Sri Lanka’s Rs53B deposit insurance fund grows 7-pct in 2018
ECONOMYNEXT – Sri Lanka’s Central Bank said a deposit insurance fund it manages has grown 7 percent from a year earlier to 53 billion rupees in 2018, paying out 600 million rupees to depositors of failed finance company Central Finance and Investments during the year.
The fund, called the Sri Lanka Deposit Insurance and Liquidity Support Scheme, was established in 2010 after the Ceylinco Group went bust, causing a run on several of its lending institutions including a bank.
The fund’s lending portfolio is primarily invested in government securities. The fund had invested 49.8 billion rupees in government securities in 2018, according to the Central Bank’s annual report for that year.
Total income generated by the fund was 3.2 billion rupees, up 40 percent from 2.3 billion rupees a year earlier.
Profits at the deposit insurance fund grew 10.2 percent from a year earlier to 10.8 billion rupees.
A loan of 1.9 billion rupees was granted to a lending institution during the year under its liquid support facility for restructuring its balance sheet.
During the year the bank cancelled the licenses of Central Investments and Finance (CIFL) and Standard Credit Finance.
Compensation to CIFL depositors commenced in August 2018, the Central Bank said in its 2018 annual report.
Total compensation paid by the deposit insurance scheme as at end December 2018 was 601.5 million rupees.
Around 76 banks and finance companies contribute annually to the deposit insurance fund.
Licensed banks with a capital adequacy of 14 percent or above were required to pay a premium of 0.10 percent of total deposits annually.
Banks with a lower capital adequacy paid 0.125 percent.
Financed companies paid 0.15 percent of deposits to the insurance scheme.
Premiums and penalties during the year amounted to 8.8 billion rupees.
The insurance coverage is for 600,000 rupees for each depositor per institution.
Deposits are major funding sources for banks accounting for 72 percent of total liabilities of the sector in 2018, the Central Bank said.
Deposits of the banking sector grew 14.8 percent from a year earlier to 8.5 trillion rupees, while loans grew a faster 19.6 percent to 7.7 trillion rupees.
Banking sector deposits growth had declined from 17.5 percent in 2017.
Net interest margins had widened 10 basis points to 3.6 percent in 2018.
Deposits account for 50 percent of total assets of finance companies.
Finance companies saw deposits grow 4.4 percent to 717 billion rupees in 2018.
With loans growing 7.6 percent to 1.13 trillion rupees, the sector’s borrowings to finance lending grew 17 percent to 467 billion rupees.
Finance company sector deposit growth had fallen sharply from 29.4 percent a year earlier, due to declining interest rates, the Central Bank said. (COLOMBO, 03 May, 2019-SB