CB cancels TKS Finance’s licence

Friday, 20 September 2019 00:00 - - {{hitsCtrl.values.hits}}

Says financial condition failed to improve even after regulatory action was taken
Insured depositors to be paid compensation up to Rs. 600,000, remainder to be recovered post-liquidation

The Central Bank yesterday said it had decided to cancel the licence of TKS Finance Ltd. as its financial condition was unsatisfactory and necessary steps would be taken to pay compensation to insured depositors up to Rs. 600,000, with the remainder to be recovered after liquidation, the monetary authority said in a statement.

TKS Finance Ltd. (TKSF), a Licensed Finance Company under the Finance Business Act No. 42 of 2011 (FBA), has continuously been violating the provisions of the FBA and several directions and rules issued thereunder. Further, the financial condition of TKSF is not satisfactory due to a deficient capital level, poor asset quality, continuous losses and failure to repay depositors’ money on demand or at maturity, etc.

Despite several time extensions granted to TKSF by the Monetary Board of the Central Bank of Sri Lanka to comply with the provisions of the FBA and directions and rules issued thereunder, no satisfactory progress was made in order to revive the critical condition of TKSF and to comply with such provisions, directions and rules.

Considering such serious concerns prevailing at TKSF, the Monetary Board took numerous regulatory actions, including imposing maximum ceilings on deposits and borrowings, suspending the acceptance of new deposits, suspending the granting of new loans and advances and restrictions on investment activities. However, since there was no satisfactory progress at TKSF even after such regulatory actions were taken, the Monetary Board issued a notice of licence cancellation to TKSF on 10 July 2019.

TKSF had the opportunity to tender its written objections to the notice of licence cancellation within the stipulated time period in the FBA, giving reasons as to why the licence issued to TKSF should not be cancelled. Accordingly, TKSF submitted its objections to the Monetary Board through letters dated 2 and 8 August 2019.

As the reasons offered in the objections did not provide sufficient and substantial grounds to withdraw the notice of cancellation of the licence issued to TKSF, the Monetary Board, in the terms of Section 37 of the FBA, decided to cancel the licence issued to TKSF under the FBA to carry on finance business with effect from 19 September 2019.

The Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) will take necessary action to compensate insured depositors of TKSF up to a maximum of Rs. 600,000 per depositor as per the regulations of the SLDILSS. Further, depositors may be able to recover part of their remaining deposits through the process of liquidation subject to the regulations relating to priority of claims in a winding up of a finance company.

All debtors of TKSF are advised to pay their dues to TKSF on time only through a bank account under the name of TKSF and maintain records for all payments to avoid litigations against the debtors of TKSF. Furthermore, the Central Bank requested depositors to co-operate with them in this regard.