Financial Times

Pramuka Bank operations resume with restrictions
The Central Bank (CB) last week allowed the Pramuka Savings and Development Bank (PSDB) to resume restricted operations for another six months under CB supervision till July 22 providing more time for a consortium led by the Asia Capital and the Richard Peiris Group to restructure a proposal to revive the failed bank.

A statement issued by the Central Bank said the decision of the Monetary Board to allow PSDB to resume business with effect from January 22 would be limited to some activities.

Among the conditions specified, it states that Pramuka should confine its business operations initially to the recovery of its loans and advances for six months until further notice from the regulator and that during this period PSDB is not allowed to engage in businesses such as raising funds through deposits or dispose assets.

A Central Bank official explained that Pramuka, under continuing Central Bank supervision, would be allowed to recover loans and advances with immediate effect compared to restricted collections in the past year. The statement said the Central Bank or the government will not infuse any funds for the resumption of the PSDB and that by July 22 if the investors' proposal cannot be implemented, the Monetary Board will review the matter with a view to suspending the bank.

The proposal put forward by the consortium has pledged to infuse Rs. 600 million, and to convert Rs. 1.2 billion of depositors' funds to non-voting equity. Under the bid offer, it is proposed to rename PSDB as 'Sathosa Bank' and set up a broad branch network using Sathosa's retail outlets while tapping the small and medium markets.

The Central Bank suspended Pramuka in late 2001 after its liabilities rose. K. Vignarajah, chairman of the Pramuka Bank Restructuring Committee - representing depositors - welcomed the Monetary Board decision of "our persistent and firm stance from the very start, that Pramuka Bank should be re opened conditionally and that liquidation was not the answer."

He said this came after much time was wasted due to the unfortunate misinterpretation, misdirection, and delays by the Director Bank Supervision (DBS), and the secretariat which had caused further erosion of the depositors and stakeholders net assets.

"This action we know has achieved results with the Pramuka Bank, and we are grateful to the monumental faith, trust, confidence and finally the discipline of the earlier demoralised and devastated depositors and stakeholders."

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