Richard Pieris Finance overcomes liquidity pressure with Rs.1 billion capital infusion

Richard Pieris Finance overcomes liquidity pressure with Rs.1 billion capital infusion

22 October 2020 10:29 pm

Richard Pieris Group has infused Rs 1 billion in Richard Pieris Finance Ltd (Arpico Finance Co.PLC) to ease liquidity pressure and meet minimum capital adequacy requirement stipulated by the Central Bank following its notification of eight finance companies facing liquidity issues. 

Richard Pieris Finance Ltd is a member of the Richard Pieris Group, a diversified conglomerate with a workforce of 28,000 employees. 

Responding promptly Richard Pieris Group has recently invested Rs. 650 Million in Tier I and Tier II capital of Richard Pieris Finance Ltd, the group announced. 

A further investment of Rs.350 Million has also been made in Richard Pieris Finance Limited this week in order to strengthen the capital, bringing the total Tier I and Tier II capital investment in Richard Pieris Finance Limited during the current financial year to Rs. 1 Billion, and cumulative capital investment to Rs. 2.2 Billion. 

Richard Pieris Finance Ltd is now out of woods with adequate capital adequacy requirements although its capital adequacy ratios had been impacted due to granting a moratorium for a lending portfolio amounting to Rs. 10 Billion to SME and individual customers.

Eight out of 39 Licensed Finance Companies have been found non-compliant with the minimum capital adequacy requirement and has been given time extension to rectify the non-compliance, Central Bank disclosed in a public notice. 

These companies are Arpico Finance Co. PLC, Associated Motor Finance Co. PLC, Bimputh Finance PLC, Kanrich Finance Ltd, Merchant Bank of Sri Lanka and Finance PLC, Richard Pieris Finance Ltd, Softlogic Finance PLC and UB Finance Co. Ltd.

According to CB, 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.

Sri Lanka's finance and leasing sector is set to face added pressure for consolidation as deadlines for the implementation of tougher capitalisation requirements approach in 2021.

Licensed Finance Companies are required to meet enhanced Rs.  2.5 billion (USD14 million) absolute capital requirement by 1 January 2021, up from Rs.2 billion at present.

The minimum Tier 1 capital ratio for FLCs has risen from 6.5% to 7% on 1 July 2020, before increasing further to 8.5% from 1 July 2021.