Eligible depositors of the failed The Finance Company (TFC) will be paid Rs. 500,000 from the liquidity fund in addition to the Rs. 600,000 they have been paid under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS), State Minister Money, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal told Parliament yesterday.
He said around Rs. 12 billion will be used to pay the depositors from the fund which currently stands at Rs. 60 billion. The decision on the additional payment comes on a directive from Prime Minister Mahinda Rajapaksa, the State Minister added. “We started the liquidity fund in 2010 with Rs. 1.1 billion when I was the Governor of the Central Bank and when the current Prime Minister Mahinda Rajapaksa was President. Both the President and the Prime Minister have informed that the depositors of The Finance Company be paid Rs. 500,000 from this fund. It will be done soon with the approval of the Monetary Board and in consultation with the Central Bank,” Cabraal said.
He was responding to a question raised by Opposition Leader Sajith Premadasa regarding failed finance companies in the country, including TFC, and what measures the Government has taken to assist the aggrieved deposits.
TFC had approximately 147,000 depositors at the time its license was cancelled in May last year, but those whose deposits were Rs. 600,000 or less were paid the full amount.
Cabraal said that a Cabinet paper has already been submitted for the restructuring of TFC and once it is approved, steps will be taken to find an investor for the company and settle all default payments to the depositors.
“A Cabinet paper has been submitted and depending on the decision of the Cabinet, we will move forward with the restructuring,” Cabraal said.
He said that in addition to TFC, six other finance companies had collapsed, all during the previous administration.
“Before 2015, we took several measures to safeguard the sector. In 2010, we started the Deposit Insurance Fund and we also started the financial sector consolidation program, under which we reduced the number of finance companies from 58 to 20 and strengthened the sector. Unfortunately, after 2015, that program was shelved and the sector began facing numerous problems from then onwards,” the State Minister claimed.
Cabraal said that the Government’s priority is safeguarding the interests of the depositors and the decision to pay an additional Rs. 500,000 shows the commitment to them.
He added that the Central Bank of Sri Lanka had cancelled the license of TFC with effect from 22 May after all efforts were made to revive the company through different strategies, which had failed.
(FT)