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Pramuka to be liquidated

by Ravi Ladduwahetty

The Central Bank of Sri Lanka announced last night that the Pramuka Savings and Development Bank Ltd (PSDBL) will be liquidated in accordance with a decision taken by the Monetary Board. Pramuka is the first Bank to be liquidated in independent Sri Lanka.

A statement issued by the Central Bank said that the license issued to the Bank has also been cancelled.

Central Bank Governor A.S. Jayawardena told the Daily News late last night that the actions of the Pramuka Savings and Development Bank Directors had resulted in the Monetary Board's decision to liquidate the bank.

Ruination had set in with serious fraud, despite the proclamations made through the media by former Chairman Rohan Perera about the sound performance of Pramuka, he said.

"It was the unanimous decision of the Monetary Board that liquidating at this stage was the most effective strategy to stem the rot. This is the best way of cushioning the deleterious effects," he said.

The Governor also said that Central Bank's Director of Banking Supervision Mrs P.T. Sirisena will serve as the liquidator and the bank will dispose of all the assets to settle the creditors, but stressed that it will be done only under court supervision.

The liquidator will see whether there are the hot liabilities which will be given priority settlement. They will be settled after the assets are disposed.

The depositors can expect to get their money back from the proceeds of the sale of assets.

Mrs. Sirisena said that the decision to liquidate the Pramuka Savings and Development Bank was with effect from October 25, 2002, the very day that the Bank was suspended and that was in accordance with Section 30(3)(b) read with Section 30(10) of the amended Monetary Law Act.

Before the decision of the Central Bank to liquidate Pramuka, the Central Bank had made available to the Board of Directors of PSDBL its findings and said that the decision to make the Bank insolvent was due to the detection of mismanagement, unsound, improper and imprudent practices at the bank by those who were responsible for the affairs of the Bank.

The Pramuka Board had also been given an opportunity to respond to these findings.

Mrs Sirisena said that Pramuka Directors had responded to this request by writing which said that they did not have any objections to the findings and the observations of the Central Bank, but requested that the Bank be made available Rs. 600 million.

According to Mrs Sirisena, the Pramuka Directors also did not demonstrate any commitment on either their part and those of the shareholders to contribute any funds to revive Pramuka and in the estimation of the auditors, a sum much larger than Rs. 600 million was needed to revive the Pramuka which would have meant that a sum much larger than Rs. 600 million was needed to revive the bank.

This would have meant that the Bank would have to use the tax payers' funds to revive Pramuka and that was the decision to liquidate the Bank, she said.

The examination of the affairs of Pramuka has also led to the Central Bank to refer these investigations to the Criminal Investigations Department, the Commission to Investigate Allegations of Bribery and Corruption and to the Commissioner General of Labour.

Meanwhile, Chairman of Pramuka Savings and Development Bank Udaya Nanayakkara when confronted with the allegations, said that his Bank had submitted a proposal drafted by its Managing Director H.A. Mendis for a Rs. 600 million credit line for the revival of the Bank and that the management of the Pramuka Bank was confident that the Central Bank would approve the proposal. However, it was sad that the CBSL decided to the contrary.

Asked the degree of his liability under the circumstances, he said that he was the Chairman of the Bank for a mere fortnight.

When pointed out that he was a Director of the Bank prior to that, he said that he was a mere non executive Director who was responsible for the policy formulations and that he was not responsible for the day-to-day running of operations of the Bank.

He said that his sympathies were with the Board, the Management, the staff and the employees.

Meanwhile, the Pramuka Bank Stakeholders' Association also protested at a news conference yesterday morning at Kollupitiya where they urged the Board to resign or be evicted by the Central Bank

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