New plan to revive failed finance companies

The Central bank’s (CB) plan to revive weak finance companies will be made public in a few weeks.
This plan will involve consolidation and have some mergers and acquisitions, CB Deputy Governor, H.A. Karunaratne said responding to a question by the Business Times at CB's Monetary Policy Review media conference on Thursday. "We are indicating to the industry to come up with some proposals in line with our suggestions. We will inform the details in a few weeks."
He said there are three types of companies that CB has identified in the finance companies' sector. "One is strong companies, mid-tier companies and weaker companies. There are a couple of avenues available (for revival) for these and one is consolidation. We also have a type of framework for mergers and acquisitions," he explained.
Analysts say this will be similar to, the CB’s banking and financial sector consolidation process launched during the latter part of the Mahinda Rajapaksa government led by then Governor Ajith Nivard Cabraal in a bid to strengthen the sector to withstand shocks and support the next phase of the country’s development financing large scale projects. Mr. Cabraal is now the State Minister for Finance and Capital Markets.
The remarks by Mr. Karunaratne came after the CB in June said in a statement, “In respect of the non-bank financial sector, the CB message is the need for consolidation.”  It also said that CB will use its “authority and powers” to push finance companies and smaller banks to merge as consolidation was necessary given there were too many financial institutions for an economy the size of Sri Lanka’s. “The smaller should consider consolidating with the stronger. We have highlighted, time and again, that Sri Lanka has too many financial institutions given the size of its economy."  
The Sri Lankan economy contracted by 1.6 % in Q1 2020, contrary to the expectations of the CB, but a faster rebound of economic activity is expected, especially in Q4 2020, CB officials on Thursday morning said. 
Presenting the CB’s Monetary Policy, Dr. Chandranath Amarasekara, CB’s Director Economic Research Department told journalists that the resultant improvement in business supported by improved political stability and the lagged impact of monetary fiscal stimulus confidence will see a rebound in Q4 2020 which is essential for the country to record a positive growth rate during this year. (DEC)