Compensation package for CIFL depositors; CB vows strong action against fraudsters
View(s):Sri Lanka’s Central Bank (CB) this week announced a compensation package for depositors of the failed Central Investments and Finance PLC (CIFL) while vowing strong action against two other companies that have defrauded depositors.
One month after cancelling the CIFL licence after efforts to find new, credible investors proved futile, the banking regulator said the level of compensation has been doubled beyond accepted limits.
“As per the present regulations, the maximum amount that can be paid under the Sri Lanka Deposit Insurance and Liquidity Support Scheme is Rs. 300,000. However, the (CB) Monetary Board having considered the plight of the small depositors (of CIFL) has decided to double the compensation from Rs. 300,000 to Rs. 600,000,” the statement said.
The total deposit liability of the company is about Rs. 3.5 billion and the number of depositors is 4,092. Of those, 2,501 depositors are with deposits less than Rs. 600,000. Accordingly, in the case of CIFL, 61 per cent of the depositors will be fully settled with their deposits, it was stated.
Responding to the latest development, K.W. Gunawardene, President, (CIFL) Depositors’ Association said the CB releases media statements making various promises and assurances from time to time, but none of them can be relied upon as none has yet been fulfilled. “From the very beginning also CB has made so many assurances and none has ever materialised,” he said.
With regard to two other failed companies, the Standard Credit Finance Ltd and City Finance Corporation Ltd, the CB statement said the Monetary Board has not issued notices of cancellation as there are legal issues to be resolved with regard to those two companies.
However the banking regulator said “every effort will be made to take legal actions against those who are responsible for the frauds and misuse of depositors’ funds of those companies”.
The CIFL licence was cancelled on November 6 after years of trying to find investors and resurrect the troubled firm. The statement said the CIFL was confronted with a severe liquidity crisis since 2013 due to mismanagement and other irregular transactions carried out by the management of that company. It has also been observed that the directors and senior management of these companies have fraudulently inflated the value of the assets and the examination of the documents relating to such assets has revealed that those are either fictitious or entangled with encumbrances, the CB said.
Noting that the CB has had discussions with local and foreign institutions/ individuals who expressed their interest in investing and reviving the company, the statement pointed out that any revival plan needs at least Rs. 3 billion investments and at least 30-40 per cent of the deposits should be repaid immediately as they had not been paid interest or the capital of their deposits for the last 4-year period. “At the same time, the investors should be credible and the funds should be transferred to Sri Lanka through legal channels, in the case of foreign investors,” it said, adding that in this context no credible investor could be found.
(Quintus)