State-owned Lankaputhra Development Bank has initiated a credit audit in a bid to recover loans amounting to a whopping Rs.1600 million given away during the previous regime, a top official of the bank said.

According to Lankaputhra Chairman Lasantha Goonewardena, who assumed duties this February, these loans are not asset-backed; hence, the bank finds it extremely difficult to recover the moneys.

He also said instead of loaning money to small and medium enterprises in line with the bank’s mandate, it had lent large sums of money to selected individuals and entities with political links to the previous regime.

“Some of the loans were written off without any proper basis. More interestingly large amounts of public money were also offered as grants to certain individuals without any kind of collateral,” Goonewardena said.

The previous management of the bank had interestingly accepted the deeds of temples, government land on long-term lease and ordinary quartz with
little monetary value as collateral for issuing loans.

Goonewardena said that the bank had received letters from the previous Presidential Secretariat, asking for “special attention” for loan applications by politically-connected individuals, which were rejected by the bank.

He also noted that senior Treasury officials too used their official capacities in assisting certain individuals to obtain loans from Lankaputhra Bank without proper collateral.

However, former President and Finance Minister Mahinda Rajapaksa recently charged the current regime’s Finance Minister Ravi Karunanayake for influencing Lankaputhra Bank’s lending process. Goonewardena refuted such claims as completely unfounded and stressed that the Finance Ministry had issued strict instructions to his bank and all the other state banks not to lend to any party without following the proper protocol.