People’s Bank clarifies reports on funding MTD Walkers Group

During the past few days various news agencies and media published news reports regarding financial facilities granted by People’s Bank to MTD Walkers PLC and Walkers Group of Companies. Some of these reports stated that these financial facilities had been extended by People’s Bank without adhering to the proper procedures. Under this background, while informing the public of the correct position with regard to this matter, People’s Bank Chairman Hemasiri Fernando has issued the following statement to enable the general public to get to know the facts and not be misled due to false and incomplete information reaching them:

MTD Walkers PLC has been a customer of People’s Bank since 2004. Since that year MTD Walkers PLC has from time to time obtained loan facilities and these have been duly repaid and settled in full. 

People’s Bank has granted loan facilities to MTD Walkers PLC after a proper evaluation of the projects for which the loans were obtained from People’s Bank. The basis for the quantum of loans granted was the business scope of the Company and the repayment capacity of the Company. Loans were granted only after considering these facts. 

A bank grants loans to a natural person or a legal personality, i.e. a Company. Accordingly, one of the main reasons for a Company to be considered as separate legal personality is the fulfilment of the objective of the government to promote business within the country. Since a Company is a separate legal personality, the Company and its Directors are considered as separate entities in the eyes of Law. Therefore, its Directors are separate from the Company. 

Furthermore, People’s Bank has granted credit facilities amounting to Rs. 10 billion over a period of time and these loans have been granted not only to MTD Walkers PLC but to Walkers Group of Companies. As such, the said loans had been granted to the Group of Companies and not to Jehan Amaratunge. He is only a Director of the Company. In this instance, while MTD Walkers PLC and the group are considered as separate legal entities before the Law, the Group of Companies should be considered as separate entities from Jehan Amaratunge. 

Jehan Amaratunge joined People’s Bank as a Director in 2010. W. Karunajeewa was the Chairman of People’s Bank at the time. 

Jehan Amaratunge was appointed as a Director of MTD Walkers PLC in 2012. But, as stated above, the business relationship between People’s Bank and MTD Walkers PLC and Walkers Group commenced prior to that, in 2004.

Therefore, loan facilities were granted to MTD Walkers PLC by People’s Bank after an independent assessment of its business activities and the repayment of loans took place together with interest thereon by MTD Walkers PLC, etc.

Generally, the approval of the Board Executive Credit Committee is sufficient for credit proposals in respect of Bank’s customers. However, in special instances such as the one stated above, following regulation of the Central Bank of Sri Lanka, it is mandatory to obtain the approval of the Board of Directors of People’s Bank for the relevant credit proposal. 

Accordingly, necessary approvals of the Board of Directors had been obtained for the loan facilities granted in respect of the credit proposals of MTD Walkers PLC. 

Walkers Group of Companies engages in various types businesses and People’s Bank has granted loans only after assessing the feasibility of all these projects.

We reiterate that Jehan Amaratunge did not exert any pressure upon People’s Bank in the approval of credit proposals in respect of MTD Walkers Group of Companies. He has duly declared his interests. Under such an environment, we also reiterate that the approvals of the above loan facilities were made by the Board of Directors of People’s Bank independently following applicable regulations.

The Central Bank has not issued any regulation barring a Director of a bank or any other Company in which he is a Director from obtaining a loan facility from the relevant Bank. Therefore, not only the People’s Bank but also any other bank could grant a loan facility to a Director of the same Bank. But the Central Bank of Sri Lanka has formulated regulations in such instances. The Central Bank regulations should be followed when a Director of a bank or the Company in which he is a Director in obtaining a loan from the same bank.

When considering the above facts, we stress that People’s Bank has adhered to the established credit procedure when granting the above loan facilities to MTD Walkers PLC and the Walkers group of companies, and followed the regulations the Central Bank of Sri Lanka, together with principles of good governance.

Furthermore, it should be stated that the repayment of the loans obtained by the MTD Walkers and Walkers group of companies is being carried out satisfactorily.