr. Sujeewa Mudalige - Independent
Mr. Kushan D’Alwis, PC - IndependentMs. (Fay) Piyachatr Chetnakarnkul - Non-Independent
Ms. Chandima Dilrukshi - Non-Independent
Ms. Kasturi Chellaraja - Independent
Ms. Shweta Pandey - Independent(Appointed w.e.f. 28 April 2023)
Mr. Hasitha Premaratne – Independent(Appointed w.e.f. 15 June 2023)
Mr. Kelum Edirisinghe - Chief Executive Officer - NonIndependent (Appointed w.e.f. 01 February 2024)

NDB Capital Limited (Bangladesh) - 84.18%
Mr. Sarath Wikramanayake – Chairman
Mr. Dimantha Seneviratne
Mr. Mohammed Al Maruf Khan
Mr. Hafiz Firoz Chowdhury
Mr. C M Alam
Mr. Darshan Perera
Mr. Bernard Sinniah
Mr. Kazi Farhan Zahir
Ms. Zakia Chowdhury

Mr. Dimantha Seneviratne - Chief Executive OfficerNon-Independent (Ceased to be a Director w.e.f. 31
January 2024)
Mr. Hiran Perera - Non-Independent(Resigned w.e.f. 14 February 2023)

404

National Development Bank PLC

Mr. Dimantha Seneviratne - Chairman
Ms. Thakshila Wijayaratne
Mr. S R P Indrakeerthi
Mr. Kusal Perera
Mr. Sanjaya Perera
Ms. Melody Wikramanayake
Dr. Kingsley Bernard
Mr. Deepal Akuretiyagama
OTHER INFORMATION
Company Secretary: Ms. Shehani Ranasinghe(Attorney-at-Law)
Compliance Officer: Mr. Chandima Kannangara
Auditors: Ernst & Young, Rotunda Towers, No. 109,
Galle Road, Colombo 03
Registrar to the Rated Unsecured SubordinatedRedeemable Debentures issued - S S P Corporate
Services (Pvt) Ltd, No. 101 Inner Flower Road,
Colombo 03
Trustees to the Rated Unsecured SubordinatedRedeemable Debentures(Issued in 2013, 2019, 2020 and 2021) - Bank of
Ceylon, Investment Banking Division No.1, BOC
Square, Bank of Ceylon Mawatha, Colombo 01(Issued in 2023) - People’s Bank , Treasury
Operations, Treasury Back Office, 13th
Floor, People’s Bank - Head Office, No.75, Sri
Chittampalam A. Gardiner Mawatha, Colombo 02
QUERIESOn the 2023 NDB Annual Report
Mr. Hasitha Athapattu
Vice President - Finance
National Development Bank PLC
No. 40, Nawam Mawatha, Colombo 02
Email: hasitha.athapattu@ndbbank.com
Tele: + 94 11 2448448 (Extn: 35301)
ON INVESTOR RELATIONS
Company Secretarial Department
Ms. Shehani Ranasinghe
Company Secretary/ Vice President
National Development Bank PLC
No. 40, Nawam Mawatha, Colombo 02
Email: shehani.ranasinghe@ndbbank.com
Tele: + 94 11 2448448 (Extn: 35013)
Investor Relations TeamMr. Hasitha Athapattu
Vice President – Finance(See above)

Annual Report 2023

Form of Proxy
I/We ...............................................................................................................................................................................................................................................................................................................................................
(holder/s of NIC/s..................................................................................................................................................................) of ..........................................................................................................................................
...........................................................................................................................................................................................................................................................................................................................................................
............................................................................................................................. being a shareholder / shareholders of National Development Bank PLC (the Bank) hereby appoint;1.

..................................................................................................................................................................................................................................................................................................................................................
......................................................................................................................................................... (holder of NIC No. .............................................................................................................................................)of .................................................................................................................................................................................................................................................................................................... or failing him/her

2.

