A new finance company law that is to be introduced in Sri Lanka will provide for tougher penalties against illegal deposit taking and give regulators wider powers to probe abuses.
The new law will repeal the existing No 78 Finance Company Act of 1988, which was seen as inadequate to deal with abuses that occurred in recent years where unlicensed deposit taking institutions duped unsuspecting savers with high interest rates. A Large number of savers has still not been able to recover their funds deposited in institutions which collapsed and some of which are being rehabilitated by the regulator. The Central Bank came in for criticism for not doing enough to prevent finance scams but the regulator maintained that it did what it could under the existing law.
A statement issued by the Government Information Department said the new law provides for a clear definition of deposits and also bans the use of names or letters similar to registered finance companies by other firms. It said unauthorized acceptance of public deposits will be made a crime and those violating the law can be indicted in the high court. It added that registered finance companies will also have to improve their public disclosures.