The recent development on ETI Finance, and Swarnamahal Jewellers where its directors were taken to task, sent a clear message to all finance companies of the need to manage and operate its businesses in a transparent and ethical manner, said State Minister of Finance Ajith Nivard Cabraal in response to steps taken to strengthen ailing finance entities.
“I have submitted proposals to the government to revive all ailing financial companies and those facing major liquidity issues and awaiting its response,” the Minister said.
The proposals according to the minister have been sent for Gazetting and when that has been done measures will be in place to strengthen finance institutions and be tough on entities that deviate from the law and good practices.
The Attorney General on Tuesday ordered a probe over the Rs. 13 billion in deposits allegedly solicited by ETI Finance, and Swarnamahal Jewellers.
The investigation was ordered following the findings of the Presidential Commission of Inquiry.
The infamous entities are alleged to have operated undisclosed accounts to the value of around Rs. 6.48 billion without the approval of the regulator.
ETI Finance is a licensed finance company. Operations of ETI and Swarnamahal Financial Services PLC were suspended by the Central Bank in July last year. ETIF and SFSP become insolvent due to irregularities that had taken place, since 2011.
Due to the inability of Board of Directors and senior management of the companies to satisfactorily address the said deficiencies businesses of the companies were restricted in January 2018. During the subsequent period both companies repaid 30% of the deposits outstanding of each Company through various measures.
Even though the MB directed the Board of Directors of both Companies to find suitable investors to revive the Companies, no viable proposal materialised.
However, with the suspension of business of ETIF and SFSP, depositors were assured that they would be compensated through the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS).
Accordingly 75% of the ETIF’s depositors were paid in full (28,554 depositors out of 38,111 total depositors), while each of the remaining 25% of the depositors (9,557 depositors) would receive Rs. 600,000 as a part of their deposit amount, and 89% of the SFSP’s depositors in full (7,802 depositors out of a total of 8,726 depositors), while each of the remaining 11 receive Rs. 600,000 as a part of their deposit amount.
The SLDILSS set up to compensate depositors of failed financial companies disbursed around Rs. 851.8 million in 2019.
However, depositors of failed finance companies such as The Finance PLC and several finance entities within the Ceylinco Group, CIFL and Standard Credit Finance Limited were left in the lurch due to financial irregularities and bad management.