Sri Lanka’s unregulated money lending activities and non licensed finance and leasing institutions are to be regulated while strengthening the stability of non bank financial institutions.
Central Bank reiterates the requirement for enactment of a legal framework to regulate unregulated money lending activities so that a better and more effective regulatory environment is crated for moneylending institutions in the future.
Hence the need for the enactment of the proposed Microfinance and Credit Regulatory Authority Act, approved by the Monetary Board of the CBSL is vital, CB announced.
The CB carries out the regulation and supervision of licensed finance companies (LFCs) to ensure and strengthen the stability of the LFCs and in turn the stability of the financial system, which is one of its core objectives.
However the Department of Supervision of Non-Bank Financial Institutions of t CBSL does not guarantee the return of deposits of a regulated financial institution, and repayment of such deposits from CBSL funds.
In 2010, CBSL established the Sri Lanka Deposit Insurance and Liquidity Support Scheme (the scheme), which currently pays a maximum of Rs. 600,000 per depositor for each financial institution of which licence is cancelled or suspended.
The depositors of Central Investment and Finance PLC, The Standard Credit Finance Ltd, The Finance PLC and TKS Finance Limited (said LFCs), of which licenses were cancelled recently are being repaid out of the scheme, subject to the said maximum of Rs. 600,000, per depositor.
Therefore, no CBSL or Government funds are used for deposit insurance payments to depositors of the said LFCs. Further, upon liquidation of the said LFCs the depositors may be entitled to further payments through proceeds received from disposal of assets.
The public is invited to be vigilant when depositing their money as to the soundness of the relevant LFC and CBSL would continue to improve the quality of information provided to customers to make this decision.
CBSL invites the public to be vigilant when obtaining finance leasing facilities, which required the relevant institution to be registered while such registration is not required to carry out hire purchase activities under the Consumer Credit Act, No. 29 of 1982.