The loans had been obtained to purchase paddy from farmers in the area. The Bank had eventually written off this amount as bad debt.
These two mill owners who enjoy a major stake in the country’s paddy marketing industry have been used to obtain loans from the banking sector during harvesting times. This had been happening from the time Chandrika Banbaranaike Kumaratunga was President.
United National Party (UNP) MP Ravi Karunanayake raised the issue in Parliament last week. He said COPE examined some documents sent by this state bank giving details about those who defaulted on their loan repayments with the backing of political higher ups.
“We summoned the bank officials and they told about these matters when we were checking on loan outstandings,” Mr. Karunanayake who is a COPE member said.
According to official statements tabled in Parliament, the non-performing loans of the Bank of Ceylon and the bad debt of the People’s Bank had increased to Rs.170 billion by March this year while the total value of non-performing loans is as high at Lankaputhra Bank is as high as Rs.1.5 billion.
At present the Treasury has a method in place for the approval of loans for private traders and mill owners to purchase paddy from farmers. Meanwhile the Paddy Marketing Board is known to buy paddy at a guaranteed price.
Former Polonnaruwa District Janatha Vimukthi Peramuna (JVP) MP S.K. Subasinghe said though there was a mechanism for the issue of loans, small mill owners are always at the receiving end.
“Leading mill owners enjoy a monopoly. Right at the beginning of harvesting, they obtain loans from state banks without any hassle. Then, they buy and hoard stocks. When small scale mill owners get loans after going through difficult formalities, there isn’t much paddy left to be procured from farmers. Leading mill owners also manipulate the prices by the use of devious methods,” he said. (Kelum Bandara)