Depositors wary of Central Bank’s payment plan for 4 failed fincos.
View(s):By Quintus Perera
Depositors representing three of the four failed finance companies that are being bailed out by the Central Bank (CB) cautiously welcomed this week’s move but sought a ‘confirmation in writing’ on the decision. Earlier this week, the CB said it has decided to repay depositors of the Standard Credit Finance Ltd (SCFL), City Finance Corporation Ltd (CFCL), Central Investment and Finance PLC (CIFL) and Entrust Securities PLC on the basis of an approval by the Monetary Board on a proposal made by the Department of Non-Bank Financial Institutions. Depositors numbering about 11,878 at these four companies would receive a total of Rs. 16.5 billion, a CB media release said. K.W. Gunawardena, President, Central Investment and Finance Ltd Depositors Association (CIFLDA), while being appreciative of the repayment plan said he has written to the CB seeking an urgent meeting to discuss the matter.
“The Depositors Association has a query on your proposal since we have bad experiences on your earlier proposal and granting approval which have not materialized up to date. As a result of that over 60 members have died and 60 per cent of senior citizen members of our association are suffering from non-communicable diseases and don’t have money for medication,” he wrote in the letter. Lakshman Moraes, representing the SCFL depositors, said they have also written to the CB seeking clarification on the repayment plan. The SCFL has discussed many previous payment plans with the CB earlier but nothing worked. In the meantime, CB officials said steps are being taken to wind up the four insolvent finance firms and start legal action against the directors/senior management of three of the companies.
A top official told the Business Times that at the last Monetary Board meeting all these decisions were arrived at, in a bid to ‘make something happen.’ ”The CB decided that it was time to stop dragging this issue as enough time was spent on it,” he said. When queried as to what had happened to the investor proposals that were being reviewed by the CB, he said that the intended investors proposals also wanted high returns which at this point in time couldn’t be accommodated. The CB official said that this unit will seize the assets of the three firms, prosecute their management and also get the CID’s assistance. C. Caldera, President Independent Association of Depositors, Finance and Guarantee Property Developers and Real Estate Co Ltd (F&G, PDL and RECL- three companies), said they were disappointed that the CB has thought fit to rescue only four companies when many “like ours” have depositors waiting for a solution.
The plight of depositors, he said has now become a serious public issue and when the regulator considers such issues it has to be just and reasonable. He urged that if the CB is genuine in helping battered depositors, the F&G Real Estate depositors and others too should also be taken into consideration. Ignatius Camillus, President, UB Finance Depositors Association (UBDA) (earlier Finance and Guarantee (F&G)), expressed the same disappointment that their members were not considered and urged that they too be brought under the repayment umbrella. Sonali Dunuwila, Secretary, City Finance Corporation Ltd (CFCL) whose depositors are to be repaid under the new plan, said that they have doubts about the CB assurance. She said that CB is actually fooling the depositors of CFCL.