October, 15, 2020
The Central Bank of Sri Lanka (CBSL) regulates and supervises Licensed Finance Companies (LFCs) in terms of provisions of the Finance Business Act No. 42 of 2011 (FBA) and Directions issued thereunder to promote safety and soundness of the overall financial sector. However, issuing a special public notice yesterday (14) the CBSL stated that regulation and supervision of the bank does not necessarily prevent the failure of any financial institution, including Licensed Finance Companies.
Meanwhile, the CBSL stated that eight licensed finance companies; Arpico Finance Co. PLC, Associated Motor Finance Co. PLC, Bimputh Finance PLC, Kanrich Finance Ltd, Merchant Bank of Sri Lanka & Finance PLC, Richard Pieris Finance Ltd, Softlogic Finance PLC and UB Finance Co. Ltd found non-compliant with the minimum capital adequacy requirement and has been given time extension to rectify the non-compliance.
Moreover, the CBSL stated that Nation Lanka Finance PLC is found to be in non-compliance with the minimum capital adequacy requirement and the licensed finance company is yet to submit a feasible capital augmentation plan.
The Central Bank further noted that LFCs that are non-compliant with minimum capital adequacy requirement are indicated in the notice as it poses a significant risk to the depositors. Hence, public is advised to exercise due care when making deposits in LFCs to ensure the safety of their funds and also to refrain from depositing funds in unauthorized institutions/persons.
The public notice as follows: