For the past 25 years scores of dubious finance companies offering interest rates of 15 percent to 20 percent to pensioners and other depositors have collapsed and thousands of people, mainly senior citizens, have been left to languish as paupers.
In recent years the two most notorious cases involved the Ceylinco Golden Key scandal and the Sakvithi Finance Company which defrauded hundreds of millions of rupees from depositors. In 2012 The Finance Company which was on the brink of collapse had been taken over by the Central Bank which appointed a Board of Management for its restructuring. In 2012, TFC recorded a marginal profit of Rs. 15 million but by March this year, it had plunged into a loss of Rs. 1.5 billion.
The latest crisis involves some 6000 depositors who have invested their life’s savings in the Central Investments and Finance Ltd (CIFL) which had been registered by the Central Bank, indicating that it was safe to invest in the company.
The collapse of this company and other financial institutions over the past 25 years is a damning indictment on the banking regulator the Central Bank, UNP Parliamentarian and economist Harsha de Silva told a news conference on Wednesday.
Mr. de Silva said if the big talking Central Bank was a proper regulator and continued to register such companies as safe for public deposits, there was no justification for the CB to hold its head and say there was nothing it could do about the crisis.
If Sri Lankan financial institutions were failing, it is clear that the supervisory authority is also failing and neglecting its duty.
He said the CB had now come up with a rescue package for troubled financial institutions, but the last time the Central Bank had undertaken the restructuring of the finance companies, it had been an unmitigated disaster. He referred mainly to The Finance Company case. The UNP economist charged that the Central Bank had promised to present legislation to prevent the defrauding of people’s life’s savings by dubious finance companies. But it was only a promise and no legislation was introduced while the huge racket was going on. Dr. de Silva said the CB had also promised to make the market and the people aware of companies in trouble and publish a list of such companies once in every three months. But that promise also was like a counterfeit currency note.
Meanwhile, the Colombo Fraud Bureau has filed 44 cases in the Fort Magistrate's Court accusing the CIFL of cheating depositors to the tune of about Rs. 78 million. The depositors told the Fraud Bureau they had invested their money in the CIFL because it had been registered by the Central Bank. Meanwhile the Kompanna Veediya police have informed court that they had also received more than 70 complaints against the CIFL. The court has issued notice on three CIFL directors to appear in court on Monday September 16.
As Dr. de Silva says the CB has been negligent by allowing fraudsters and confidence tricksters to play out innocent depositors of their life's savings. If the CB is registering these companies and not taking responsibility for their frauds then the government itself is responsible because it had been elected to serve and protect the people.
This will happen again and again. Although, licences are issued to the new finance companies on regular basic to accept the deposits from the general public, Credible action has not been taken so far to give a redress to the depositors of collapsed financial institutions. It is the duty of the government to protect the general public from this calamity.
Nilanthi Amerasinghe Sunday, 15 September 2013 05:52 PM
Thank u for this editorial.I am a retired senior citizen who had deposited all my savings at CIFL.When my deposit with then matured a few years ago, i wanted to withdraw the money but CIFL was adamant that I reinvest with them as they were a stable company registered with the Central Bank. The CB was advertising at that time the names of companies registered with them. Now that the monthly interest is not forthcoming, I am without money for my daily necessities and have ti depend on my two young sons for all my needs. My boys are married and have their own families to support.The Central Bank and the government must take total responsibility for the plight we senior citizens are facing owing to their neglect.. -
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