By Nishel Fernando

The Central Bank (CB) is considering liquidity support for four troubled non-bank financial institutions (NBIFs) in the country while mulling on a plan to promote consolidation within the sector, targeting mid to long-term sustainability of NBIFs. 

 

“We are considering liquidity support for four finance companies based on their requests. However, as a whole, the sector maintains sufficient liquidity,” a senior CB official told Mirror Business. 

 

According to the CB data, the asset quality in the licensed finance companies sector, measured by gross non-performing loans (NPLs), deteriorated to 14.31 percent of the sector’s total loans outstanding at end-June, from 11.56 percent at end-March and 10.59 percent at end-2019.

 

Meanwhile, addressing a press briefing last Friday, CB Deputy Governor H.A. Karunaratne revealed that the CB would unveil a revival plan for the sector, which focuses on promoting consolidation, in coming weeks.“We will be indicating the industry to come with some proposals in line with our suggestions because we have designed the plan, which is for consolidation with some M&A and that type of framework. We will inform the details in few weeks,” he elaborated. 

 

The CB early this year revealed that 20 out of 49 finance companies were facing some kind of liquidity issue at the time. 

 

The CB, as the financial sector regulator, also moved to cancel the licences of several NBIFs, recently, including that of ETI Finance Ltd (ETIF), Swarnamahal Financial Services PLC (SFSP) and The Finance Company PLC, after they failed to find investors.

Karunaratne noted that the CB has broken down NBIFs into three categories for monitoring purposes.

Despite the liquidity issues in certain NBIFs, the top-tier NBIFs, which account for majority of the sector assets, remain healthy, while some larger NBIFs maintain their asset quality on par with the banking sector.