Mr. Sriyan Cooray (Chair, Board of Directors) of Colombo or failing him,
Mr. Bernard Sinniah of Colombo or failing him,
Mr. Sujeewa Mudalige of Colombo or failing him,
Mr. Kushan D’Alwis, PC of Colombo or failing him,Ms. (Fay) Piyachatr Chetnakarnkul of Colombo or failing her,Ms. Chandima Dilrukshi of Colombo or failing her,
Ms. Kasturi Chellaraja of Colombo or failing her,Ms. Shweta Pandey of Colombo or failing her,Mr. Hasitha Premaratne of Colombo or failing him,
Mr. Kelum Edirisinghe (Director/ CEO of the Bank) of Colombo

as my/our proxy to represent me/us and to vote for me/us and on my/our behalf at the Nineteenth (19) Annual General Meeting of the Bank to be held on
Thursday, the Twenty Eighth(28) day of March, 2024 and at any adjournment thereof and at every poll which may be taken in consequence thereof. I/We
the undersigned hereby authorise my/our proxy to vote on my/our behalf in accordance with the preferences indicated below:
For
1.

To reappoint Ms. Shweta Pandey in terms of Article 44 (2) of the Articles of Association of the Bank.

2.

To reappoint Mr. Hasitha Premaratne in terms of Article 44 (2) of the Articles of Association of the Bank.

3.

To re-elect Mr. Sriyan Cooray, as a Director in terms of Article 42 of the Articles of Association of the Bank.

4.

To re-elect Mr. Sujeewa Mudalige, as a Director in terms of Article 42 of the Articles of Association of the Bank.

5.

To reappoint Messrs. Ernst & Young, Chartered Accountants, as Auditors of the Bank as set out in Section 154 of theCompanies Act No. 7 of 2007 and Section 39 of the Banking Act No. 30 of 1988 (as amended) and to fix the fees andexpenses of such Auditors.

Against6. To determine the aggregate remuneration payable to Non-Executive Directors including the Chairman in termsof Article 58 of the Articles of Association of the Bank and to authorise the Board of Directors to approve other
remuneration and benefits to the Directors (including the remuneration of the Executive Director/s) in terms of Section
216 of the Companies Act No. 7 of 2007.
7.

To authorise the Board of Directors to determine donations for the financial year 2024 (in accordance with the provisionsof the Companies Donations Act No. 26 of 1951) through which the corporate social activities of the Bank in 2024 will be
carried out (similar to the activities carried out in 2023 as detailed in the Annual Report).

As witness I/We have set my/our hand/s hereunto this ............................................................................................................ day of ......................................................................................................
....................................................................................................................... Two Thousand and Twenty Four (2024).
................................................................................................................
Shareholder / Shareholders Signature/sNational Development Bank PLC

Annual Report 2023

405

Instructions for completion of the Form of Proxy1.

In order to appoint a proxy holder, kindly complete the Form of Proxy. The full name and theregistered address of the shareholder appointing the proxy should be legibly entered in the Formof Proxy and should be signed and dated by the shareholder. The duly completed Form of Proxymust be deposited at the Registered Office of the Bank, at No. 40, Nawam Mawatha, Colombo 02 or
via email to the Company Secretary (companysecretary@ndbbank.com) or by facsimile
No. +94 1123 41050, not less than twenty four (24) hours before the time appointed for the meeting.
Shareholders should duly complete the Form of Proxy clearly setting out their preference of vote in
the Form of Proxy.
Please indicate an “X” in the cage provided on how your proxy should vote for each resolution. If no
indication is given, or if there is, in the view of the proxy holder, any doubt (by reason of the mannerin which the instructions contained in the proxy have been completed) as to the way in which theproxy holder should vote, the proxy holder in his/her discretion may vote as he/she thinks fit.

406

2.

If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney, if executed prior to
25 October 2022, should be duly registered at the Registrar General’s office (RGO) and if executed
after 25 October 2022, should be duly executed and attested in terms of the Power of Attorney(Amendment) Act No 28 of 2022 and registered at the RGO. A certified copy thereof duly certified by
the Registrar General, should also accompany the completed Form of Proxy.

3.

If you wish to appoint a person other than the Chair, Board of Directors or a Director of the Bank as
your proxy, please insert the relevant information in the Form of Proxy4.

The proxy holder appointed need not be a shareholder of the Bank.

5.

In case of a corporate member, the proxy must be executed under its Common Seal (if applicable) orin such other manner prescribed by its Articles of Association or other constitutional documents.

6.

The first joint holder shall have the power to sign the Form of Proxy without the concurrence of theother joint holder/s.

National Development Bank PLC

Annual Report 2023

Form of Proxy

Designed & produced byPrinted by Softwave Printing & Packaging (Pvt) Ltd
Photography by Dimitri Cruz