CB to introduce “traffic lights” warning for finance companies   

 
Sri Lanka’s overcrowded finance company sector with 50 licensed non-bank finance institutions (NBFI) are to be strictly monitored by the Central Bank by strengthening the existing regulatory frame work, Central Bank (CB) Governor Dr. Indrajit Coomaraswamy told a media conference on the monetary policy review in Colombo on Thursday.
 
He noted that some of these NBFIs have to brace for tough times as a result of low capitalisation levels amid a challenging operating environment and unfavourable weather conditions and declining profitability due to higher funding and credit costs.
 
The CB will seek technical assistance to handle ailing finance companies, he said adding that a traffic light system will be introduced to issue prior warnings before the building up of pressure on capitalisation, he disclosed.

Dr. Coomaraswamy pointed out that they encourage shareholder-driven consolidation for small NBFIs and collapsed finance companies should be liquidated to repay the money of depositors.

Deputy Governor. C.J.P Siriwardane revealed that the CB issued a directive requiring all licensed finance companies to increase their minimum core capital levels to Rs.2.5 billion by end-2020 in stages from the current Rs.400 million, with the first target of Rs. 1 billion to be reached by next year.
 
He said that this will spur small companies to improve their capital buffers and may reignite industry consolidation.
 
Answering a question raised by a journalist on the entry of PayPal, Dr. Coomaraswamy said that “the Central Bank has no objections relating to the entry of PayPal in Sri Lanka. But they are not interested in carrying out their business in the country because our market is too small for them”. “We are not blocking their entry,” he added. (Bandula)