Central Bank pulls the plug on Nation Lanka Finance after failed rescue attempts

The Central Bank of Sri Lanka has officially cancelled the finance business licence of Nation Lanka Finance PLC, effective July 3, 2026, moving to liquidate the chronically distressed firm after exhaustive restructuring efforts failed to yield a viable revival plan. 

The banking regulator stated that the decisive action, taken under the Banking (Special Provisions) Act No. 17 of 2023, follows continuous violations of the Finance Business Act despite numerous regulatory interventions over the years. The licence cancellation marks the final step in a tumultuous resolution process that began in July 2025, when the Central Bank first stepped in and appointed an administrator to seize full control of the entity.

Prior to the regulatory hammer falling, the Central Bank and the appointed administrator explored multiple structural options to revive the embattled company. These efforts included actively promoting an acquisition by stable licensed commercial banks or finance companies, alongside an open invitation for expressions of interest to secure fresh investor capital. 

However, the Central Bank noted that a sustainable outcome could not be achieved, and the continued deterioration of the company’s financial position meant that maintaining the status quo would only further harm the interests of depositors and stakeholders. Prior to the cancellation, the company was languishing on the Colombo Stock Exchange Watch List with its share trading suspended since July 2025 due to a disclaimer of opinion in its audited accounts.

The company’s latest unaudited interim financial statements for the twelve months ended March 31, 2026, lay bare the sheer scale of the financial collapse. Nation Lanka reported a staggering total equity deficit of Rs. 2,135.68 million and a net asset value per share of negative Rs. 0.31, burdened by a net loss of Rs. 984.05 million for the financial year. 

The institution’s asset quality had collapsed entirely, with gross non-performing accommodations soaring to Rs. 4,852.02 million, representing an alarming 96 percent of its total loan portfolio. Furthermore, the firm was operating with a core capital adequacy ratio of negative 86.95 percent—far below the statutory minimum of 8.5 percent—and faced a severe liquidity deficit of Rs. 295.14 million against regulatory mandates.

For the company’s depositors, who are holding a collective Rs. 4,143.35 million in claims, the Sri Lanka Deposit Insurance Scheme will now step in to provide statutory compensation. The Central Bank announced that the scheme will pay compensation to insured depositors up to a maximum of Rs. 1,100,000 per depositor. This measure is expected to enable full settlement for approximately 99.1 percent of the company’s total depositors. The remaining 0.9 percent of depositors whose holdings exceed the cap will receive the maximum payout as a part settlement, with the eligible amount calculated by amalgamating all eligible deposits and unpaid accrued interest as of the licence cancellation date. Any remaining balances above the insurance threshold can only be pursued through the formal liquidation process, subject to the priority of claims. 

Depositors have been granted a six-year window, until July 2, 2032, to submit their duly filled claims to secure compensation under the scheme. The regulatory authority indicated that detailed procedures, payment modes, and the official commencement date for these payouts will be publicized in due course, urging depositors to keep their original deposit certificates and identification documents ready. Meanwhile, the Central Bank has strictly advised all debtors of Nation Lanka to continue settling their dues on time through dedicated bank accounts maintained under the company’s name to avoid immediate legal action during the winding-up proceedings.