Finance Ministry rubbishes People’s Bank privatization claims

• Says amendments to People’s Bank Act aimed at increasing the bank’s capital base
• Stresses privatization allegations baseless and politically-motivated

The Finance Ministry yesterday emphasized that the proposed amendments to the People’s Bank Act are not aimed at privatizing the State-owned bank, and rubbished claims made otherwise as baseless and politically-motivated.

“The only objectives are to increase the authorized share capital of People’s Bank and to enable the bank to issue debentures without the additional requirement of obtaining a Treasury guarantee,” a Finance Ministry

statement said.  It further pointed out that as per Section 13 of People’s Bank Act 29 of 1961, the ultimate ownership of People’s Bank vests with the government
of Sri Lanka.

“Its responsibility lies with the Secretary to the General Treasury. People’s Bank Act clearly states that People’s Bank shares cannot be sold to any party other than cooperative societies or to the Secretary to the General Treasury.”

The Finance Ministry stressed that Section 13 has not been included in the proposed amendment bill, and the amendments only seek to amend Sections 12, 20, 21 and 43 of People’s Bank Act.

With the proposed amendments, the government expects to increase People’s Bank’s authorized capital to Rs.50 billion from Rs.1 billion, enabling the bank to issue debentures without the additional requirement of obtaining a Treasury guarantee.

All other State banks issue debentures without being backed by Treasury guarantees.

The Finance Ministry pointed out that according to the Parliamentary Acts which established Bank of Ceylon and other State banks, there is a mechanism as well as permission for these State banks to issue debentures to fulfill their regulatory requirements.

The ministry reiterated that after the People’s Bank Act has been amended, there is no opportunity whatsoever to convert any issued debentures to the share capital because Section 13 of People’s Bank Act does not permit such conversions.  The People’s Bank (Amendment) Bill is expected to be presented to Parliament for a vote tomorrow.