By: Staff Writer
Colombo (LNW): Credit regulatory authority is to be established following the enactment of the credit regulation authority bill in parliament soon, Central Bank Governor Nandalal Weerasinghe disclosed.
This will enable the government to regulate the money lending business and the microfinance business and to provide for matters connected therewith, including protection of customers of said businesses.
He noted that this bill is to be presented in parliament for enactment soon and it will tackle unauthorized money lending and online loan business mushrooming at present.
The Central Bank Governor on last Friday revealed the establishment of the Credit Regulatory Authority, aiming to fill the regulatory void concerning credit lending firms.
The Credit Regulatory Authority is to address the absence of regulations for credit lending firms, thus far operating without specific regulations.
“The draft bill is approved by the Attorney General and gazetted now. It will soon get approval from the Parliament to make it a statute,” Weerasinghe said last Friday.
As the draft bill progresses through Parliamentary approval, the Central Bank hopes it will bring about responsible lending practices and overall financial stability to the sector.
The Governor noted that the new regulatory authority stands as a distinct institution from the Central Bank and will operate under the purview of the Finance Ministry.
The separation is designed to provide a specialised focus on credit-related activities and to streamline regulatory efforts.
Despite its independence, a representative from the Central Bank will hold a seat on the Board of the Credit Regulatory Authority.
The move comes amid former JVP Parliamentarian Wasantha Samarasinghe revealing that certain online loan providers were imposing exorbitant interest rates of 365%.
Speaking to the media last Friday, Samarasinghe called on the Central Bank and other relevant institutions to promptly intervene and implement regulatory measures to curb such lending practices.
He disclosed that certain companies operating in online lending, request users to download an app and submit a selfie, giving them access to all phone data, including contacts.
“These companies, charging a daily interest rate of 1%, engage in aggressive debt recovery tactics, demanding repayment within a week. If borrowers cannot comply, the companies resort to calling contacts and even use submitted selfies for public exposure on social media,” he said.
Samarasinghe expressed concern about the adverse impact of such lending practices, cautioning of potential severe consequences, including self-harm.