State Birth

The Sri Lankan government is planning a Rs. 2.2 billion capital injection into the failed Pramuka Bank, in hopes of reviving it as a state-owned bank. Money for the capital injection will come through a long-term government bond issue.

Banking Development Minister Wijedasa Rajapakse said the Cabinet of Ministers had approved a draft bill to re-start the bank.

The bill is expected to be tabled in parliament as early as next month.

Rajapakse also said that said fresh staff would be recruited from state and other banks to run the revived Pramuka Bank.

The government has in previous years injected nearly Rs30 billion into Peoples’ Bank and the Bank of Ceylon, through similar restructuring bonds.

Both state banks fell into financial difficulties after politically directed lending turned bad.

Sri Lankan politicians routinely misuse the two state banks to fund pet projects.

Some government ministers attempted to foist the failed bank on Peoples’ Bank and the Bank of Ceylon, but the two banks managed to escape the threat.

-Money Report Newsdesk: lboemail@vanguardlk.com