Six out of Sri Lanka’s 44 Licensed Finance Companies (LFCs) will become eligible to accept foreign currency deposits with the recent introduction of standard criteria by the Central Bank of Sri Lanka (CB) to permit non-bank financial institutions, analysts said last week. According to the criteria stipulated by CB, LFCs which are rated at a credit rating of A- or above by Central Bank specified credit rating agencies will be permitted on application, to open and maintain foreign currency deposit accounts for their customers.
However, the CB says the total quantum of such deposits that could be harnessed by each LFC will be subject to guidelines to be issued by the Director, Supervision of Non-Bank Financial Institutions.
Currently, the Securities and Exchange Commission of Sri Lanka (SEC) has licensed three credit rating agencies namely, Fitch Ratings Lanka Limited, RAM Ratings (Lanka) Ltd and ICRA Lanka Limited.
Fitch sources said that People’s Leasing & Finance Co PLC with a rating of AA-(lka), Central Finance Company PLC with a rating of A+ (lka) and Melsta Regal Finance Ltd rated A+ (lka) will get eligibility whilst according to ICRA Lanka Limited, LFCs LOLC Finance Plc and Commercial Leasing who both hold A- rating would fulfill the criteria. RAM Ratings said that LB Finance will be the only company to fit the criteria as far as they were concerned.
When asked to comment on the pros and cons of the relaxation, Managing Director/CEO of ICRA Lanka Limited, said that W Don Barnabas said that the eligible LFCs will now be able to expand their business and particularly remittances helping them to capture market from what is presently remitted through unofficial sources.
“On the other hand there will be risk of mismatch in managing foreign exchange risk because although they would accept foreign exchange deposits, they wouldn’t be able to lend foreign currency. The risk will also depend on the volumes in which each LFC would be eligible by the CB to harness deposits,” Barnabas added.
- See more at: http://www.nation.lk/edition/biz-news/item/18628-six-lfcs-qualify-cb-criteria.