Financial Times

People's Bank succeeds in recoveries

The People's Bank has made a breakthrough in its efforts to recover the huge amount of bad loans taken by one of its biggest defaulters, a well-known businessman with whom the bank had been involved in litigation, its chairman Lal Nanayakkara said.

"For a long time we were unable to get his consent on the outstanding amount," he said, declining to reveal the identify of the businessman. It has been reported in the past that Yasasiri Kasturiarachchi, owner of Yashoda Enterprises, is the bank's biggest debtor.

"I'm now happy to say our internal audit department, working with the debtor's auditors, have jointly agreed on the balance. It is a positive step. It is most important that he must acknowledge liability. Now the bank intends rescheduling his loans and recovering them," Nanayakkara said

People's Bank was also considering all options in its efforts to find the cash needed for it to survive, he said.

"Initially we had a negative net worth of Rs 6 billion. We also needed another Rs 6 billion to meet the Central Bank's capital adequacy ratio. In 2002 we made a Rs 1 billion profit. We also had a surplus on revaluation of fixed assets which came to Rs 2 billion. Of the negative net worth, half has been covered. The balance half needs to be capitalized. The government is not giving funds so we are considering all options."

The bank had also managed to make headway in recovering other bad loans with a special recovery drive islandwide, he said.

Kelly's removal linked to privatization?

The sudden removal of People's Bank chief executive officer and general manager Derek Kelly is seen as being linked to government concerns about opposition to its privatization efforts, union sources said. Kelly was eased out of his position because of pressure on the government to go easy on the privatization of state banks, which is being opposed by opposition parties and labour unions, which are mobilizing against further privatization. Lending agencies have been pushing for the privatization of state banks but so far the government has said that it would only privatize their management. People's Bank chairman Lal Nanayakkara denied Kelly's position was changed owing to pressure from the government in order to deflect criticism about privatization plans.

Kelly has been placed in charge of restructuring and strategic development and was replaced by Asoka de Silva as general manager (previously additional general manager) who will act "in close liaison with Kelly", Nanayakkara said adding that the change came because Kelly's contract had ended on February 15 and he had been given a new contract on new terms.

"We have to think in terms of a permanent arrangement, especially for the higher management positions," he said, adding that local staff will eventually take charge from Kelly in a phased manner.

Ministry unable to take action

The Ministry of Mass Communications has said that it will not be able to take action about the tender awarded by Mobitel to Ericsson despite allegations of improper tender procedures.

Ministry secretary Kumar Abeysinghe said the tender had been floated by the company and that they would have followed their own tender procedures in coming to a decision.

Even though Seimens alleged that the government could lose up to $10 million, since a representative of the ministry was not involved in the tender board they would not be able to comment or take action with regard to the allegations, he said.

Finance Minister K.N. Choksy was not available for comment though several attempts were made to contact him.

Seimens, the German electronics and electrical engineering company, has alleged improper dealings on the part of Sri Lanka Telecom and its Mobitel subsidiary after losing a multi-million dollar tender to Ericsson, which had ranked second to them in the evaluation process.

Mobitel chairman Lalith de Silva denied the allegations on the grounds that they had followed the best practices of evaluation and that all vendors were given a fair opportunity.

The vendors were put through a process of technical, commercial and credit evaluation involving internal as well as external consultants, he added.
(RC)

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