The CB intervenes and imposes regulations to prevent the collapse of banking or non-banking financial institutions. That is to give legal safeguards to the depositors and the assets of the creditors who have a responsibility towards those institutions. We know about the financial institutions that rendered their depositors helpless as the CB did not intervene. The depositors had to waste many years to get their money and interest back. But, depositors and creditors of financial institutions registered with and regulated by the CB do not have to worry like that.
The CB has given six months for the two institutions to revive. They have the time and space to find new investors, local or foreign. The CB will give the legal guidance and contribution towards that end.
According to what we know, the old management of the two has found solutions to revive the institutions. They have taken steps to bridge the gap between the assets and liabilities by selling their assets. The way out is by way of a Rs. 12 billion (75 million USD) investment on ETI. The CB governor confirms the liquidity needed by the two is exactly that amount.
A foreign investor has already come forward. The CB will look into its qualifications. It will regularly monitor the financial status of the investor, credibility and safety. It was this investor who loaned 2.6 m USD for the company to maintain its liquidity for the past few months. That shows the investor’s confidence that the two can be revived.
We know that subsidiaries of ETI are involved in television, radio and cinema industries. The CB governor says the investor will not interfere with those businesses. The investor will invest as per the financial regulations.
CB governor Indrajit Coomaraswamy also told the media that the company was unlikely to collapse as it had adequate assets, despite facing a crisis.
The parent company, ETI Finance, has assets worth Rs. 33 b, with 33,000 depositors. Swarnamahal Financial Services, with 2,300 depositors, has another Rs. 2.5 b.
In this light, depositors need not panic, the CB governor says.
That is why withdrawals of the maturing deposits have been restricted for next 06 months. Due to intentional attacks on the two by the media, depositors panicked and withdrew their money. Careless reporting led to a claim that ETI had been sold to a Malaysian investor. As we know, depositors have withdrawn their money and interest in the past few weeks. Careless reporting of the media is to be blamed.
The businesses of both were mainly investing in gold securities. The gold price declined considerably in 2012 in the world market. It should not be forgotten that they got involved in business since 2015 by making the single largest investment in the field. They have paid the interest due on time, up to the day previous to its management takeover by the CB.
The CB has appointed a panel – former assistant governor of the CB Sepala Ratnayake, and former deputy general managers of the Bank of Ceylon P.A. Lionel and H.M. Tilakaratne, who are experienced, talented bankers.
As a responsible media, we will keep a watch on the rights of the 33,000 depositors of the two companies, who depend on the interest they receive. They should understand that it is not as bad as it looks, and that undue panicking will bring them nothing.