CBSL settles over Rs. 11 b for ETI depositors

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Depositors and legal beneficiaries of troubled ETI Finance Limited have been paid a total of about Rs. 11 billion as of end-June by the Central Bank of Sri Lanka, The Sunday Morning Business learns.

The payments have been made under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) of the Central Bank.

Speaking to us, CBSL Deputy Governor T.M.J.Y.P Fernando stated that the Monetary Board is currently working on winding up the process of ETIFL in terms of Section 31(5)(b) of the Finance Business Act, No. 42 of 2011 (FBA) to facilitate the payment dues of eligible depositors.

“As of 30 June 2021, CBSL has paid a compensation payment of Rs. 11 billion to all eligible depositors of ETIFL. Nevertheless, all remaining depositors can claim their payments through the People’s Bank after submitting required documentation,” Fernando said.

Having considered deteriorating financial conditions and non-availability of a viable revival plan, the Monetary Board of Central Bank took the decision to suspend the business of ETI Finance in terms of Section 31(1) of FBA with effect from 13 July 2020 due to the various irregularities that took place since 2011.

With reference to Central Bank official data, the Monetary Board had paid a sum of Rs. 8,941.6 million by the end of 2020 for 65% of the insured depositors out of the total of 37,586 depositors up to a maximum of Rs. 600,000 per insured depositor.

Central Bank is currently compensating depositors of five finance companies excluding ETI Finance and they are Central Investments and Finance PLC (CIFL), The Standard Credit Finance Limited (TSCFL), TKS Finance Limited (TKSFL), The Finance Company PLC (TFC), and Swarnamahal Financial Services PLC (SFSP) – whose licenses have been cancelled or suspended by the Monetary Board.

However, the Central Bank decided to increase the maximum compensation payment per depositor under the SLDILSS by Rs.500,000 recently, taking it from Rs. 600,000 to Rs. 1.1 million, to provide further relief to the depositors of financial institutions regulated by CBSL in the event of the cancellation or suspension of the licences of such institutions.

A Central Bank press release issued on 19 March noted that an “increase of the maximum compensation payment will result in an additional payment of Rs. 9.8 billion for the depositors of the six companies, while the percentage of depositors that can be fully compensated will be increased to 94.0”. 

Meanwhile, The Sunday Morning Business spoke to Central Bank Resolution and Enforcement Department Director D.M.D.B. Dissanayake, who said the Central Bank has nearly settled Rs. 10 billion to TFC depositors as of March 2021. 

“We have started, and there has been no delay in handing out compensation to the depositors,” Dissanayake added.  

TFC is a finance company that was also severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008. The financial status of the company deteriorated gradually since then, resulting in dire straits such as negative capital, poor liquidity position, continuous losses, and significantly deteriorated asset quality.

At the end of the grace period extended to the firm (until October 2019), the Central Bank issued a Notice of Cancellation (NOC) of the finance business license issued to TFC for continuous violations of the Financial Business Act No. 42 of 2011 – including minimum core capital, capital adequacy, and liquid assets requirements.

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