Mar 20, 2009 (LBO) – Balance sheets of Sri Lanka’s non bank financial firms have shrunk over 10 percent in two months as jittery savers took cash out, but the sector as a whole is still rolling over most of their deposits, officials said. “Our experience has been that 90 percent of deposits will be renewed,” says Shirley Perera, who heads the Finance Houses’ Association, an industry grouping.
“That rate has decreased to 50 in some companies.”
Pressure on the 34 central bank regulated non bank finance firms which lend to riskier ‘sub-prime’ borrowers who have weak access to commercial banks, mounted after the collapse of illegal deposit taking firms.
One of them was in Sri Lanka’s Ceylinco group, which owned several regulated firms, which are called ‘finance companies.’
Most finance companies have enough assets to back their liabilities, but they have to be liquidated or lending halted to repay depositors who do not want to renew.
Perera estimates that non-bank finance firm balance sheets have shrunk over 10 percent in the last couple of months; with the crisis compounded by a sick economy.
“We aren’t getting many new deposits to continue with our business…withdrawals too have