Monday, 29 July 2013 00:00
Sri Lanka’s powerful Credit Agency Approval Board has been activated. “I am confident that as the new members of this important board, with your experience, you can help us for a strong credit system here,” said Minister of Industry and Commerce Rishad Bathiudeen on 18 July at the Ministry in Colombo.
Bathiudeen was speaking to the newly appointed members of the Board for the Approval of Credit Agencies (BACA) of Sri Lanka. BACA appointments were made by the Director General of Commerce functioning under the Industry and Commerce Ministry, as per powers vested on him by the Mortgage Act No. 06 of 1949.
The new members of BACA are ICASL President Sujeewa Rajapaksa, Attorney-at-Law Anura Meddagoda and Ministry of Industry and Commerce Chief Accountant V.M. Weerasinghe.
“I believe that I have selected the most qualified three persons to serve as the members of this vital body,” Bathiudeen added.
The new members pledged their support in taking the BACA process forward. “We pledge our total commitment and fullest cooperation,” said ICASL President Sujeewa Rajapaksa. “This is an honour for us,” he added, as both Attorney-at-Law Meddagoda and Chief Accountant Weerasinghe nodded in agreement.
The approval of credit agencies is an activity vested with the Director of Commerce for well over 60 years, by the Mortgage Act No. 06 of 1949, the Trust Receipts Ordinance 12 of 1947 and the Inland Trust Receipts Act No. 14 of 1990. Thus, the authority to declare any institution as an approved credit agency under all three laws is with the Director General of Commerce (DGC), though the process varies from law to law.
For instance, under Section 114 of the Mortgage Act, the DG Commerce shall declare an applicant (which can be a company, firm, institution, or individual) to be an approved credit agency, only on the recommendation of this three-member Board appointed by the Minister.
Under the Mortgage Act No. 06 of 1949, the Board can give approvals for credit agencies (that have been already approved and licensed by the Central Bank) on exercising additional powers to enter into their mortgage transactions. In that, an approved financial institution already empowered to enter into credit transactions, requests clearance from BACA to enter into ‘mortgage transactions’.
Further, under the regular practice carried out in adherence to Trust Receipts Ordinance No. 12 of 1947 and the Inland Trust Receipts Act No. 14 of 1990, the Director General of Commerce can, on the Board’s consensus, grant powers required for transactions of Trust Receipts (as collateral in clients’ transactions used for both import/export loan applications as well as domestic goods transport) to the applying financial institutions/credit agencies (that have been already approved by the Central Bank).
According to the Department of Commerce, the Department has facilitated the approval of 355 companies up to 2008. Most of the credit agencies approved at the initial stage had been in the form of multi-purpose corporative societies or similar entities. In that, 265 multipurpose societies and 90 ‘other institutions’ had obtained the approval from the Department of Commerce to act as the credit agencies. ‘Other Institutions’ mainly consisted of banks and finance companies.