CB’s NBFIs undergo restructuring process
The Central Bank (CB) facing criticism for regulatory and inspection gaps that have been blamed partially for the collapse of several finance companies is being directed to overhaul its regulatory and supervision apparatus for the Non Bank Financial sector.
The authorities have taken a decision to restructure the CB’s Department of Supervision of Non-Bank Financial Institutions (NBFI) and formulate a new institutional structure to regulate finance companies, the Information Department disclosed.
Far reaching changes will be made in the administration, organisation and regulation structure overhauling regulatory and supervision apparatus of the CB’s Department of Supervision of NBFIs.
The recent recommendations made by the Presidential Commission appointed by the President to investigate inspect and report the alleged wrongdoings, irregularities and malpractices of the Edirisinghe Trust Investments Ltd have prompted the government to take this action, it was stated.
The Commission has pointed out multiple offenses that were committed in violation under the Company Law, the Financial Cooperation Act, the Money Laundering Act, the Financial Information Reporting Act, the Legal Framework for the transfer of lands to foreigners and the Penal Code of Sri Lanka.
Further, the Commission had recommended to completely restructure the Department of Supervision of Non-Bank Financial Institutions. Retired Supreme Court Judge K.T. Chitrasiri chaired the three-member committee, official sources revealed.
This report will be forwarded to the Attorney General to take immediate legal action to execute the recommendations of the Commission on alleged finance and property irregularities of Edirisinghe Trust Investment Ltd.
The Ministry of Finance has directed the CB to completely reorganise the Non-Bank Financial Institutions Supervision Department and eliminate irregularities and alleged corrupt practices that prevailed in the past.
20 out of the 42 licensed finance companies in Sri Lanka are presently facing liquidity issues, with some of it at a high level of distress with high percentage of Non Performing Loans, a senior CB official disclosed to media some time back.
NBFIs in Sri Lanka processed Rs. 1.3 trillion in assets as of 2019, and served an estimated seven million customers.
Of these persons more than 60 per cent were borrowers, while the remainder was depositors numbering around three million with Rs. 758 billion in deposits.