Sri Lanka’s banking sector is facing a critical credibility test following the exposure of a Rs. 13.2 billion internal fraud at National Development Bank PLC, with the Central Bank of Sri Lanka stepping in to contain potential fallout.

While regulators insist the bank remains stable, the scale and duration of the fraud estimated to have unfolded over nearly 18 months has raised serious concerns about governance failures and systemic oversight weaknesses.

The CBSL has moved quickly to reassure depositors, confirming that capital adequacy and liquidity ratios remain above required thresholds and that customer deposits are unaffected. However, confidence in internal controls has been shaken, particularly after revelations that suspicious transaction patterns linked to CEFT (Common Electronic Fund Transfer) accounts—were visible as early as mid-2024.

Financial disclosures show a dramatic surge in receivables tied to CEFT transactions, rising from Rs. 3.1 billion in 2024 to over Rs. 12 billion in 2025. Analysts argue this spike should have triggered immediate scrutiny from management, internal audit teams, and board-level risk committees.

Instead, the alleged fraud continued largely undetected. Investigations suggest that funds were siphoned through repeated transactions, often executed during weekend windows when oversight was weaker. In one instance, more than 70 transactions were reportedly carried out just days before the fraud was exposed.

The financial impact, though significant, remains manageable in proportion to the bank’s nearly Rs. 1 trillion asset base. Net losses are estimated at around Rs. 7 billion after provisioning, with capital adequacy expected to decline but remain above regulatory minimums.

Still, the reputational damage may prove more difficult to contain. Investor confidence has been rattled, and governance activists have pointed to clear lapses in monitoring, calling it a “systemic breakdown” across multiple layers of control.

The CBSL’s directive to suspend dividend payments preserving roughly Rs. 2.7 billion in capital signals a cautious regulatory stance. At the same time, authorities have indicated readiness to provide emergency liquidity support if conditions worsen.

Attention is now turning to accountability at the highest levels. The Board of Directors faces mounting pressure to explain how early warning signs were missed and whether leadership failures contributed to the breach.

With law enforcement, including the CID, now involved, the episode has evolved beyond an internal lapse into a broader test of Sri Lanka’s financial governance framework one that could shape regulatory intervention strategies in the months ahead.

Economic growth in developing Asia and the Pacific is expected to slow this year as the ongoing conflict in the Middle East disrupts trade and energy markets, the Asian Development Bank (ADB) said on Friday.

ADB President Masato Kanda described the situation as a “formidable test” for the region’s economic momentum, noting that the conflict has added fresh uncertainty to an already fragile global environment.

According to the ADB’s latest Asia Development Outlook, regional growth could ease to 4.7% in 2026, down from 5.4% last year, while inflation may rise to 5.6% from 3.0% in 2025 if hostilities persist through the third quarter.

The report also warns that if the conflict continues for a full year, the region could lose around 1.3 percentage points of growth across 2026 and 2027.

Developing Asia and the Pacific includes 43 economies, ranging from China and India to smaller nations such as Georgia and Samoa, but excludes advanced economies like Australia, Japan, New Zealand, Singapore, and South Korea.

These projections differ from the ADB’s baseline scenario finalised on March 10, which assumed a shorter, one-month conflict. Under that outlook, growth was expected to moderate only slightly to 5.1% in 2026 and 2027, with inflation rising to 3.6% this year before easing to 3.4% in 2027.

ADB Chief Economist Albert Park noted that prolonged disruptions to energy supplies remain a key risk. “The ceasefire appears fragile, and markets suggest a low probability that it will hold,” he said, warning that continued instability could further impact growth.

The conflict, which has significantly disrupted global energy flows, has driven up oil and gas prices and intensified inflationary pressures worldwide. The Strait of Hormuz—through which about one-fifth of global oil trade typically passes—has been particularly affected.

The ADB stressed that policymakers should focus on containing inflation and financial stress in the short term, while accelerating energy diversification and improving efficiency to reduce long-term vulnerabilities.

The Ministry of Education (MOE) has announced that the second phase of the first school term for government and government-approved schools concludes today (10).

In line with the Sinhala and Tamil New Year, schools will observe a holiday period from April 10 to April 19.

The second school term is scheduled to commence on April 20 and will continue until July 24.

A no-confidence motion against Minister of Energy Kumara Jayakodi is scheduled to be debated in Parliament today.

The motion, submitted by the Opposition, centres on allegations related to the procurement and quality of coal imports and their impact on power generation. Opposition MPs claim that issues in coal procurement and supply contributed to disruptions in electricity generation, prompting the move against the Minister.

Despite the challenge, the government is expected to defeat the motion, given its parliamentary majority.

A recent audit report highlighting alleged irregularities in coal procurement is also likely to come under discussion during the debate. In addition, Opposition members are expected to raise the Minister’s indictment in court over a corruption case linked to his tenure as a state official.

The motion was handed over to the Speaker last month, with the Committee on Parliamentary Business subsequently scheduling the debate for today. The outcome of the vote is expected later in the day following the conclusion of proceedings.

Passengers travelling ahead of the Sinhala and Tamil New Year holidays are advised that additional bus services have been deployed from the Makumbura Multimodal Centre (MMC) in Kottawa.

Transport services will operate daily from 5.00 a.m. to 10.00 p.m. from April 08 to 13 to accommodate increased passenger demand.

Commuters can obtain bus schedule information by contacting 0112-034474 prior to arriving at the terminal.

NTC Makumbura Bus Terminal Assistant Manager D.M. Wettasinghe urged passengers to arrive early to avoid inconvenience, noting that night services may experience delays depending on the return of buses from Colombo.

The special transport operations are being jointly carried out by the Sri Lanka Transport Board (SLTB), the National Transport Commission (NTC), and the Provincial Road Passenger Transport Authority.

Showers or thundershowers will occur at several places in Western, Sabaragamuwa, Southern and Uva provinces and in Kandy and Nuwara-Eliya districts after 2.00 p.m.

Mainly dry weather will prevail over the other parts of the island.

Misty conditions can be expected at some places in Central, Sabaragamuwa and Uva provinces and in Ampara district during the early hours of the morning.

The general public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka during 05th to 15th of April in this year.

The nearest areas of Sri Lanka over which the sun is overhead today (10th) are Nagawilluwa, Galgamuwa, Sigiriya, Palugasdamana and Mankerni about 12:11 noon.

Condition of Rain:
Showers or thundershowers are likely at a few places in the sea areas off the coast extending from Colombo to Hambantota via Galle and Matara.

Winds:
Winds will be south-westerly or variable. Wind speed will be (20-30) kmph. Wind speed can increase up to 40 kmph at times in the sea areas off the coast extending from Galle to Pottuvil via Matara and Hambantota.

State of Sea:
The sea areas off the coast extending from Galle to Pottuvil via Matara and Hambantota may be fairly rough at times. The other sea areas around the island will be slight.

Temporarily strong gusty winds and very rough seas can be expected during thundershowers.

By Adolf

The governance failure at NDB—spanning the Board of Directors, Audit function, management, and CBSL supervision is simply illustrated below. This episode —serves as a stark example for better understanding. It underscores the critical need for vigilance, strong skills, and active oversight at all levels. Equally important is that the CEO and top management fulfill their responsibilities diligently, delivering the performance expected for the salaries they are paid. This incident is a reminder that governance and accountability cannot be mere formalities—they are essential to the credibility and stability of the banking sector to safeguard public deposits and their livelihoods.