SHABIYA ALI AHLAM 
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NDB fraud exposes control gaps as losses climb to Rs.13.2bn
- NDB says and CBSL affirms no customer accounts or deposits affected
- Regulator highlights readiness to extend liquidity support if required
- NDB management frames episode as a failure of oversight rather than absence of controls
- Funds routed through internal accounts since around 2024, using smaller transactions to bypass threshold
- Cash dividend suspended
- Independent forensic auditor to be appointed
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| NDB Bank Director and Chief Executive Officer Kelum Edirisinghe addresses a media roundtable on the Rs.13.2 billion fraud, at the bank’s head office yesterday PIC BY PRADEEP PATHIRANA |
By Shabiya Ali Ahlam
A control failure that began beneath the surface has now forced National Development Bank PLC (NDB) to confront a multi-billion-rupee fraud, testing both its governance framework and the broader confidence in the banking system.
Trading of NDB shares was halted by the Colombo Stock Exchange pending disclosure, as the bank moved to update the market on the scale of the incident.
In a sequence of disclosures over the past few days, NDB Bank revised the scale of the fraud from an initial estimate of around Rs.380 million to approximately Rs.13.2 billion, following the internal investigations that traced the activity to a specific operational area involving collusion among employees.
The bank has opted to take the full impact upfront, estimating a Rs.4 billion loss after tax for the March 2026 quarter, after provisioning for the worst-case outcome.
The financial sector regulator, the Central Bank of Sri Lanka (CBSL), in a parallel statement sought to steady the depositor confidence, stating that no customer accounts or deposits have been affected and that NDB’s capital adequacy and liquidity ratios remain above the minimum regulatory requirement.
The regulator also highlighted its readiness to extend liquidity support if required, which indicates that the issue remains contained at institution level.
At bank level, the management framed the episode as a failure of oversight rather than absence of controls, with NDB Bank Director and Chief Executive Officer Kelum Edirisinghe acknowledging gaps in scrutiny.
“With the benefit of hindsight, there should have been more probing questions … that is a key learning,” he told a media roundtable with select senior journalists and editors.
He added that corrective measures are already underway.
The incident reveals cracks in internal safeguards. The bank said funds were routed through internal accounts since around 2024, using smaller transactions to stay within the approval limits while building up to a significant loss. Collusion and monitoring gaps enabled the fraud to go undetected, Edirisinghe said.
NDB has since moved to ring-fence the issue operationally, suspending the implicated employees, revoking system access, segregating the affected unit under new oversight and tightening access controls across the organisation. The law enforcement agencies, including the CID, are now involved, with the recovery efforts underway.
Despite the scale of the fraud, the balance sheet impact appears manageable. The bank’s asset base of nearly Rs.990 billion would see a marginal erosion of about 0.7 percent, while its capital ratios, including Common Equity Tier I and Total CAR, are expected to remain above the regulatory thresholds.
Meanwhile, acting on supervisory considerations, the CBSL directed the bank to suspend its cash dividend. The bank has also committed to appointing an independent forensic auditor, a move that will be closely watched for both accountability outcomes and insights into control failures.
NDB reiterated customer balances are unaffected and operations remain normal. The incident however raises concerns about how strong internal controls are against coordinated fraud.
Oversight of NDB rests with its board of directors, chaired by Sriyan Cooray and comprising Bernard Sinniah, Sujeewa Mudalige, Kushan D’Alwis, Kasturi Chellaraja, Shweta Pandey, Hasitha Premaratne, Sanjaya Mohottala and Shanil Fernando.
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