EAP Group’s ETIFL and SFS CBSL urges investors to keep calm

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By 2018-01-03

By Ishara Gamage

The Central Bank of Sri Lanka (CBSL) has urged investors in the troubled EAP group owned ETI Finance Limited and Swarnamahal Financial Services PLC, to stay calm over the prevailing liquidity issues of the two companies.

Governor of the CBSL, Dr. Indrajit Coomaraswamy addressed the media in Colombo yesterday (2), hours after the Bank took regulatory action against the ETI Finance Ltd and Swarnamahal Financial Services PLC, due to weak financial performances.

The CBSL appointed a panel to manage the affairs of the companies, of which the withdrawal of maturing deposits has since been restricted.

Governor Dr. Coomaraswamy insisted that "the prevailing situation is temporary and there was no solvency (no immediate bankruptcy) issue in those companies."

As a temporary measure to enhance liquidity, the CBSL yesterday announced with immediate effect that it has restricted the withdrawal of maturing deposits and renewed such deposits for a period of six months, while allowing the payment of interests to depositors.

As an immediate measure, the Governor said, a Rs 4 billion liquidity facility will be arranged with a commercial bank, which will be guaranteed by the CBSL.

Dr. Coomaraswamy assured the public that the two finance companies have combined assets of over Rs 36 billion with a monthly operating income of Rs 1 billion and as such the CBSL can easily control the current issues within a short period.

Meanwhile, Dr. Coomaraswamy further revealed "there is a possible investor for this company. The investor has already given Rs 400 million as a loan to the ETI to fulfil their immediate liquidity problem. They already agreed to invest US$ 75 million to take over nine subsidies of the EAP Group excluding the ETI Finance. Through that investment, they are planning to invest in the ETI later on."

Earlier, in a press release issued shortly after regulatory action was taken, the Bank said the regulatory action had been taken as a temporary measure under the provisions of the Finance Business Act, No. 42 of 2011, "with a view to safeguard the interests of the depositors and other creditors of the two companies, and to ensure the safety and soundness of the financial system."

The Governor alluded that the failure of certain finance companies in the past was due to political interference. However, he said this time around there was no interference and that it was possible for the Bank to quickly take corrective action.

The ETI has been serving millions of Sri Lankans for more than four decades.

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