- Use of any physical force prohibited even now, though seizing permitted
- CB Governor says Central Bank will implement short-term proposals soon
The committee appointed to look in to unauthorised finance and leasing companies has proposed to terminate the operations of leasing businesses, which operate without Central Bank license.
The committee has also proposed to avoid use of force when seizing assets, which are under leasing facilities after they become overdue.
The lessor can seize the asset, after following the due process if the lessee continues to avoid servicing the facility even after several reminders to recover the dues.
Although seizing is allowed, use of any physical force is prohibited even now.
The two proposals are among a set of 10-point proposals presented to Central Bank Governor recently by the three-member committee appointed to look in to the irregularities of the unauthorised finance and leasing companies.
The final report handed over to the Governor also includes some long-term proposals, which would be made available to the public in the future.
The committee was appointed in mid-June in the wake of the murder of a person allegedly by associates of an unauthorised leasing institution over a matter related to loan moratorium.
Central Bank Governor Prof. W.D. Lakshman said Central Bank would implement the short-term proposals as soon as possible. It is mandatory for any person or institution to register under the Finance Leasing Act, No 56 of 2000 (as amended) to carry out finance leasing business, and failure do so is equivalent to committing an offence under the Act.
The proposed Microfinance Credit Regulatory Authority Act is also expected to establish an authority to address issues surrounding informal money lending and regulatory oversight over microfinance institutions.
The proposed Act has already received Monetary Board approval and awaits parliamentary approval after the elections in August.
At the press conference held to announce the Monetary Policy last Thursday, the Central Bank officials expressed confidence for the easy passage of the Act once the new parliament is convened after the polls.
“CBSL reiterates the requirement for enactment of a legal framework to regulate unregulated moneylending 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,” the Central Bank said in a recent statement on regulation and supervision of non-bank financial institutions.