Another group of around 6000 depositors have been pushed into the portals of misery following the collapse of Central Investment and Finance PLC (CIFL) as the Central Bank (CB) has failed to safeguard the licensed finance company by taking precautionary measures. Disgruntled CIFL depositors reiterated that the CB’s restructuring plan will swallow their lifetime savings [...]

The Sundaytimes Sri Lanka

CIFL depositors, pushed to the portals of misery, reject Central Bank revival plan


Another group of around 6000 depositors have been pushed into the portals of misery following the collapse of Central Investment and Finance PLC (CIFL) as the Central Bank (CB) has failed to safeguard the licensed finance company by taking precautionary measures.

Disgruntled CIFL depositors reiterated that the CB’s restructuring plan will swallow their lifetime savings as they will have to wait at

Mr Piyasena Weerasinghe

least for seven years to get at least 40 per cent of their hard earned money after converting 60 per cent of their deposits into non –voting shares of the collapsed finance company.

Around 2000 depositors of troubled CIFL unanimously rejected the Central Bank’s restructuring plan and put forward an alternate plan at a fully packed meeting at New Town hall in Colombo on Monday.

President of the newly formed CIFL Depositors Association Piyasena Weerasinghe said that the committee has devised an alternate plan to resurrect the company.

He said that they are going to ask the CB to provide a sum of Rs. 1 billion of their defaulted money by Aspic Homes, a subsidiary of CIFL for a housing scheme in Homagama, to operate the plan initially and later find an investor to make a capital infusion to resurrect the company.

The Homagama housing scheme (where the money was siphoned off) was started in 2006 with CIFL money. From the inception Rs. 30 million was stated as received as interest from Aspic to CIFL, according to financial reports published up to 2012.

The CB could have easily monitored it in the balance sheet and they could have easily known that the money was not coming into CIFL. For them to overlook this for six long years surely is not a mistake, he said.

The depositors have agreed to block their deposits for two years and draw the interest at 12 per cent till the company is revived in accordance with their own revival plan.

Depositors have put the blame on the CB for the failure to monitor the financial mismanagement of the company directors, for allegedly cheating and committing a criminal breach of trust with regards to depositors’ money.

Mr. Weerasinghe told the gathering of desperate depositors that the CB has failed to take any action to save the company from collapsing; instead they have given its consent to appoint Touchwood Group Chairman Roscoe Maloney and wife Swarna as Chairman and Co-Chairman with a promised investment of US$ 12 million and the board of directors of the CIFL has been re-constituted with three Maloney nominees.

Jagath Wettasinghe, Committee member

But the Maloney couple has failed to infuse the capital investment promised by them placing the company in dire strait, he said adding that the restructuring plan proposed afterwards cannot be acceptable as it will create another “Golden-Key” crisis.

Mr. Weerasinghe noted by advertising that it is a registered finance company in the CB the company has attracted nearly 6000 depositors with total deposits of Rs. 3.4 billion.

He emphasized that the CB should be responsible for the plight faced by the 6000 customers who got into trouble by investing in the sinking CIFL and CB’s intervention was too late as they have appointed People’s Leasing and Finance PLC as the Managing Agent of Central Investment and Finance PLC (CIFL) with effect from 1st July 2013 and put forward a restructuring plan a couple of weeks ago although the company was in trouble since 2012.

Some CB officials accused

CIFL depositors have also accused some senior regulatory officials of making deals when licenced finance companies such as CIFL are faced with the threat of collapse.

These officials are in the practice of allowing the devaluation of assets and handing it over to their business cronies putting their friends as heads of collapsed companies to continue the operations, they allege.

Similar methods have been adopted by the CB in their restructuring plans for at least four more companies, depositors said.
The CB is planning to extend financial assistance under the Liquidity Support Scheme for some of troubled finance companies, Finance Ministry sources said adding that the ministry is monitoring the situation as it has received complaints of malpractices by some top officials handling the subject.

A section of the audience (Pix by M. A .Pushpa Kumara)

Mr. Weerasinghe told the Business Times that a top official told a group of depositors that the CB has no responsibility of repaying deposits of collapsed licenced finance companies but depositors had kept faith in the CB to safeguard peoples’ deposit of over Rs.2.6 billion and the money other investors put in CIFL. This is a company that has assets over Rs.3.6 billion, he said.

