Depositors of failed finance companies get upto Rs.1.1mn in compensation

Announcing further relief to those who lost their savings to now defunct finance companies, the Central Bank last week said the maximum compensation that a depositor receives will be increased from Rs.600,000 to Rs.1.1 million. 

Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) has been in place since 2010 to provide relief to depositors of licensed banks and finance companies in the event of failure or cancellation of 
their licenses.

“The Monetary Board of the Central Bank of Sri Lanka has decided to increase the maximum compensation payment under SLDILSS from Rs.600,000 to Rs.1,100,000, by Rs.500,000. This decision has been taken to provide further relief to the depositors of financial institutions regulated by CBSL in the event of cancellation or suspension of the licences of such institutions,” the Central Bank said in a statement 
last Friday. 

While it may not be directly linked, the move came in at a time when a group of depositors of a failed finance company recently demanded higher compensation over and above what was already paid under SLDILSS. The Central Bank ramped up payments under SLDILSS in recent times, while rigorously litigating companies and their directors for their alleged misdeeds which led the ultimate undoing of these finance companies, costing billions of moneys for thousands of depositors. 

Central Bank Governor Professor W.D Lakshman in January said the SLDILSS would undergo revisions this year to expedite compensation payments to the depositors, either defrauded by or in cases of failed finance companies. 

The compensation enhancement by Rs.500,000 will result in an additional payment of Rs.9.8 billion for the now defunct six finance companies. Meanwhile, the Central Bank requested the depositors of the failed six finance companies who haven’t obtained any compensation thus far, to apply for the revised maximum amount 
of Rs.1.1 million. 

“The Resolution and Enforcement Department of CBSL is currently taking necessary measures to commence the payment of additional compensation expeditiously. The payment mechanism and the date of commencement of payments under the increased compensation threshold will be notified by CBSL in due course,” a Central Bank statement said.

SLDILSS had a balance of around Rs.70 billion by the end of 2019 after paying Rs.852 million as compensation in that year, according to latest available data.