Despite allegations of privatisation of state owned banks by opposition political parties, Sri Lanka’s people’s bank is set to be restructured soon with the aim of strengthening the financial stability and effectiveness of its operations, banking sector sources divulged.
The government will present the People’s Bank amendment act in parliament next month in parliament as an initial step of selling state owned banks including the Bank of Ceylon, National Savings Bank to the private sector.
The aim is to escape from cash crunch faced by state financial institutions and to infuse new capital make the state banks more viable and efficient institutions, giving it a new outlook, finance ministry source said.
Opposition political parties including the JVP leveled allegations against the government for initiating action to sell the state banks to raise money, the ruling party is spending ‘ last days in administration.
However all those protesters were silent except certain leading news papers which highlighted details of the Peoples Bank amended act in early 2007 and almost similar attempt made by Rajapaksa regime during the latter part of their administration.
The Cabinet of Ministers on February 8 2017 approved a proposal to amend the People’s Bank act to enable the institution to increase the authorised share capital and issue debentures without government guarantee to strengthen the financial stability and effectiveness of its operations.
In the proposal, the then Public Enterprise Development Minister Kabir Hasheem sought approval to amend section 12 of the People’s Bank Act to increase the share capital from Rs. 1 billion divided in to twenty million shares of Rs. 50 each.
Accordingly, “the authorised capital of the bank shall be Rs. 50 billion divided into one billion shares of Rs. 50 each”. He also proposes that “where deemed necessary in the interest of the Bank, the paid-up capital of the Bank may be determined from time to time by the Minister by order published in the gazette”.
However, sub section 2, (b) of the new regulations says that every order made by the Minister “shall be brought before Parliament for approval.”
The Minister also proposed to amend sections 20 & 21, the Bank, to allow it to raise any funds through debentures issued without Government guarantee for the repayment of any Sum due on debentures.
Currently, regulations dictate that such issuance should be done with the approval of the Minister in charge of the subject of Finance, subject to Government guarantee for the repayment of any Sum due on debentures.
Accordingly, the Cabinet paper proposes to replace section 20 with “(1) The Bank may, in addition to the sums lent by the Government under section 15 (1) (b) for the purpose of granting long term or medium term loans, raise with the approval of the Minister any sums by the issue of debentures.”
The proposal also includes repealing of paragraph (b) of subsection 1 of section 21 and subsection (3) which relates to Government guarantees. Accordingly, an amendment has been proposed to section 43 by repealing Section 43 (2) (C).
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