20 out of 42 licensed finance companies face liquidity issues*** 

Out of the 42 licensed financial companies in Sri Lanka, 20 are presently facing liquidity issues, with majority of it at a high level of distress with high percentage of non-performing loans, the Central Bank (CB) revealed on Thursday.

CB Deputy Governor H. A. Karunaratne told a media conference on the Monetary Policy Review in Colombo, that the management of several licence finance companies made a request from the CB to grant them a moratorium to repay their bank borrowings as they cannot meet the capital adequacy ratio.
These finance companies came under pressure as a result of asset quality pressures stemming from a challenging operating environment and declining profitability due to higher funding and credit costs.
The non-banking financial sector has been affected due to a slowdown in the vehicle financing segment following the increase in import tariffs, imposition of lower allowable loan-to-value ratios coupled with a high interest rate environment.
These companies should find investors to make capital infusion as soon as possible and it should maintain strict financial discipline to avoid liquidation, he added.
Answering a question raised by a journalist, Mr. Karunaratne said that the CB has no option other than cancelling the license issued to The Finance Company PLC (TFC) as it has failed to find a suitable investor to infuse capital amounting to several billions of rupees to resurrect the company.  
The repayments to the 135,000 small depositors out of the total number of 145,000 depositors with a deposit of Rs.600.000 or less could be settled under the Sri Lanka Deposit Insurance and liquidity support Scheme, he added. (Bandula)