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Statutes and regulations associated with Regulated Finance Companies

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By Shiranthi Gunawardana –
Attorney at Law and Legal Consultant to the Finance
Houses Association

Regulated Finance Companies (RFCs) are major financial intermediaries which are duly regulated and governed by the laws of Sri Lanka. RFCs are strictly governed by virtue of statutes and Acts such as Finance Business Act No. 42 of 2011. The other statutes which are applicable are Finance Leasing Act No. 56 of 2000 as amended, Consumer Credit Act, Mortgage Act, Motor Traffic Act, Inland Trust Receipts Act, Debt Recovery Special Provisions Act, Criminal Procedure Amendment Act, Companies Act and so on.

The Finance Business Act No. 42 of 2011 is an Act to provide control and supervision of finance companies registered in the Central Bank and the act has repealed the Finance Companies Act No. 78 of 1998. The Act outlines the licensing procedures, directions, rules and requirements of finance companies, including core capital reserve funds, admissible business activities by finance companies. Under this act, it is mandatory that a company cannot accept public deposits unless it is registered and licensed as a finance company under the Act and to be registered as a Licensed Finance Company, that company needs to have registered under the Companies Act, No. 7 of 2007. The Act also provides for a separate director in the CBSL to monitor and control NBFIs. According to the sections 13 and 14 of the Act, the director is vested with power to act upon NBFIs if they fail to comply with the directions which are listed in sections 13 and 14 suggested under the Finance Business Act.

All RFCs are legally bound and obliged to comply with all the directions and circulars issued under the Finance Businesses Act No. 42 of 2011.

Importance of the Finance Leasing Act

The Finance Leasing Act No. 56 of 2000 as amended by Act No. 24 of 2005 and Act No. 33 of 2007 makes it that it is mandatory to have a license under the Finance Leasing Act to carry on finance leasing businesses. Section 32 of the Finance Leasing Act clearly sets out the repercussions of carrying on Finance Leasing Businesses without registration. Under this section, the director of the Central Bank has the right under Section 32(2) and Section 32(3) (a) (b) to apply to the High Court and obtain an injunction.

Under the Finance Leasing Act, there are 4 mandatory provisions which have to be strictly followed as provided by Section 31 of the Finance leasing Act No. 56 of 2000.

 

The mandatory provisions are

• Section 11 – Right to undisturbed possession

• Section 16 – Termination on variations of a supply agreement.

• Section 22 – Computation of damages recoverable from the Lessee.

• Section 24 – Which has been amended by Act No 24 of 2005 – Which provides for transfer or assignment of Lessor’s rights.

For RFCs – To carry out finance business and to accept public deposits, a license has to be obtained from the monetary board which has to be annually renewed and for finance leasing businesses a separate license which is again renewable annually has to be obtained.

Approved credit agency status is granted under the Mortgage Act No. 06 of 1949 as amended. The Trust receipt ordinance No. 12 of 1947 and the Inland trust receipt Act of No. 14 of 1990 also are Acts under which businesses can be carried on.

Under these Acts, with the relevant authority given, a finance company can engage in mortgage of movables and mortgage of shares and allied businesses.

The mortgage of corporeal movables such as gold articles, motor vehicles can be carried on by finance companies who are also approved credit agencies and can enjoy the special benefits granted under these Acts in their recovery process.

It is evident from the above statues and regulations that RFCs are well regulated and governed and are legally bound to abide by the said regulations and directions. RFCs are aware of the consequences of failing to abide by these regulations, accordingly 99% of RFCs do comply with these regulations which is an encouraging sign for customers to embrace the services of RFCs.

The writer is the Legal Consultant of the FHA with 45 years of experience in the finance industry.



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LOLC Al-Falaah unveils pioneering Wadi’ah Gold-Storage Facility with multiple customer benefits

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Sri Lanka’s most awarded and trusted Alternate Financial services brand, LOLC Al-Falaah recently unveiled their ground-breaking new product – the Wadi’ah Gold Loan Facility. This is the 1st time a Finance company in Sri Lanka is offering this facility. Al-Falaah Wadi’ah is a unique gold storage option offered to Al-Falaah’s valued customer base. All gold articles are tested for quality and authenticity using state-of-the art equipment by the company’s experienced staff without causing any damage to the jewellery. A unique ‘Gold Storage Certificate’ with the description of articles, including weight, quality and quantity along with the market value will be issued to the customer when obtaining this facility.

Speaking about the new product, Mr. Shiraz Refai, Deputy General Manager of LOLC Al-Falaah said, “Gold is a favourite investment option at all levels within the concentrated community. The metal is usually pawned, sold or exchanged when in need of cash. As the conventional Pawning options and Gold Loan offering has limitations to cater to the specific needs, as well as contradict with certain beliefs of the community, a concept acceptable and practiced in the industry is introduced by LOLC’s Alternate Financial Services Unit to its valued customer segment”.

