Having observed the varied views published recently on discretionary payments including payment of cash dividends by licensed banks, the Central Bank of Sri Lanka wishes to clarify the following. Previously, the Central Bank of Sri Lanka, on 13 May 2020 decided to restrict certain discretionary payments of licensed banks, such as declaring cash dividends and repatriation of profits, engaging in share buy backs, increasing management allowances and payments to the Board of Directors until 31 December 2020 with a view to strengthening the liquidity and capital positions of licensed banks under exceptional circumstances amidst COVID 19 pandemic.
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Discretionary Payments of Licensed Banks
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Beware of Online Financial Frauds and Scams
The Central Bank of Sri Lanka has received information regarding several types of financial frauds and scams being operated through social media, Internet-based applications and mobile payment applications. Most of these scams are conducted through web or mobile app based easy loan schemes that attract the public. During such loan application evaluation process, the fraudsters entice the public to share confidential personal customer information/data such as;
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NCPI based Inflation decreased in December 2020
Headline inflation as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100) decreased to 4.6 per cent in December 2020 from 5.2 per cent in November 2020. This was due to the statistical effect of the high base prevailed in December 2019. Meanwhile, Food inflation (Y-o-Y) decreased to 7.5 per cent in December 2020 from 9.4 per cent in November 2020, whereas Non-food inflation (Y-o-Y) increased to 2.2 per cent in December 2020 from 1.7 per cent in November 2020.
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The Central Bank of Sri Lanka Continues its Accommodative Monetary Policy Stance
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 18 January 2021, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively. The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts. The Board, having noted the reduction in overall market lending rates during 2020, stressed the need for a continued downward adjustment in lending rates to boost economic growth in the absence of demand driven inflationary pressures, particularly considering the significant levels of excess liquidity prevailing in the domestic money market.
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Sri Lanka Purchasing Managers’ Index - December 2020
Benefitting from the gradual normalising of economic activities in the country, the Manufacturing PMI continued to increase in December 2020, on a month-on-month basis, recording an index value of 61.2. This was mainly attributable to the increases observed in Production, New Orders, Employment, and Stock of Purchases sub-indices.
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External Sector Performance - November 2020
Amidst a decline in earnings from exports, a number of positive developments were observed in the external sector in November 2020, including a lower trade deficit, and a notable increase in workers’ remittances. Merchandise imports continued to decline supported by the continuation of restrictions on non-essential imports and low global oil prices. There was a notable decline in merchandise exports in November compared to previous months due to disturbances to domestic production processes with the second wave of the COVID-19 pandemic. Workers’ remittances continued to record a growth in November as well. In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in November 2020.
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Swarnamahal Financial Services PLC - Resumption of Business for a Limited Purpose on a Conditional Basis
The Monetary Board of the Central Bank of Sri Lanka (Monetary Board) has made an order permitting Swarnamahal Financial Services PLC (SFSP) to resume business notionally for a limited purpose and limited time under the supervision of the Panel of Management appointed by the Monetary Board (Panel of Management), subject to several strict conditions, in the public interest and in the interests of the depositors of the Company, for a limited period of three (03) months from 13th January 2021 to 12th April 2021, in terms of Section 31(5)(a) of Finance Business Act, No. 42 of 2011 (FBA), only for the purpose of repayment up to fifty percent (50%) of the remaining deposits of the Company (repayment plan).
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ETI Finance Ltd – Making Application to a Competent Court for Winding Up
The Monetary Board of the Central Bank of Sri Lanka (Monetary Board) has decided to cause Director, Supervision of Non-Bank Financial Institutions to make an application to a competent court for the winding up of ETI Finance Limited (ETIF), in terms of Section 31(5)(b) of the Finance Business Act, No. 42 of 2011 (FBA).
Due to the various irregularities taken place since 2011 and inability of the Board of Directors and the Senior Management of ETIF to address the resultant issues, the Monetary Board on 02nd January 2018, issued Directions to the directors of the Company and appointed a Panel of Management to oversee the affairs of the Company.
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Imposition of Penalties to Enforce Compliance on Financial Institutions During 2020 by the Financial Intelligence Unit (FIU)
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 are imposed on Institutions for non-compliances with the provisions of the FTRA. The penalty may be prescribed taking into consideration the nature and gravity of relevant non- compliance of the Financial Institution or the Designated Non-Finance Business.
Accordingly, as the regulator for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) in the country, the FIU imposed penalties amounting to Rs. 2.3 million in total for the period from 01.06.2020 to 31.12.2020 to enforce compliance on Financial Institutions. The Monetary Board of the Central Bank of Sri Lanka decided to publish the penalties imposed on the Financial Institutions by the FIU in order to improve the AML/CFT compliance level in the country.
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Extension of the Suspension of Business of Perpetual Treasuries Limited
The Monetary Board of the Central Bank of Sri Lanka, acting in terms of the Regulations made under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance, has decided to extend the suspension of Perpetual Treasuries Limited (PTL) from carrying on the business and activities of a Primary Dealer for a further period of six months with effect from 4.30 p.m. on 05th January 2021, in order to continue the investigations being conducted by the Central Bank of Sri Lanka.