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Bank gave Rs. 1 b in political loans; nothing recovered
A state-owned bank allegedly disbursed loans amounting to more than Rs. 1 billion due to political influence without proper collateral and had failed to recover the funds, a probe by the Financial Crimes Investigation Division (FCID) has revealed.
The investigations were carried out on the Lankaputhra Development Bank Limited, a licensed specialised bank fully owned by the Government. This was done on a complaint by the Finance Ministry.
The investigations revealed that the bank had given an interest free loan of Rs 581 million to a leading garment exporter who had failed to pay back the loan. The company had retained 23 per cent of its share as guarantee. As the bank lacked funds to release the loan, the funds were released through the Treasury to the bank and then to the exporter under the influence of a former Treasury official, the FCID found.
In another case, Rs. 75 million had been disbursed to a fisheries organisation in Trincomalee at an interest rate of 14 per cent in 2007. The money had not been paid back and now the capital and interest have accumulated to Rs. 136 million.
In another case, the bank had released a loan of Rs. 3 million at an interest rate of 10 per cent after keeping 42 perch land owned by a Rajamaha Viharaya as security, though temple land cannot be sold or mortgaged.
The loan and interest have now accumulated to Rs 4. 6 million and remain unpaid. Of the 14 cases, the FCID investigated it was revealed that Rs 1.4 billion was due as capital and interest. More transactions are to be investigated. A senior FCID detective said the preliminary findings regarding the bank had been reported to the Magistrate’s courts in Gangodawila.
He said two former senior officials were to be questioned. A separate investigation regarding these transactions is being carried out by the Finance Ministry.