BACA introduces vibrant credit system

Minister of Industry and Commerce, Rishad Bathiudeen said he was confident that the new board will help create a vibrant credit system in the country.

He was addressing a ceremony to appoint members to the Board for the Approval of Credit Agencies of Sri Lanka (BACA).

The new members of BACA are President of ICASL, Sujeewa Rajapaksa, Attorney-at-Law Anura Meddagoda and Chief Accountant, Ministry of Industry and Commerce, V M Weerasinghe.

"I have selected the three most qualified people to serve as the members of this vital body," the Minister said.

"This is an honour for us. We pledge our total commitment and fullest cooperation," said Sujeewa Rajapaksa.

The approval of Credit Agencies is vested on the Director of Commerce by the Mortgage Act No 6 of 1949, the Trust Receipts Ordinance 12 of 1947 and the Inland Trust Receipts Act No 14 of 1990.

Thus, the authority to declare any institution as an approved credit agency under all three laws is with the Director General of Commerce (DGC), though the process varies from law to law. For instance, under Section 114 of the Mortgage Act, the DG Commerce shall declare an applicant (which can be a company, firm, institution, or individual) to be an approved credit agency, only on the recommendation of this three-member Board appointed by the Minister.

The Board can grant approval for Credit Agencies (that have been already approved and licensed by the Central Bank) to enter into mortgage transactions, under the Mortgage Act No 06 of 1949.

Tthe Director General of Commerce can, with the Board's consensus, grant powers required for transactions of Trust Receipts (as collateral in clients' transactions used for import and export loan applications and domestic goods transport) to financial institutions and credit agencies (that have been already approved by the Central Bank) under the Trust Receipts Ordinance No 12 of 1947 and the Inland Trust Receipts Act No 14 of 1990.

According to the Department of Commerce, it has approved 355 companies up to 2008. Most of the credit agencies approved at the initial stage were multi-purpose cooperative societies or similar entities. Two-hundred-and-sixty-five multi-purpose societies and 90 'other institutions' had obtained approval from the Department of Commerce to act as Credit Agencies. The 'other Institutions' were mainly banks and finance companies.