10 July 2020 08:36 am
The Central Bank (CB) plans to exert pressure on certain troubled licensed finance companies (LFCs) to merge with others under a new programme instead of cancellation of licences.
CB Deputy Governor, H. A. Karunaratne yesterday told reporters that they have come up with a sound programme to revive troubled finance companies in the country.
According to the CB, half of LFCs in operation are faced with different levels of liquidity issues while some of them are in the red-zone with high percentage of non-performing loans.
CB earlier said that it was formulating timelines on an individual basis for these firms that are facing liquidity issues to raise sufficient capital by encouraging consolidation, while warning on cancellation of licences if failed to meet these timeline.
However, Karunaratne noted that CB has now decided to push for mergers instead of cancellation of licences in case these firms fail to meet these timelines.
“Lower category firms can be merged. We are going to force some companies to merge,” he said.
The CB most recently cancelled the licence of the trouble The Finance Company (TFC) after nearly 10 years under the management of a CB-appointed director board.
The cancellation of TFC licence was criticised by President Gotabaya Rajapaksa at a recent meeting with top Central Bankers.Karunaratne reasoned that the recent spike in troubled finance companies was due certain legacies.
“Most of the companies came from Ceylinco Group, which were hard to manage,” he said.
However, he noted that the number of LFCs was brought down to 41 from 55 several years ago.