Business Times

Depositor files action against F & G for default on maturity payment

A case was filed at the Colombo District Court on Monday against the Finance & Guarantee Company, (F&G) a registered finance company run by Central Bank appointed Managing Agents, Merchant Bank of Sri Lanka (MBSL), for default of Maturity Payment of depositors and ‘explicit promissory notes’ issued to them .

The petitioner who filed the petition alleged that the company has refused to repay their matured deposits violating the undertaking given by the management. He noted that MBSL was appointed Managing Agents by the Central Bank to safeguard depositors, restructure the company and help establish confidence in this regulated financial institution.

To this end, MBSL on 20th April 2009 wrote individually to depositors urging them to renew their deposits for one year. F & G then issued deposit certificates for 12 months at 21% interest paying part thereof and issued promissory notes for the balance interest with no period of grace. MBSL requested this one year’s reinvestment "to formulate a win - win situation for both investors & the Company in the near future". After one year depositors were told that they would not be able to withdraw the deposits they had made into the company heeding the request of the management.

Aggrieved depositors, particularly elderly, citizens told the Business Times that the solicited one year period of reinvestment must surely have been determined with recourse to strong evidence of improved liquidity. If the urging of reinvestment was merly to get round immediate problems, then MBSL and F& G were violating the Central Bank intentions, they added.

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