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Saturday November 27th, 2021
Banking

Swarnamahal Financial Services depositors to get another payment: Sri Lanka central bank

ECONOMYNEXT – Sri Lanka’s central bank said depositors of Swarnamahal Financial Services will get another tranche of cash, taking repayments up to 50 percent of their deposits and the firm will be allowed to be open for period for the purpose.

In 2018 and 2019, up to 30 percent of the depositors had been repaid.

By end 2020, 834.1 million rupees has been paid for 25 percent of the insured depositors out of the total of 9,660, up to a maximum of 600,000 rupees per insured depositor.

“CBSL wishes to inform the public that SFSP has not been permitted to carry on any finance business or non-finance business whatsoever, except executing the aforementioned repayment plan and recovering of all money due to the Company,” a statement said.

“Therefore, the public is kindly requested to refrain from placing deposits or engaging in any other business with SFSP in any manner, other than settlement of any dues to SFSP…”

The full statement is reproduced below:

Swarnamahal Financial Services PLC – Resumption of business for a limited purpose on a Conditional Basis

The Monetary Board of the Central Bank of Sri Lanka (Monetary Board) has made an order permitting Swarnamahal Financial Services PLC (SFSP) to resume business notionally for a limited purpose and limited time under the supervision of the Panel of Management appointed by the Monetary Board (Panel of Management), subject to several strict conditions, in the public interest and in the interests of the depositors of the Company, for a limited period of three (03) months from 13th January 2021 to 12th April 2021, in terms of Section 31(5)(a) of Finance Business Act, No. 42 of 2011 (FBA), only for the purpose of repayment up to fifty percent (50%) of the remaining deposits of the Company (repayment plan).

Due to the various irregularities taken place and inability of the Board of Directors and the Senior Management of SFSP to address the resultant issues, the Monetary Board, on 02nd January 2018, issued Directions to the directors of the Company and appointed a Panel of Management to oversee the affairs of the Company.

Even though the Monetary Board directed the Board of Directors of SFSP to bring suitable investor(s) to revive the Company, no viable investment proposal was available and the financial condition of the Company continued to deteriorate. In the meantime, 30% of SFSP deposits was repaid in 2018 and 2019.

Having considered the continuously deteriorating financial condition and non-availability of a viable revival plan, the Monetary Board decided to suspend the business of SFSP in terms of Section 31(1) of FBA, with effect from 13th July 2020.

During the period of suspension, payment of compensation for the insured depositors under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) was commenced
through the island wide branches of the People’s Bank. By end 2020, a sum of Rs. 834.1 mn has been paid for 25% of the insured depositors out of the total of 9,660, up to a maximum of Rs. 600,000/- per insured depositor.

Such amount covers 84.9% of the Rs. 982.9 mn of eligible compensation under SLDILSS. SLDILSS will continue to pay compensation payment to the eligible depositors of SFSP, who have not received their compensation payment so far, up to a maximum of Rs. 600,000/- per depositor.

During the suspended period, SFSP was able to recover a significant amount of dues to the Company, mainly through recoveries of gold loans that could be utilized to repay part of the remaining deposits of SFSP. Further, the Central Bank of Sri Lanka (CBSL) has continuously received requests from the depositors as well as from the Company to repay the remaining deposits out of the money so recovered.

Having considered the non-availability of a viable plan to revive the Company through a capital infusion, the insolvent position of SFSP and continuous deterioration in the financial condition, the financial impact on depositors in receiving a part of deposits after the lengthy liquidation process, the Monetary Board decided to permit SFSP to resume business notionally for three (03) months from 13th January 2021 to 12th April 2021, in terms of Section 31(5)(a) of FBA, only for the purpose of implementation of the repayment plan mentioned in Paragraph 1 above.

The Panel of Management shall continue to manage the affairs of SFSP and oversee the above mentioned repayment process, while directors of SFSP and their agents or connected parties are prohibited from involving in any activities of SFSP in any manner.

CBSL wishes to inform the public that SFSP has not been permitted to carry on any finance business or non-finance business whatsoever, except executing the aforementioned repayment plan and recovering of all money due to the Company. Therefore, the public is kindly requested to refrain from placing deposits or engaging in any other business with SFSP in any manner, other than settlement of any dues to SFSP as indicated below.

All debtors of SFSP are advised to pay their dues to SFSP on time, only through the following bank accounts under the name of SFSP and maintain records for all payments to avoid any possible litigations against them for non-repayment of dues.

The date of commencement of the repayment of 50% of the remaining value of deposits of SFSP, after deducting 30% repayment made and the eligible compensation under SLDILSS, will be notified to the depositors by SFSP in due course.

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