Six more in negotiationsThe Central Bank guaranteed a loan amounting to Rs. 120 million from Seylan Bank PLC to Industrial Finance Limited (IFL) yesterday, the first of several the Central Bank hopes to unveil in a bid to restoring public trust in registered finance companies and making them profitable businesses once again.
The guarantee is provided against real estate held by IFL, which is yet to be valuated, according to D. P. Kumarage, CEO People’s Leasing Company, the appointed management agents to IFL by the Central Bank. He said the companies deposit base was around Rs. 900 million.
"These funds are intended to help the IFL with its working capital. The money would be used to finance interest payments, withdrawals and day-to-day expenses of the company. It is not meant for deposit repayments. Depositors have to be patient and allow the company to stand on its own feet and resume normal business activities," Deputy Governor Priyantha Fernando said last morning.
The credit guarantee scheme was spoken of last January but the Central Bank, IFL, People’s Leasing Company and IFL depositors’ Association took time to formulate the final scheme.
"It is true we took time with this, but we had to do it right," Fernando said.
The credit guarantee scheme so far applies only to IFL, which, according to Kumarage is yet to finalise a feasible business strategy to take itself out of difficulty.
Fernando said there are five to six other registered finance companies negotiating similar schemes with commercial banks.
"The problem with many of these finance companies is that there is a mismatch between their assets and liabilities. They accept depositor funds (liability) and invest them in long term assets (loans or real estate). So when there is run on deposits there is obviously not enough liquid assets available," he said.
source - www.island.lk
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