Troubled Swarnamahal Finance gets permission to resume business for three months

Troubled Swarnamahal Financial Services PLC is to allowed the resumption of business by the Central Bank for a limited purpose on a ‘conditional basis’ -- mainly to repay its depositors.

On Tuesday, the Monetary Board of the Central Bank (Monetary Board) made an order permitting Swarnamahal Financial Services PLC (SFSP) to resume business for a limited purpose and limited time.

This will be carried out under the supervision of the Panel of Management appointed by the Monetary Board subject to several strict conditions, in the public interest and in the interests of the depositors of the company, the bank said in a media release.

This operation of the finance company is limited for period of three months from 13th January to 12th April in terms of Section 31(5)(a) of Finance Business Act, No. 42 of 2011 (FBA), only for the purpose of repayment up to 50 per cent of the remaining deposits of the company (repayment plan). 

Due to the various irregularities that had taken place and the inability of the Board of Directors and the Senior Management of SFSP to address the resultant issues, the Monetary Board, on January 2, 2018, issued Directions to the directors of the Company and appointed a Panel of Management to oversee the affairs of the company.

Even though the Monetary Board directed the Board of Directors of SFSP to bring suitable investor(s) to revive the company, no viable investment proposal was available and the financial condition of the company continued to deteriorate.

In the meantime, 30 per cent of SFSP deposits was repaid in 2018 and 2019. Having considered the continuously deteriorating financial condition and non-availability of a viable revival plan, the Monetary Board decided to suspend the business of SFSP in terms of Section 31(1) of FBA, with effect from 13th July 2020.

During the period of suspension, payment of compensation for the insured depositors under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) commenced through the island-wide branches of the People’s Bank.

By end 2020, a sum of Rs. 834.1 million has been paid for 25 per cent of the insured depositors out of the total of 9,660, up to a maximum of Rs. 600,000 per insured depositor. Such amount covers 84.9 per cent of the Rs. 982.9 million of eligible compensation under SLDILSS.

SLDILSS will continue to pay compensation payment to the eligible depositors of SFSP, who have not received their compensation payment so far, up to a maximum of Rs. 600,000 per depositor.