National Savings Bank (NSB working director Sumanadasa Abeygunawardena, better known as an astrologer, resigned on Friday amidst pressure from trade unions and the public to take action against those involved in the controversial share deal, officials said.
No reasons were given for his resignation which was handed over to Finance Ministry Secretary P.B. Jayasundara. Mr. Abeygunawardena is widely believed to be the President's astrologer.
Meanwhile the Finance Ministry is yet to receive a full report that was called for from the crisis-hit National Savings Bank (NSB) to ascertain the reasons that led to the purchase of the controversial 13% stock market stake of The Finance Co (TFC), the officials said.
They said NSB Chairman Pradeepa Kariyawasam, under the heaviest fire over this questionable deal, has also failed to respond to queries by a special ministry committee probing the whole affair.
Mr. Kariyawasam is defiantly continuing to resist trade unions’ demand for his resignation over his role, justifying the murky Rs. 390 million deal which drew condemnation from all quarters.
The NSB purchased shares of the loss-making company at 65% higher than the market value. Unions at the NSB were bracing for more protests next week, calling out unions from all state banks to join the protest which will continue until Mr. Kariyawasam steps down.In a face-saving and damage-control option, the NSB on Friday sold back the near eight million shares to the original sellers at the same average of Rs 50 a share in a reverse transaction guided by the Securities and Exchange Commission.
The Finance Ministry has asked the bank’s Sub Committee on Corporate Lending and Equity Investment appointed by its directors to validate the strategic decision to buy this stock. Mr. Kariyawasam has told unions that the purchase decision was based on a larger plan to eventually take control of the TFC and use it as an arm for finance, leasing and real estate among other activities to circumvent the NSB Act which doesn’t permit such activities.
The officials said the Ministry would convey its findings to the President who is also the Finance Minister and he would decide on what action to take against persons responsible and accountable for the deal which tarnished the credibility of the 40-year-old bank.
The Ministry is also assessing whether the directors, including the chairman, conform to the ‘Fit & Proper’ Guidelines expected of them in their official positions. The officials said the ministry had sought an explanation from the NSB as to whether its analysis reports of 2011 and 2012 on TFC had made any references to financial viability, long and short term sustainability and solvency, present financial status, and the ability to meet all present and past liabilities.Under current rules, the NSB cannot purchase even a block of land to set up a branch without following proper procedures. It can invest 60% of its deposits in government securities while its stock market investment portfolio is marginal.
Veteran bankers and NSB staff agree on the need for reforms at the NSB to ensure it can fairly compete with other banks in investment decisions as it is sitting on a pot of cash but restricted in investing in instruments that provide a better return. “We are following 40-year market practices, having a huge cash pile but getting low returns due to the restrictions placed in the Act. Thus our return on investments is much lower than other banks placing us at a huge disadvantage. Such changes would also help depositors to earn a better return,” one staffer said stressing the need for urgent reforms in the NSB law.
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