Monday 14th August, 2023
Non-performing loans affecting the local banking sector amount to a whopping 1.4 trillion rupees, State Minister of Finance Ranjith Siyambalapitiya is reported to have said. The banks have been able to recover only 17 billion rupees so far, he has added, noting that they are exercising their legal right to foreclose on debtors’ assets kept as collateral. This is a very serious situation, which warrants a state intervention to ensure the stability of the banking sector and grant relief to the hapless debtors as much as possible.
Curiously, the state-owned banks exercise the right of Parate execution selectively. TNA MP Shanakiyan Rasamanickam, quoting from a COPE (Committee on Public Enterprises) report informed Parliament, last year, that among the non-performing loans a state bank was burdened with were those obtained by some businesses with links to the incumbent dispensation. He said a company owned by former Minister Daya Gamage, a financier of the UNP, owed as much as Rs. 3 billion to the bank concerned. His statement has gone unchallenged. Now that State Minister Siyambalapitiya has defended the banks’ right to foreclose on collaterals in case of default, will he care to inform the public whether politicians’ non-performing loans have been written off, or whether any action has been taken to recover them?
Instead of resorting to legal action to deal with defaulters with political connections, the banks conveniently pass their losses on to ordinary borrowers and depositors. Some banks have arbitrarily increased ‘fixed’ lending rates and are paying depositors very low interests in defiance of a Central Bank directive. Thus, the Finance Ministry’s much-advertised efforts to provide a fillip to the economy by lowering lending rates have come a cropper so much so that one wonders whether the government has lost control over some banks.
Microfinance companies have come under fire for fleecing the ordinary people, who borrow from them at very exorbitant interest rates for want of a better alternative. They are above the law to all intents and purposes; the government does not take any action against them. Unfortunately, some mainstream banks have failed to be different from such loan sharks! They have brought the entire banking sector into disrepute. They must be brought to account. The ire of the public is directed at the government.
While non-performing loans are threatening the stability of the local banks, and many unfortunate borrowers are losing their precious assets including their houses, the government continues to lament its financial woes, which it has sought to mitigate by jacking up taxes and tariffs and curtailing essential expenditure. It may not have to do so if it cares to recover losses that big businesses have caused to the state coffers through corrupt deals.
SJB MP and United Republican Front Leader Champika Ranawaka is reported to have asked the government why it has not carried out recommendations by the Committee on Public Finance and the Committee on Public Accounts that losses that the country suffered to the tune of Rs. 16 billion owing to the 2021 sugar tax scam be recovered from seven importers with political connections; one of them bankrolled the Viyathmaga events, where a large number of self-proclaimed intellectuals who entered into a Faustian bargain with the Rajapaksas were wined and dined; among them were some of self-righteous SLPP dissidents, who have taken moral high ground and are pontificating about the virtues of financial integrity, transparency, etc.
One may recall that the current administration scuttled the Election Commission’s efforts to hold the local government elections by claiming that it cannot afford to allocate Rs. 10 billion for electoral purposes. If the losses caused by the sugar tax scam are recovered, there will be enough funds for elections. Curiously, the Opposition is not flogging this issue hard.