CB faults CIFL in Court over financial mismanagement
Tuesday, 24 September 2013 00:03
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By Lakmal Sooriyagoda
The Central Bank yesterday informed Court that Central Investment and Finance Ltd. (CIFL) was liable to pay a sum of Rs. 1,032 million to depositors at maturity and a further payment of Rs.179 million as interest. The Central Bank yesterday faulted CIFL for violating the directions issued by the Monetary Board of the Central Bank over liquidity issues of the company.
Filing a report before Colombo Fort Magistrate Thilina Gamage, the Director of the Central Bank’s Non-Bank Finance Institutions said that the CIFL had submitted false and incomplete information to the Central Bank over the negative gap between assets and liabilities.
Director H.M. Ekanayake alleged that the finance company was carrying on finance business following unsound or improper financial practices which were detrimental to the interests of the depositors and other creditors.
Meanwhile, the Central Bank further told Court that according to the reports of the Managing Agent (People’s Leasing Company), CIFL was not in a position to pay back the depositors’ money as it was even facing difficulties to meet day-to-day expenses of the company. It further believed that the repayment would be commenced once the Business Restructuring Plan (BRP) was implemented after a grace period of two years.
Magistrate Thilina Gamage observed that all parties should dedicate themselves to expedite the repayment plan since the public who invested money were hopeful and looking for a prompt solution to the issue.
Meanwhile, the Magistrate ordered the directors of CIFL to repay the money regarding three cases filed against them over allegedly defrauding depositors by issuing dud cheques before 7 October since the Directors had undertaken to make the payments while they were being released on bail.
Inspector Nalaka Gunasekara, the Crimes OIC of Slave Island ,Police stated that the depositors had told Police they tended to trust the concerned finance company since it was a registered company under the Central Bank and the Central Bank had published a list of registered companies in the newspapers.
The Business Restructuring Plan (BRP) has proposed to the conversion of 60% of existing public deposits of Rs. 3.40 billion into non-voting shares subject to the consent of the depositors and to pay the remaining deposits after a grace period of two years. (Rs. 120 million after three years, Rs. 300 million after four years, Rs. 300 million after five years and Rs. 640 million within six or seven years).
It had further proposed to pay a nominal interest rate of 5% on outstanding deposits from the date the capital infusion takes place. The BRP also proposed to find new investors who are capable of infusing capital amounting to Rs. 1 billion.
The BRP also proposed to reduce the staff cost to Rs. 7 million a month by way of reducing redundant staff. The Central Bank had observed that it was the responsibility of the Board of Directors of CIFL to implement the BRP under the supervision of the Managing Agent. Further Magisterial inquiry was postponed for 7 October.
