State-owned People's Bank of Sri Lanka has been blacklisted by the Economic and Commercial Office of the Chinese Embassy in Colombo.
The bank has been blacklisted for failing to make payments according to the Letter of Credit (LC) opened between two parties in relation to the recent purchase of organic fertiliser from a Chinese company.
In its statement, the embassy said that recently, People's Bank of Sri Lanka has witnessed a "vicious event of L/C default." This has caused huge losses to Chinese enterprises in international trade with Sri Lanka, it further said, adding that this bank now has been blacklisted by the Economic and Commercial Office of Chinese Embassy in Sri Lanka.
"The Office solemnly reminds all Chinese enterprises to strengthen risk control and avoid accepting L/C issued by People's Bank of Sri Lanka in international trade with Sri Lanka," the embassy stressed.
Last week, the State-owned Ceylon Fertiliser Company (CFC) obtained an enjoining order from the Commercial High Court against Qingdao Biotech Group Co. Ltd., its local agent and the People’s Bank, preventing the bank from making any payment under a Letter of Credit (LC) opened in favour of the Chinese company.
Earlier, the Ministry of Agriculture stated that it will not accept the shipment of organic fertiliser sent by Qingdao Biotech after tests conducted by the National Plant Quarantine Service (NPQS) on samples of the shipment confirmed the presence of harmful bateria. However, both the company and the Chinese Embassy in Colombo disputed these findings, calling the NPQS's conclusions "hasty" and "without scientific basis."
The enjoining order was later obtained to prevent the People's Bank from releasing the funds in terms of the LC after it emerged that the vessel carrying the shipment was still enroute to Sri Lanka and that Qingdao had requested 75 percent of payment to be made in terms of the agreement.
Meanwhile, in a response to the statement by the Chinese Embassy blacklisting it, People's Bank stated that the payment was halted due to an interim injunction issued by courts and action on payments will be taken depending on future court decisions.
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