The Central Bank, close on the heels of disgruntled depositors of Industrial Finance Ltd (IFL) staging a protest in Colombo on July 8 demanding that their delayed deposits be repaid, this week announced the granting of the first ever financial facility from its Credit Guarantee Scheme to IFL to tackle the issue. The total outstanding credit guaranteed to finance companies under this scheme shall not exceed Rs. 4.2billion, the Central Bank said in a press release.
Under this scheme, Registered Finance Companies (RFCs) and specialized leasing companies (SLCs) are entitled to obtain loan facilities from banks against their real estate and financial assets, to enhance their liquidity position to conduct their normal business operations, with a credit guarantee being provided by the CBSL. As some RFCs and SLCs have a large number of real estate assets, the scheme will provide quick liquidity to such companies, thereby enabling them to discharge their obligations and improve their businesses faster, the Central Bank said.
However, President of the IFL Depositors Society Patricia Fernando told the Business Times that they have been informed that as the available loan amount is small, depositors will only be paid one month’s interest if and when the loan is released. Further the owners, management and staff of IFL are still continuing to defraud the company by resorting to various illegal and underhand activities, she alleged.
Earlier the Monetary Board of the Central Bank appointed People’s Leasing Co Ltd (PLC) as Managing Agents of IFL. PLC took two months to carry out an audit of the company and found that it had a deposit base of Rs.1.8 billion, liabilities of Rs. 280 million while the corresponding asset value was only Rs.480 million. IFL has been closed for business since PLC took over, and this only serves to increase the liabilities of the company as staff has to be paid and essential facilities provided, whereas business is at a standstill and depositors dues remain unpaid for over one and a half years, resulting in untold hardships to depositors and their families, she said. IFL’s staff of over 100 employees has been reduced to about 25 including staff at three branch offices which are virtually closed.
A senior official of the Central Bank said that they have instructed IFL to obtain a loan of Rs.350 million under the Credit Guarantee Scheme, and the company would be able to continue their normal business operations expeditiously. Through the resumption and revival of their normal business, the IFL is expected to be able to meet their creditor obligations, he said.