Nov 21, 2013 (LBO) – Sri Lanka finance companies with subsidiary finance companies as well as banks having subsidiary finance companies will be asked to merge, President Mahinda Rajapaksa said. “¦I propose that any finance company which is a subsidiary company owned by a main company be absorbed by the main company to consolidate their operations,” President Rajapaksa said in a budget for 2014.
“I also propose that banks, which have finance companies, to consolidate their operations.”
Finance companies play in a sub-prime sector catering to riskier customers that are not served by banks.
Having separate structure allows risks to be separated and higher deposit rates also to be charged, analysts say.
Qualifying payments status will be given for company that has acquired a finance company, President Rajapaksa who is also finance minister said.
“As a part of financial sector strengthening, I propose to encourage development banks to merge..”, he said.
Companies that list will get a three year tax holiday at half the rate