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COPE hits out at Central Bank’s management
By Chandani Kirinde
In its report submitted to Parliament on Wednesday the Parliamentary Committee on Public Enterprises (COPE) had expressed serious concern over poor management of finances by the Central Bank.

Some of the shortcomings highlighted include the granting loans from the Bank, amounting to Rs. 2,723 million, to six private finance companies, to overcome their liquidity problems.

The outstanding loan balances and accrued interest since 1988 owed by them amount to Rs.2,551 m and Rs. 4,540m at the end of 2005. However this proved to be a futile exercise as the finance companies concerned had become insolvent.

The report also noted the decline in remittances of export earnings to the country as the Bank did not enforce or monitor the remittances of such export proceeds with resultant loss of foreign exchange to the country.

The Bank had also paid Rs. 626 million to the contractor on the "extension building and the rehabilitation building projects" due to the delay-taking place on the part of the bank in the finalisation of the engineer's drawings.
In the meantime the contractor had already made a claim for Rs. 400 million as the Bank had retained Rs. 90 million as liquidated damages.

The report also noted that even though the Finance Companies Act No 78 of 1998 prohibits companies from engaging in financial business without obtaining a licence from the Central Bank, there are about 30 such companies operating in Sri Lanka by violating this legal provision.

The report has observed among others that lack of proper supervision over financial operations resulted in the fraud and mismanagement in the Pramuka Bank and failure to recover, to date, large sums of money paid by way of compensation by the Bank to the deposit holders on account of finance companies, despite the lapse of several years.

The report has recommended that immediate steps be taken to expedite recovery of compensation paid on account of failed finance companies, carry out investigations into the non-repatriation of export proceeds to Sri Lanka and take corrective action to avoid drain of foreign resources.

The report also noted that the Bank did not have an updated corporate plan and failed to make available the completed annual budget report for the year 2004. The report was submitted to Parliament by the COPE Chairman Minister Rohitha Bogollagama.

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