Financial Times

Central Bank public awareness campaign on finance companies a success
By Duruthu Edirimuni
The Central Bank's public awareness campaign on institutions that are authorised to accept deposits has been successful with a marked reduction in complaints about unregistered financial institutions.

"We relied heavily on the public awareness campaigns and it has been successful, as we are not getting any complaints and inquiries as before on finance companies that are not authorised to accept deposits," L.K. Gunatilake, Director, Supervision of Non Bank Financial Institutions, said.

There are 27 finance companies registered with the Central Bank. Gunatilake said that it is very difficult to place a number on the institutions mobilizing deposits without authority, as sometimes they operate without being noticed.

The public from time to time bring to the notice of the Central Bank the names of institutions which raise funds from the public directly as deposits or in a manner akin to deposits and inquire as to whether such institutions are authorized to accept deposits.

In response to inquiries made, the Central Bank on two occasions published names and registered offices of 58 institutions stating that those institutions were neither licensed under the Banking Act nor registered under the Finance Companies Act for the purpose of accepting deposits from the public.

In addition, the names of institutions which are authorized to accept deposits were published on several occasions for the information of the public. Police stations in a number of areas also have done a useful service by instituting legal action against directors of some unauthorized deposit taking institutions who defrauded the monies collected from the public.

Officers of the Central Bank have assisted the police by providing necessary information and giving evidence in courts. Meanwhile, despite the interest rates going down, there hasn't been a strong shift from depositors from banks to finance companies. "We have imposed a ceiling on deposit interest rates on finance companies which stops them deviating from market trends," Gunatilake said, explaining that the deposit interest rates are related to the weighted average treasury bill yield.

She emphasized that deposit taking institutions have to be well monitored and prompt action taken to safeguard the depositors as well as to avoid any systemic consequences.

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