What? No CB insurance for depositors?

By Elmo Leonard

Wronged depositors of Ceylinco and Sakvithi finance companies (FCs) go uncompensated for over a year; the little recent `compensation’ is compared to a fallen crumb from their deposits. Golden Key and Sakvithi are unregistered FCs. Ceylinco’s The Finance and Guaranteed Co Ltd (F&G) is one of the Central Bank (CB) registered companies “in trouble.” Attorneys-at-law M Thiyagaraja and Kaymandu Perera say that Central Banks of democratic countries ensures insurance for deposits made to financial institutions registered under them; and bears moral responsibility to depositors, for FCs not registered under them. Thus, CB should have offered a bail out package for these investors without leaving them high and dry, Thiyagaraja, who is also a chartered accountant, said.
CB failed to take an initiative when FCs offered high interest rates. All the registered finance companies in Sri Lanka are FITCH rated.
When Sakvithi advertised their rates in the newspapers, what was CB doing? - The two told Lakbima News. When the problem got acute, CB told companies like Okanda Finance to register their companies; (some FCs did not have enough funds to qualify for registration). Going the way of the democratic world, the public of this country, invested with these companies, because they trusted the role of the CB. It is wrong for CB to blame depositors and to back out of their responsibility. Capital formation is the life blood of the economy of a democratic country. Capital formation is encouraged in the free world, and cardinal to an open economy. The total deposits of all faltered finance companies have not been officially given. Some think it ought to be in excess of Rs40 billion.
When such mammoth amounts of capital are lost, small industries, part of the engine of economic growth are grounded.
In such instances, in democratic countries, CBs make out a financial bail out package. Then, the negative spill over to the masses could have been cushioned. The worst of the fallout is yet to come.
State media has given a rosy picture of depositors being compensated. The story of 33-year-old Chinthaka a smalltime entrepreneur is typical of the fact.
With the fall of Sakvithi, Chinthaka read a CB ad in the Sinhala Lankadeepa newspaper informing depositors of FCs registered under it. From it, Chinthaka chose F&G and deposited Rs2 million at 24 percent interest per annum. He was even told that at any time before maturity he could withdraw the money, but at a reduced rate of interest.
Chinthaka avoids using his full name, fearing the company may make it an excuse to further hold back his money.