Accordingly, a unique feature has been introduced to the Al-Falaah Wadi’ah Gold Storage facility offering the Customer the benefit of obtaining an interest-free maximum Cash-Advance in the industry at zero mark-up against the gold storage certificate value for any emergencies. In addition, for the convenience of the customers, the Gold storage facility period is extended from 3, 6 and 12 months without any requirement for a deposit and the custodial fees are comparatively competitive. The stored gold articles will also be offered a free Takaful cover with a reassurance of highest safety and security.

The Al-Falaah Wadi’ah gold storage facility will be initially available at selected branches including Wellawatta, Akkaraipattu, Kalmunai, Pottuvil, Grandpass, Maradana, Mawanella, Matara, Nawalapitiya and Negombo. Al-Falaah aims to make the facility available across all LOLC Finance branches and dedicated Al-Falaah centers island-wide by the end of the 1st quarter of 2021.

Commenting on the new Al-Falaah Wadi’ah Gold loan facility, Nishantha Jayasekera, Chief Manager, SME Unit & Head of Gold Loan Business of LOLC Finance said, “The main aim of this facility is to give financial-access to the grass-root level clients who do not have direct access to banking & finance, but require small cash advances to develop daily businesses and self-employment. Through this product and its value added features, we hope to cover all segments of the population”.

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LANKATILES donates high-end ventilator to Colombo North Teaching Hospital

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A Rs. 4.3 million ventilator has been donated to the Coronary Care Unit of the Colombo North Teaching Hospital, Ragama, by LANKATILES, the country’s leading tile manufacturer.

The machine was described as a high-end, world-class piece of equipment suitable for all patient groups.

Present at the official hand-over were Mr Mahendra Jayasekera, Managing Director of Lanka Walltiles PLC and Lanka Tiles PLC, Dr. S. P. A. Liyanage Ranaweera, Director of Colombo North Teaching Hospital, and Dr. Sanjeewa Rajapakse, Consultant Cardiologist of the hospital.

At a time when state-of-the-art equipment is urgently needed to contain the COVID-19 pandemic, LANKATILES reaffirmed its commitment to help frontline hospital staff in their efforts at reducing the spread of the virus and easing patient numbers.

The company said this was a commitment it is ready to stand by at all times in the interests of the country.

 

 

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Sampath Bank hosts Central Bank’s ‘MatarataQR’ event to promote QR code use

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Matara, April 3rd, 2021: Sampath Bank PLC recently hosted the Central Bank of Sri Lanka’s (CBSL) MatarataQR event, in a bid to drive awareness and increase acceptance and usage of LANKAQR, the common Quick Response (QR) code standard for the country that was introduced in 2020.

Encouraging consumers to adopt the use of QR codes in their day-to-day transactions, the event was held at the Sanath Jayasuriya Grounds in Matara under the patronage of the Chief Guest, Dullas Alahapperuma, Minister of Power and Guest of Honour, D. Kumaratunga, Director – Payments and Settlements, Central Bank of Sri Lanka; along with senior officials from the CBSL, other commercial banks and financial institutions. Sampath Bank was represented by Nanda Fernando – Managing Director; Tharaka Ranwala – Senior DGM – Operations / Group Chief Marketing Officer and Ajith Salgado – Group Chief Information Officer.

At the event, the Bank actively promoted its ‘WePay’ mobile wallet which helped attract more customers while also onboarding new merchants. A 25% cash back was on offer for payments at over 200 merchants in Matara on the day, made via the LANKAQR enabled WePay digital mobile payment app.

“We are very proud to partner with the Central Bank to host this event that will highlight the safety, convenience and speed of getting onboard the LANKAQR payment standard to the people of Matara. These benefits, coupled with the advanced digital banking solutions offered by Sampath Bank, make it a simple choice to migrate to digital payment technology and we warmly invite the merchants in Matara to come experience the benefits of adopting this new method of payments,” said Nanda Fernando, Managing Director, Sampath Bank PLC.

Sampath Bank is a 100% local bank that has deeply rooted itself in the lives of the people of Sri Lanka. Established in 1987, the bank has become a state-of-the-art financial institution that continues to be a market leader today thanks to its constant innovation and customer focused approach to business. It has introduced many firsts to the Sri Lankan banking sector including introducing ATMs to Sri Lanka, extended banking hours and slip-less banking to name a few. The Bank is steadily transforming itself into a ‘tech company engaged in banking,’ from the traditional approach of a bank engaged in technology.

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