CB suspends business of two more failed finance companies

Sri Lankan authorities have decided to suspend the business of ETI Finance Ltd (ETIF) and Swarnamahal Financial Services PLC (SFSP), two finance companies which have struggled to meet their liabilities, with effect from Monday July 13.

The decision was made by the Monetary Board (MB) of the Central Bank of Sri Lanka (CB) at its meeting held on July 10, acting in terms of Section 31 of the Finance Business Act, No. 42 of 2011 (FBA).

ETIF and SFSP have become insolvent due to various irregularities that have taken place since 2011, the CB said in a media release. 
Giving the background to these issues, the CB said that due to the inability of Board of Directors and Senior Management of the respective companies to satisfactorily address the said deficiencies, the MB in January 2018 issued Directions restricting the affairs of the companies and the powers of the Board of Directors of the two companies. A Panel of Management was also appointed by the MB to oversee the affairs of both companies.
During the subsequent period both companies were able to repay 30 per cent of the deposits outstanding of each company through various measures. Even though the MB directed the Board of Directors of both companies to find suitable investors to revive the companies, no viable proposal did materialize. Due to the inability to revive the companies successfully the financial situation of both companies continued to deteriorate.
As a result, both ETIF and SFSP are currently not in a position to repay the deposits by themselves, irrespective of such deposits being matured, the release said.
However, with the suspension of business of ETIF and SFSP the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) of the CB will take necessary actions to pay compensation to the insured depositors under the applicable laws and regulations which would facilitate to settle;
1. 75% of the ETIF’s total depositors in full (28,554 depositors out of 38,111 total depositors), while each of the remaining 25% depositors (9,557 depositors) will also receive Rs.600,000/- as a part of their deposit amount, and
2. 89% of the SFSP’s total depositors in full (7,802 depositors out of 8,726 total depositors), while each of the remaining 11% depositors (924 depositors) will also receive Rs.600,000/- as a part of their deposit amount. 
Further, the Director of the Department of Supervision of Non-Bank Financial Institutions of the CB decided to issue notices of suspension of Certificate of Registration of ETIF and SFSP as Registered Finance Leasing Establishments in terms of Section 9(1) of the Finance Leasing Act No. 56 of 2000 with effect from July 13. (BS)