With a view of overcoming liquidity constraints, Asian Finance Limited (AFL), now managed by the Merchant Bank of Sri Lanka, has introduced a ‘Fixed Deposit Refund Scheme (FDRS), for the benefit of depositors and investors.
Under this scheme, depositors were offered repayment of capital and the interest component in monthly installments stretched over 12 - 48 months, MBSL Chairman M.R. Shah, said. With the introduction of this scheme AFL was able to control a panic situation among the depositors and gradually managed to win the confidence of depositors who lost hope during the financial crisis, he said.
Several depositors of AFL including some senior citizens told the Business Times that their interest and capital due for redemption had not been paid and their interest rates were reduced pushing them into difficulties. Replying to these claims Mr. Shah said that there was some reduction in the interest rate, but he was not aware about the non-payment of interest.
He noted that around 60% of depositors have opted to back the company and many other finance companies who faced the crisis also have adopted the same as a best alternate solution. He added that he has instructed AFL to pay special attention to senior citizens, the sick and the needy in the repayment process as well as to pay the due interest on time. However he said that repayment of fixed deposits on maturity outside the refund scheme is still not possible because the company is grappling with financial constraints. He stressed that all customers will be treated alike and there will be no discriminations when paying interest.
Now, 18 months after the run on deposits, there are no panic withdrawals and the customer base has increased to more than 5000 loyal depositors. Currently the tendency is that depositors who entered into FDRS are converting their deposits back in normal deposits, he said.
Outlining the position of The Finance and Guarantee Company (F&G), Mr. Shah said that the company is progressing positively under the ongoing restructuring plan. He said that he has directed the F&G to implement a refund scheme for depositors. MBSL was instrumental in re-structuring the activities of the company and presently it is continuing to pay monthly interest as agreed in the plan, he said.
The company has recommenced commercial lending on June 1 and it will also be restarting mobilizing of deposits by July 1 under a new Deposit Scheme with attractive alternative returns to investors. Meanwhile F &G has initiated action to be listed in the Colombo Stock Exchange in the near future, he added. All finance companies must be listed on the exchange under new Central Bank rules.