The Central Bank (CB) on Friday suspended the acceptance of new deposits, placed restrictions on withdrawal of deposits and restricted disbursement of loans and advances to facilitate the restructuring process of the troubled The Finance Company (TFC).
These decisions, effective from Friday, February 15, were taken by the CB’s Monetary Board at its meeting on February 8 after considering the weak financial performances of TFC and with a view to safeguard the interests of the depositors and other stakeholders of the company.
In a media release, it said in order to facilitate the restructuring process, a panel of experts in banking and finance has been appointed by the CB. “The company shall continue to negotiate and finalize the proposals of prospective investors and the CB will facilitate TFC to proceed with suitable investors as per the applicable laws and regulations. At the same time, all borrowers of the company are strictly advised to pay their dues. It is further expected that these measures will greatly assist potential investors of TFC and to ensure the safety and soundness of the financial system,” it said.
TFC has been severely impacted by the failure of a number of financial institutions within the group in 2008. Since then the financial status of the company deteriorated gradually and currently with severe liquidity issues, which need to be addressed, immediately, the CB statement said giving some background to the issue.
“Although, several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialized yet. Thus the continuity of current status will be further detrimental to the interest of depositors and other stakeholders of the company,” it said.
The CB said interest due for deposits will continually be paid to the depositors as per the CB directions. With the restructuring process, it is expected to improve the cash flows and facilitate the prospective investors and revival of the company. Attention is also drawn to the fact that the deposit insurance and liquidity support scheme will also safeguard the interest of all depositors, to a maximum of Rs.600,000 per depositor, which will cover 93 per cent of the depositors in full. -ENDS -
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