Non-Bank Finance and Leasing Sector

Non-Bank Finance and Leasing Sector includes Licensed Finance Companies (LFCs) and Specialised Leasing Companies (SLCs). The Supervision of Non-Bank Finance and Leasing Sector is conducted through Examinations, Continuous surveillance, Granting regulatory approvals, Issuance of directions and prudential requirements, Investigating into companies carrying on finance business and accepting deposits without authority and investigating in to public complaints. The directions, regulations and rules issued under the provisions of the Finance Business Act (FBA) mainly cover minimum capital adequacy, liquidity requirements, provisioning for bad and doubtful debts, single borrower limits, limits on equity investments etc.

In the event of any non-compliance with the prudential requirements, the FBA empowers the Monetary Board and Director of Supervision of Non-Bank Financial Institutions (SNBFI) to take necessary corrective actions such as penalty, business restrictions, license cancellation and further investigation of books etc.

Licensed Finance Companies (LFCs)

The regulation and supervision of LFCs is governed by the FBA No. 42 of 2011 which was enacted on 09.11.2011 repealing and replacing the Finance Companies Act No 78 of 1988 to strengthen the regulation and supervision of LFCs and to curb unauthorized finance businesses.

Specialised Leasing Companies (SLCs)

In terms of Finance Leasing Act, No 56 of 2000 (FLA), a certificate of registration issued by the Director of SNBFI is necessary to conduct finance leasing business having prescribed amount of capital.

There are four categories of institutions that are eligible to register as Registered Finance Leasing Establishments (RFLEs). They are Licensed Commercial Banks, Licensed Specialised Banks, Licensed Finance Companies and Public companies (Specialised Leasing Companies). The regulation and supervision function of (SLCs) licensed under the FLA is carried out by the SNBFI Department of the Centrl Bank.

SLCs are not permitted to accept money from the public as deposits. However, they may borrow money by issuing debt instruments such as promissory notes, commercial paper and debentures etc. with the prior approval of the Director of SNBFI.