Enactment of Microfinance & Credit Regulatory Authority law vital: CBSL

Jun 26, 2020 (LBO) – Central Bank reiterates the requirement for the enactment of a legal framework to regulate unregulated moneylending activities so that a better and more effective regulatory environment is crated for money lending institutions in the future.

Releasing a statement, the bank said the need for the enactment of the proposed Microfinance and Credit Regulatory Authority Act, approved by the Monetary Board of the CBSL is therefore vital.

Commenting on the cancellation of licence of an licensed finance company (LFC), the bank said that it is the final step of a number of supervisory measures, and is done only when it is established that continuation of the business of such finance company would be detrimental to the interest of its depositors and other creditors.

“The CBSL does not ensure that an LFC under its regulation and supervision does not fail but would take all possible efforts to prevent such failure,” the statement emphasized.

“It is categorically stated that no banking regulator extends such assurance, which is evidenced by failures of many reputed international banking institutions during the last several decades.”

The public is invited to be vigilant when depositing their money as to the soundness of the relevant licensed finance company. The Central Bank said it would continue to improve the quality of the information provided to customers to make this decision.

The public is also advised to obtain finance leasing facilities only from registered leasing establishments (RLEs), registered by the CBSL.

It is emphasized that the debt moratorium does not apply to entities other than licensed banks, licensed finance companies, and other specialized leasing establishments registered under the FLA.

The public is also encouraged to inform the CBSL of any such unauthorized organisations providing such leasing facilities and adopting unethical practices.

Press-Release-Format-Eng