By virtue of the powers vested under Section 19 (1) read together with section 19 (2) of the Financial Transactions Reporting Act, No. 06 of 2006 (FTRA), financial penalties can be imposed on Institutions for non-compliance with the provision of the FTRA. The penalties may be prescribed taking into consideration the nature and gravity of relevant noncompliance of the Financial Institution or the Designated Non-Finance Business (DNFBs).
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Imposition of penalties to enforce compliance on Financial Institutions during 2019 and 2020 by the Financial Intelligence Unit (FIU)
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The Central Bank approved 3,985 new loans amounting to Rs.11,829 million under the Saubagya COVID-19 renaissance facility during the period 13-23 July 2020
The Central Bank of Sri Lanka (CBSL) approved 3,985 new loan applications, amounting to Rs. 11,829 million, submitted by licensed banks under the Saubagya COVID-19 renaissance facility Phase II & III during the period 13-23 July 2020.
With the new approvals mentioned above, the cumulative number of loan applications so far approved by the CBSL under the Saubagya COVID-19 renaissance facility increased to 26,291 as of 23rd July 2020. Similarly, the total value of loans approved by the CBSL increased to Rs. 72,079 million as of 23rd July 2020. The licensed banks had already disbursed Rs. 45,777 million among 18,007 borrowers island-wide as of 23rd July 2020 as shown in Table – 1 below.
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Compensation Payments to the depositors of ETI Finance Limited (ETIFL) and Swarnamahal Financial Services PLC (SFSP)
Central Bank of Sri Lanka (CBSL) has taken measures to pay the compensation payments to the depositors of ETIFL and SFSP from the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS), upon suspension of the finance businesses of ETI Finance Limited (ETIFL) and Swarnamahal Financial Services PLC (SFSP) with effect from 13.07.2020. Accordingly, compensation payment will be commenced from Saturday 25.07.2020 through selected branches of the People’s Bank Island wide. In terms of the regulations of the SLDILSS, maximum compensation of Rs. 600,000/- per depositor will be paid through 45 branches of People’s Bank Island wide.
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NCPI based Inflation increased in June 2020
Headline inflation as measured by the yearon-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100) increased to 6.3 per cent in June 2020 from 5.2 per cent in May 2020. This was mainly driven by the monthly increase in prices of items in the Food category. Accordingly, Food inflation (Y-o-Y) increased to 13.6 per cent in June 2020 from 11.1 per cent in May 2020, while Non-food inflation (Y-o-Y) remained unchanged at 0.8 per cent in June 2020.
The change in the NCPI measured on an annual average basis increased to 5.6 per cent in June 2020 from 5.2 per cent in May 2020.
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Continuation of Measures Taken to Preserve the Foreign Currency Reserve Position of Sri Lanka
With a view to preserve the foreign currency reserve position of the country and considering the possible negative impact to the Sri Lankan economy due to the outbreak of Covid-19 pandemic, the Hon. Minister of Finance, Economic and Policy Developments with the recommendation of the Monetary Board of the Central Bank of Sri Lanka and the approval of the Cabinet of Ministers have issued an Order introducing following measures on outward remittances on Capital Transactions for a period of six (06) months effective from 02 July 2020.
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Sri Lanka Purchasing Managers’ Index - June 2020
Benefitting from the normalizing of economic activities in the country following the complete relaxation of restrictions for mobility, the Manufacturing PMI increased significantly in June 2020 recording 67.3 with a month-on-month increase of 18.0 index points compared to May 2020.
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Appointments to the Monetary Board - Mr Sanjeeva Jayawardena PC, Dr (Mrs) Ranee Jayamaha and Mr Samantha Kumarasinghe
Three new members have assumed duties as serving members of the Monetary Board of the Central Bank of Sri Lanka (CBSL), pursuant to being appointed to the Board by His Excellency the President, under section 8(2)(c) of the Monetary Law Act with the approval of the Constitutional Council.
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External Sector Performance – May 2020
The external sector showed signs of stabilisation, with the removal of most lockdown measures in the second week of May 2020. The impact of restrictions on non essential imports was observed in May with a notable reduction in merchandise imports. Meanwhile, merchandise exports, which dropped significantly in April, rebounded more than expected during the month. Workers’ remittances were significantly low in May 2020 compared to the same period in 2019, but recorded a notable increase compared to the extreme low levels recorded in April 2020. In relation to financial flows, the total exposure of foreign investment in the government securities market remained significantly low with a marginal outflow of government securities being recorded in May. With the resumption of trading in the Colombo Stock Exchange (CSE) in mid May 2020, there were some outflows of foreign investment.
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Compensation Payments to the depositors of The Finance Company PLC under the Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS)
The compensation payments to the depositors of The Finance Company PLC under the SLDILSS subject to a maximum amount of Rs.600,000 per depositor was commenced on 07.06.2020 through 63 branches of the People’s Bank island wide.
The funds required for making compensations to approximately 147,000 depositors whose eligibility has been confirmed by The Finance Company PLC have already been allocated from the SLDILSS.
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Suspension of Business of “ETI Finance Ltd and Swarnamahal Financial Services PLC”
The Monetary Board (MB) of the Central Bank of Sri Lanka (CBSL) at its meeting held on 10th July 2020 has decided to suspend business of ETI Finance Ltd (ETIF) and Swarnamahal Financial Services PLC (SFSP), in terms of Section 31 of the Finance Business Act, No. 42 of 2011 (FBA) with effect from 13th July 2020.
ETIF and SFSP have become insolvent due to various irregularities taken place, since 2011. Due to the inability of Board of Directors and Senior Management of the respective companies to satisfactorily address the said deficiencies, the MB on 02nd January 2018 issued Directions restricting the affairs of the Companies and the powers of the Board of Directors of the two Companies. A Panel of Management was also appointed by the MB to oversee the affairs of both Companies.