New directions and rules for finance companies

The Monetary Board of the Central Bank (CB) of Sri Lanka, in order to strengthen prudential requirements for registered finance companies, has issued five new Directions and one Rule to replace the previous ones.

The CB said in a press advertisement that the new Directions and Rule will give greater flexibility for registered finance companies in their operations wherever possible. The new Directions for all registered finance companies pertain to provisions for bad and doubtful debts, single borrower limit, lending, business transactions with directors and their relatives and investments. For example, the previous Direction on investments specified that registered finance companies were not allowed to invest over 40% of issued share capital of a company. The new Direction 'facilitates the formation of subsidiaries or the acquisition of shares of a company exceeding 50% of the issued ordinary share capital of a company, with the approval of the Monetary Board.'

The new rule was issued on advertisements which detail requirements for advertisements published, broadcast or transmitted through the print and electronic media and through hoardings, billboards and banners. With the new Rule, certain additional information such as credit rating is now required to be included in advertisements published in print and electronic media while eliminating the need for other details. Further details regarding the new Directions and Rule for finance companies is available on the Central Bank website at www.centralbanklanka.org.