The Governor of the Central Bank of Sri Lanka, Dr. Indrajit Coomaraswamy speaking to the Sunday Observer said he is hopeful the depositors of ETI Finance Limited (ETIFL) will be able to receive at least two thirds of their deposits, even in a worst case scenario, where the ailing finance firm is forced into liquidation.
The Central Bank, having considered the critical financial conditions of ETIFL and the possible implications to the financial system, decided to permit and facilitate ETIFL to sell its shareholdings in subsidiary and sub-subsidiary companies and investment properties, based on a proposal submitted by the ETIFL Board, for a net amount of US$ 75 million.
The deal however is subject to compliance with the applicable laws and regulations, the banking regulator said.
“The idea is that you need another investor to revive ETI Finance. Because, even after the receipt of Rs. 11.5 billion (US$ 75 million), there is still a hole of about Rs. 22 billion that will be outstanding to depositors. So if we can’t find an investor absolutely quickly, then we have an option to liquidate,” the Governor noted.
It is learnt that out of the sales proceeds of US$ 75 million, ETI Finance has been requested to pay 20% of deposit liabilities by July. ETIFL has been instructed to pay urgently, 10% of deposit liabilities (approximately Rs. 3.35 billion) and the accrued interests of Rs.1.4 billion as at end May 2018 using the sales proceeds received. The Monetary Board of the Central Bank said the payments for initial 10% of deposit liabilities will commence on 05th June, 2018.
Explaining the scenario in the case of liquidation, the Governor pointed out that the planned sales proceeds of Rs. 11.5 billion will be available and in addition Rs. 8-9 billion can be generated as compensation to depositors under the Government’s Deposit Insurance Scheme. According to the scheme, each depositor is entitled upto Rs. 600,000 which amounts to Rs. 8-9 billion for the total of 24,000 odd depositors. Further, the Governor said potential sales of the remaining one or two properties of the group could generate around Rs. 2 billion.
“So if we go down the liquidation route which is the worst case scenario, my officials at the Bank have told me that somewhere around Rs. 22 billion of the Rs. 33 billion can be mobilized
All in all, that’s about two thirds or even a little bit more,” the Governor said.
The Governor however highlighted that he is still optimistic that a new investor could be found for ETIFL given that there had been expressions of interest from various parties.
“The Monetary Board has not set a deadline for the liquidation route. But the decision has to be taken early,” the Governor asserted.