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RanaTop contributor
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Join date : 2015-12-16
Central Bank curtails the expansion of Finance Companies
Sun Jul 31, 2016 9:26 am
http://www.srilankamirror.com/news/item/11828-central-bank-curtails-the-expansion-of-finance-companies
Sri Lanka’s Finance Companies (Non Bank Financial Institutions -NBFI) are to be shrinking further under the Central Bank’s plan to restrict the opening of new branches, NBFI officials warned.
Several CEOs said that the regulator’s proposed plan has prompted them to suspend their business plan this year and curtail expansion out stations.
They accused the CB Governor for trying to prevent the expansion of NBFIs possessing strong financial back up and sound management without taking measures to tackle the low efficiency financial sector (including the state sector) which has caused high cost of intermediation to the public and businesses in Sri Lanka.
A CEO of a Colombo Finance Company questioned as to how the NBFI’s are going to maintain its daily cash flow without branch operations especially during the periods of natural disasters like floods.
He said that some small finance companies had to face cash flow difficulties during the recent bad weather condition in Colombo and the Central Bank should take decisions considering all ground realities deviating from the present elite way of top decision making.
The Central Bank’s decision to stop Commercial Banks practice of giving big loans to expand business of Micro Finance clients of Finance companies had been revealed recently he said adding that NBFI’S cannot provide such credit to them as they are no longer micro finance customers.
It is up commercial banks to service them as they have been elevated to the status of Small and Medium scale Enterprises (SMEs), he pointed out.
The government has also suspended the ‘directed’ mergers or acquisitions (M&As) of finance companies being implemented during the previous regime and it has so far failed to set up Financial Institution Restructuring Agency (FIRA) on the lines of the Resolution Trust Corporation in the United States to help failing finance companies to be recapitalized.
This proposal was made in 2016 budget to take over assets of troubled finance companies by this agency for the purpose of restructuring ailing finance companies.
Sri Lanka’s Finance Companies (Non Bank Financial Institutions -NBFI) are to be shrinking further under the Central Bank’s plan to restrict the opening of new branches, NBFI officials warned.
Several CEOs said that the regulator’s proposed plan has prompted them to suspend their business plan this year and curtail expansion out stations.
They accused the CB Governor for trying to prevent the expansion of NBFIs possessing strong financial back up and sound management without taking measures to tackle the low efficiency financial sector (including the state sector) which has caused high cost of intermediation to the public and businesses in Sri Lanka.
A CEO of a Colombo Finance Company questioned as to how the NBFI’s are going to maintain its daily cash flow without branch operations especially during the periods of natural disasters like floods.
He said that some small finance companies had to face cash flow difficulties during the recent bad weather condition in Colombo and the Central Bank should take decisions considering all ground realities deviating from the present elite way of top decision making.
The Central Bank’s decision to stop Commercial Banks practice of giving big loans to expand business of Micro Finance clients of Finance companies had been revealed recently he said adding that NBFI’S cannot provide such credit to them as they are no longer micro finance customers.
It is up commercial banks to service them as they have been elevated to the status of Small and Medium scale Enterprises (SMEs), he pointed out.
The government has also suspended the ‘directed’ mergers or acquisitions (M&As) of finance companies being implemented during the previous regime and it has so far failed to set up Financial Institution Restructuring Agency (FIRA) on the lines of the Resolution Trust Corporation in the United States to help failing finance companies to be recapitalized.
This proposal was made in 2016 budget to take over assets of troubled finance companies by this agency for the purpose of restructuring ailing finance companies.
- Danidu
- Posts : 264
Join date : 2015-09-03
Age : 43
Location : Welisara
Re: Central Bank curtails the expansion of Finance Companies
Sun Jul 31, 2016 7:35 pm
Thank you Rana.
- Future123Active Member
- Posts : 1435
Join date : 2014-04-09
Re: Central Bank curtails the expansion of Finance Companies
Sun Jul 31, 2016 7:41 pm
Thanks Rana.
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