BoC lending to SOEs only cashflow-based
View(s):For months now, the Bank of Ceylon (BoC) lending to State Owned Enterprises (SOEs) have been solely based on their cash flows, top officials said.
These enterprises have borrowed repeatedly and created interconnected risks amongst their balance sheets, the Treasury, and government sector banks like BoC.
BoC has given Rs. 12.9 billion in loans to national carrier Sri Lankan Airlines for the last 10 years most of which have been taken for working capital, to cancel leases of Airbus A350 aircraft and to pay Ceylon Petroleum Corporation unpaid dues – which have yet to be repaid. Most loans to SriLankan Airlines are without collateral.
The official said that state banks such as BoC are at the mercy of the Treasury and politically driven motives for funding such SOEs. “With the government’s SOEs restructuring drive, we were requested by the management to lend to SOEs based on their cashflows,” an official said.
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