Credit Support

July 13, 2010 (LBO) – Sri Lanka’s finance companies which are facing liquidity shortages will get new credit under a central bank guarantee scheme with the first facility going to a firm this week, the regulator said. “Through the resumption and revival of their normal business, the RFCs are expected to be able to meet their creditor obligations and such situation is expected to be in the best interest of all stakeholders, including depositors, lenders, staff and customers.”

The Central Bank said registered finance companies (RFCs) and leasing firms will be able to get credit from banks by pledging their real estate or financial assets.

“Currently, several RFCs are negotiating with banks to obtain credit facilities under the scheme,” the Central Bank said in a statement.

“These negotiations are expected to be finalized within a short period of time, with the first ever such facility being availed of by Industrial Finance Ltd on Thursday 15th July 2010.”

Sri Lanka’s finance companies faced a run in 2009 and several were put under special managing agents by the regulator. A change of ownership can also stop a run.

Even a finance firm that has positive net assets may find it difficult to repay la