Measures to bail out crisis-ridden Finance Companies | Daily News

Measures to bail out crisis-ridden Finance Companies

Depositors of six failed FCs to receive additional Rs. 500,000
Rs. 12 bn to be used from liquidity fund

The government will look to bail out failed Finance Companies including The Finance Company (TFC) soon and a Cabinet Paper for this has been forwarded, State Minister Money, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal said.

The Central Bank of Sri Lanka had cancelled the license of TFC last May after efforts to revive the company through different strategies had failed. “We are now awaiting the Cabinet approval to go ahead with finding new investors to restart some of these defunct Finance companies,” he said.

The State Minister said that this problem of finance companies collapsing aggravated in 2008 but every effort was made using various tools to protect financial institutions and thus protect the country’s financial stability during that period which was not an easy one. He noted that under the previous regime the depositors’ monies were not paid despite the Rajapaksa government and him as the Governor of Central Bank starting a ‘Deposit Insurance Fund’ in 2010 with Rs. 1.1 billion when the current Prime Minister Mahinda Rajapaksa was President.”

He also recalled that in 2014 a Financial Sector Consolidation Programme was submitted by merging over 58 financial institutions to 20 making them strong financial institutions. State Minister Cabraal said that unfortunately all of that was set aside in 2015. As a result, financial institutions faced financial crises and some collapsed.

Cabraal said that recently he had a discussion with the Prime Minister and consequently, it was decided to compensate depositors of collapsed finance companies with an additional sum of Rs. 500,000 among the 25,000 depositors of six failed financial institutions. A total of around Rs. 12 billion will be used to pay the additional amounts to eligible depositors. This is in addition to the Rs. 600,000 paid to 147,000 depositors of six financial institutions under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) which currently stands at Rs. 60 billion.

He also said that the government was making an effort to solve this problem to the best of their ability and paying Rs. 600,000 to depositors shows the commitment towards them. (SS)