Sri Lanka doubles insurance payout for CIFL depositors
ECONOMYNEXT – Sri Lanka’s central bank has doubled the compensation payable to depositors of Central Investments and Finance PLC (CIFL), which failed owing to fraud, with no investor being found yet to pump in Rs. 3 billion to revive the finance company.
The central bank’s Department of Supervision of Non-Bank Financial Institutions said every effort will be made to take legal actions against those responsible for frauds and misuse of depositors’ funds of failed finance companies.
CIFL was confronted with severe liquidity crisis since 2013 due to mismanagement and other irregular transactions carried out by the management of that company, a statement said.
“It has also been observed that the directors and senior management of these companies have fraudulently inflated the value of the assets and the examination of the documents relating to such assets has revealed that those are either fictitious or entangled with encumbrances.”
CIFL has not been in operation since 2014 and the central bank last month decided to issue a notice of cancellation of its licence.
The total deposit liability of the company is about Rs. 3.5 billion and the number of depositors is 4,092.
Of those, 2,501 depositors are with deposits less than Rs. 600,000/-.
Under present regulations, the maximum amount that can be paid under Sri Lanka Deposit Insurance and Liquidity Support Scheme is Rs. 300,000.
“However, the Monetary Board having considered the plight of the small depositors has decided to double the compensation from Rs. 300,000/- to Rs. 600,000/-,” the central bank said.
“Accordingly, in the case of CIFL, 61% of the depositors will be fully settled with their deposits.”
The Central Bank also said it has extended the deadline given to a potential investor on several occasions to prove the availability of funds to revive CIFL “which has not been fulfilled as yet.”
The central bank has had discussions with local and foreign institutions and individuals who expressed their interest in investing and reviving the company.
It said any revival plan needs at least Rs. 3 billion investments and at least 30-40% of the deposits should be repaid immediately as they had not been paid interest or the capital of their deposits for the last 4 year period.
It also said that with regard to the Standard Credit Finance Ltd and City Finance Corporation Ltd, the Monetary Board has not issued notices of cancellation as there are legal issues to be resolved.
(COLOMBO, December 5, 2017)