By Chathuri Dissanayake
The Cabinet yesterday approved a proposal to amend the People’s Bank act to enable the institution to increase the authorised share capital and issue debentures without government guarantee to strengthen the financial stability and effectiveness of its operations.
In the proposal, Public Enterprise Development Minister Kabir Hasheem sought approval to change section 12 of the People’s Bank Act to increase the share capital from Rs. 1 billion divided in to twenty million shares of Rs. 50 each.
Accordingly, “the authorised capital of the bank shall be Rs. 50 billion divided into one billion shares of Rs. 50 each”. He also proposes that “where deemed necessary in the interest of the Bank, the paid-up capital of the Bank may be determined from time to time by the Minister by order published in the gazette”. However, sub section 2, (b) of the new regulations says that every order made by the Minister “shall be brought before Parliament for approval.”
The Minister also proposed to amend sections 20 & 21, the Bank, to allow it to raise any funds through debentures issued without Government guarantee for the repayment of any Sum due on debentures. Currently, regulations dictate that such issuance should be done with the approval of the Minister in charge of the subject of Finance, subject to Government guarantee for the repayment of any Sum due on debentures.
Accordingly, the Cabinet paper proposes to replace section 20 with “(1) The Bank may, in addition to the sums lent by the Government under section 15 (1) (b) for the purpose of granting long term or medium term loans, raise with the approval of the Minister any sums by the issue of debentures.”
The proposal also includes repealing of paragraph (b) of subsection 1 of section 21 and subsection (3) which relates to Government guarantees. Accordingly, an amendment has been proposed to section 43 by repealing Section 43 (2) (C).