Cooperative Banks Adversely Affect Economy :Minister

By Yohan Perera   

Cooperative banks engaged in microfinance activities are adversely affecting financial markets and the overall economy, a Cabinet Minister said yesterday.   

Minister Wasantha Samarasinghe stated that certain cooperative movements exploit loopholes in existing laws to operate banks, accept deposits, and provide loans.   

“This results in fluctuations in interest rates, which in turn negatively impact financial markets and the economy as a whole,” the Minister said during a recent discussion aimed at reforming Sri Lanka’s cooperative system.   

The Minister further revealed that frauds amounting to millions of rupees have been reported in cooperative-backed microfinance institutions. He also alleged that some cooperative banks are involved in unlawful seizure of assets belonging to borrowers.   

“A local politician informed me that his vehicle was seized due to non-payment of a loan. When I inquired from the Cooperative Commissioner, I was told that the Cooperative Act does not permit such actions,” he said.   

The Minister added that amendments to both the Banking Act and the Cooperative Act would be introduced soon to close loopholes in the existing legal framework.