Central Bank’s responsibilities and lapses brought to light | Sunday Observer
A robust banking landscape and a progressive stock market, indicators of growth

Central Bank’s responsibilities and lapses brought to light

21 June, 2020
President Gotabaya Rajapaksa addressing Central Bank officials
President Gotabaya Rajapaksa addressing Central Bank officials

A robust banking landscape and a progressive stock market are two of the key pillars to measure a country’s growth and a case study for any investor before making a commitment to invest.

While the stock market is making progress and functioning to the expectations in Sri Lanka, the banking sector is having ‘black scars’ with the closure of several finance companies. The lethargic attitude of the guardian of the financial landscape, the Central Bank of Sri Lanka (CBSL) also came in to question when President Gotabaya Rajapaksa met its decision makers.

The Central Bank issues guidelines to economic development in addition to other obligations. The President said that the bank had failed to implement his policies or put forward alternative proposals.

He said that the Government had put forward proposals for economic revival, but the Central Bank has neither supported it nor put forward a proposal to rebuild the economy.

“The Central Bank has ignored a proposal to provide Rs. 150 billion to banks by accepting the outstanding due as collateral. The Government will have to take the blame for the economic slowdown due to the negligence of duty on the part of the Central Bank,” the President said.

He said the Central Bank has not done any thing to revive the economy, despite having economists drawing high salaries. “It has been eight months since my appointment to the office and nothing has been done by the Central Bank to implement my policies. The officials who worked at the Central Bank during the bond scam still hold their positions,” the President said.

The President expressed his displeasure for not receiving the cooperation of the officials who supported the bond scam to rebuild the country. While highlighting to the mandate he received from the people for the betterment of the nation, the President reiterated that he committed himself to fulfilling the aspirations of the people.

He said that it is the responsibility of the Central Bank to regularise and monitor finance companies.

“However, you have failed in your task. Leasing companies too evade their responsibilities. The ETI is not in a position to repay the people who invested in the company. The Finance has been closed without informing. How are we going to pay for that? There is no management there,” the President said.


 Ravi Karunanayake

Former Finance Minister and parliamentarian Ravi Karunanayake said that he agreed with the President on the Central Bank.

He said just after the President’s meeting with the Central Bank officials, some proposals were implemented and asked why the Central Bank waited so long to implement them.

The ex-Minister said the Sakwithi Finance Company had published newspaper advertisements offering over 30 percent interest for fixed deposits. “Didn’t the Central Bank officials see this and why they failed to take action,” he asked.


 Ajith Nivard Cabraal 

Karunanayake said that although the Government has decided to grant loans at four percent interest to small and medium enterprises affected by the Covid-19 crisis, this has not been achieved through the Central Bank.

“Certain Central Bank officials are IMF loyalists as they seek employment with IMF after they retire,” he said.

“Sri Lanka is having a major issue with micro-lending. When a micro-loan scheme and Act was proposed by him to offer credit for 3 percent interest, the Act never saw the light of the day. This is because the Central Bank wants to allow financial institutions to lend people at a higher rate,” Karunanayake said.

Former Central Bank Governor and Senior Economic Advisor to the Prime Minister, Ajith Nivard Cabraal said he objects to the closure of The Finance and steps could have been taken by the Central Bank to keep it running. “The Government was not updated about this closure of The Finance,” he said. Former Governor Cabraal and Finance Minister Mahinda Rajapaksa had saved the Seylan Bank, which was on the brink of collapse, in protecting the country’s fiscal system; offered billions in saving The Finance Company; 6 billion offered at an interest of 6 percent through the Deposit Insurance Fund.


Wasantha Samarasinghe

A consolidation plan for the non-banking financial sector was formulated to prevent strained financial institutions from bankruptcy.

The former Governor had introduced the ‘Consolidation in the Financial Sector’ in strengthening the fiscal bodies of the country between 2006 and 2014. Following government change in 2015, the consolidation program was neglected affecting financial institutions.

Meanwhile, Convener of the Voice Against Corruption, Wasantha Samarasinghe has said that some Central Bank officials have even taken bribes from financial companies to say that finance companies in ‘red’ are in ‘green’ territory to the public.

The bankruptcy of CIFL, ETI, The Finance and other companies did not happen overnight and the Central Bank’s Monitoring Unit should have taken precautionary measures to stop their closure. 

Comments