Parliamentarian and Economist Dr. Harsha De Silva said that if Sri Lankan financial institutions were failing, the supervisory authority was neglecting its duty.

The CB had learnt no lessons from the Sakvithi and Golden Key catastrophes, he said, charging that promised legislation to prevent public deposits being jeopardised and were being confined to bookshelves.

Many frustrated depositors who gathered at the New Town Hall Colombo staged a protest demonstration chanting slogans against the CB.

“Kumantrane, kumantrane, mokakdame kumantrane, Mahaa Bankuwe kumantrane. Cabraalge kumantrane. Gedara yawavu, mahaa bankuwa gedara yawavu, Cabraalwa gedara yawavu” (plot, plot, what is this plot, Central Bank Plot, Cabraal’s plot, send home, send Central Bank home, send Cabraal home) they chanted in despair.

Many of the deposits for these finance companies are in fact not spare savings in access of abundance of money, but just the retirement benefits of old people who deposit them and try to obtain maximum interest as their monthly income for their future livelihood.
Relating pathetic and heart-rending accounts, these old people spend the interest earned for medical care in their old age sicknesses, children’s education and the lump sum at maturity for children’s marriage, etc.

H.C.K. Rajasooriya of Moratuwa, with a grim face, was seen shuttling along the verandah of the New Town Hall restlessly while the depositors’ meeting was on.

She told the Business Times that she had deposited all of her Provident Fund benefits in CIFL after toiling 27 years in a private firm.

Interest income looks after children

She said that she opted for voluntary retirement prematurely as she needed money for her three children’s education. She said that with this income they have adjusted their family expenditure.

Ms. Rajasooriya said that clipping off the income jeopardized the family affairs putting the entire system into a mess.
Ajantha Fernando of Mahadeniya, Oruwala Aturugiriya who was a former employee of Sri Lanka Broadcasting Corporation and Sri Lanka Rupavahini Corporation, sent an e-mail to the Business Times from her sick bed stating that she is one of the victims of the CIFL saga.

After meeting with an accident and receiving injuries to her spinal code she lived on the interest on her deposit from CIFL as she has no permanent income, she said.

She has no money to take treatment for her ailment and even to pay light bills and water bills and she is living in pain and has became a beggar overnight due to the collapse of CIFL, she added.

J.R.S George of Daluwakotuwa, Kochchikade revealed that he has deposited Rs. 600,000 in CIFL. His wife is suffering from a terrible kidney disease and with the monthly interest he was able to get his wife’s blood transfusion done and was able to buy her medicine.
Doctors have warned him that his wife’s kidney ailment is critical and will have to go for a kidney transplant and is now in the General Hospital under treatment. He noted that he has no money to save his wife’s life.

P. K. Mahindapala, Secretary of the Depositors Association said that all the depositors are with them as one body to get justice and plans are afoot to put the company on to the rails again, sooner the better.

Jayasuriya promoted CIFL

He noted that well known cricketer Sanath Jayasooriya appeared in TV advertisements to convince the people on the stability of CIFL and many depositors had been hoodwinked by these advertisements along with SLBC Chairman Hudson Samarasinghe’s remarks in favour of CIFL over state run radio.

He called on these two well known personalities to help CIFL depositors to overcome this problem.

Some of these depositors pointed out that according to the Finance Business Act No.42 of 2011, these finance companies are mandated to insure the depositors’ funds and if it has been done, the insurance claims would have been obtained when such finance companies collapse.

Meanwhile the Colombo Fort Magistrate recently questioned the CB as to how CIFL reached a position of dishonouring depositors if the regulator had supervised the activities of the finance company.

Magistrate Thilina Gamage posed this question to H.B.D. Karunaratne, acting Director of the Non Bank Finance Institutions of the CB, when he informed Court that the CB had continuously supervised the activities of CIFL as a licensed finance company.He told Court that on a previous occasion the CIFL Director Board had failed to submit the relevant documents to the CB when it carried out supervision into the finance company.

He further told Court that CIFL was liable to pay a sum of Rs. 1 billion to the depositors.

Depositors noted that in the circumstances the CB should accept responsibility for its lack of professionalism in the department for the Supervision of Non-Bank Financial Institutions.

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