Stimulus package for financial institutions

by Lalin FERNANDOPULLE

The Central Bank (CB) yesterday launched a stimulus package in a bid to boost confidence and restore stability of financial and leasing companies facing crisis following the recent collapse of non-registered financial institutions. CB under instructions from President Mahinda Rajapaksa introduced the Rs. 4.2 billion package to restore confidence and stability to the financial system in the country as a pre-emptive measure to face the impact of the global economic recession.

The package will help raise liquidity levels and investor confidence in the stability of institution. The Lankaputhra Development Bank (LDB) will act as an implementing and asset management bank for financial institutions who wish to deal with sale of lands and properties.

Institutions could trade according to a proper evaluation of the LDB.

A Special Oversight Committee will be set up to ensure the transactions are conducted in a proper manner. Governor of the Central Bank, Ajith Nivard Cabraal said the Central Bank will respond immediately to restore stability of financial institutions as in the case of Seylan Bank which is now progressing well.

"Banks have been reluctant to lead and as a result confidence in the financial institutions have deteriorated. To allay fears the Government will provide a guarantee to financial companies to continue business without fear", he said.

The reduction of the liquidity ratio from 15% to 10% is another feature of the package which will help the institutions to gain confidence and continue businesses. The CB will ensure those who avail themselves for the incentives will have to take steps to cease transfer of funds to other companies and also curtail special benefits and high remuneration to employees.

The lending and deposit ratio will be reduced to at least 2% more points to ensure repayments will be made in time.

Cabraal said that scheme will also help regain properties acquired by leasing companies without hassle through a convenient procedure.