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Friday, 29 December 2017 00:00 - - {{hitsCtrl.values.hits}}
By Uditha Jayasinghe
Central Bank Governor Dr. Indrajit Coomaraswamy yesterday defended the conduct of his staff in connection with Central Investments and Finance Plc (CIFL), insisting his institution stands ready to talk to credible investors and outlined fresh measures to increase regulations and capital requirements to reduce troubled finance companies.
Dr. Coomaraswamy, responding to questions on CIFL, insisted that the Central Bank had done all within its power to hold parties within CIFL responsible. “The Central Bank conducted a forensic account, which is what has been called for, way back in September 2013 and the findings have been shared with the Attorney General and the CID. So I don’t know who in the Central Bank is trying to hide things. Nobody is trying to hide anything,” he said.
“There was a letter sent to the Attorney General’s Department requesting for legal action to be taken against errant parties on 16 April 2014. Several letters have been written to the AG’s Department since then, four letters have been sent to the CID, the first one in December 2012.”
He also insisted the Central Bank had taken action against former CIFL Chairman Deepthi Perera who had fled overseas after the company ran into financial meltdown.
“A case has been filed under one party. In fact, on the basis of information supplied by the Central Bank, the CID issued an Interpol Red Notice and that person was brought back to Sri Lanka and arrested but the courts have given him bail.” Dr. Coomaraswamy also rejected allegations that the Central Bank was refusing to cooperate with prospective investors emphasising no credible investors had come forward so far.
“I don’t know what else the Central Bank could have done. There are allegations the Central Bank is ignoring investors. The easiest thing for us is if an investor came and rescued these companies, that is the best thing that can happen. But unfortunately there is no credible investor that has come. There was an investor who issued a fraudulent bearer bond, which is a very serious violation. Then we are told we are not encouraging investors. Secondly that party has an ongoing case against fraudulent activities.”
“All we are saying is one, have proof of funds; two, the money must come cleanly, bank to bank. That is all we want. These are problems we want to solve.”
CIFL has filed an objection with the Central Bank against having its license cancelled, which is being studied by the Central Bank for validity but he warned the situation could not drag on “indefinitely.” The Central Bank is also working to reduce the number of finance companies, which currently stands at about 50, by placing a mandatory Rs. 1 billion capital requirement, introducing a early warning system and increasing regulations.
“We are happy to discuss with investors but we can’t let this thing drag on forever. I get letters all the time from elderly people for whom even the Rs. 600,000 that we offer would be a large amount of money. In fact if we pay Rs. 600,000 to the depositors 61% of the depositors would be paid off in full, a further 15% will get 60% of their money. These are all investments below Rs. 1 million. In our view that is the just the thing to do but if there is an investor we are willing to talk.”
The Governor conceded the Central Bank could have handled some aspects of CIFL better but stressed it was not done intentionally. “Nothing is perfect in this world. I don’t want to say the Central Bank has never made any mistakes, along the way we may have been able to do things better. But I don’t think that anybody in the Central Bank has ever done anything with mala fide or bad intentions. There is a possible investor we are looking at.”
The Central Bank in the first week of December cancelled the licence issued to CIFL and said it would make every effort to bring legal action against parties responsible for fraud and misuse of depositor funds. The Central Bank also said any revival plan would need at least Rs. 3 billion in investments with provision to repay at least one-third of deposits immediately and pointed out that despite interested parties coming forward, no funds had been transferred despite multiple extensions of deadlines.
The Monetary Board of the Central Bank of Sri Lanka (CBSL) on 6 November decided to issue a notice of cancellation of the licence issued to Central Investments and Finance Plc (CIFL) to carry on the finance business under Finance Business Act No. 42 of 2011.
