• CIFL to be liquidated after licence cancellation
• Compensation paid to depositors reaches Rs. 30.5 b
• CIFL operated as a ponzi scheme, report reveals 

The Commercial High Court has issued an order dated 9 June 2023 to wind up the defunct Central Investments and Finance Ltd. (CIFL), marking the conclusion of a sordid saga that began in 2018 with the cancellation of its licence by the Central Bank of Sri Lanka (CBSL).

The Director of the CBSL Department of Supervision of Non-Bank Financial Institutions had published the order of the Commercial High Court dated 9 June in gazette extraordinary No. 2337/08 dated 20 June 2023, wherein it was provided that CIFL shall be wound up subject to the supervision of the court, and accordingly appointed Gerard Jeevananthan David of SJMS Associates as the liquidator.

A petition was filed before the Commercial High Court in 2019 by former Director of the CBSL Department of Supervision of Non-Bank Financial Institutions Weerappulige Ranaweera instituting the action bearing number CHC 91/2019/CO to wind up CIFL.

Subsequent to the cancellation of the finance business licence of CIFL in 2018, the CBSL took measures to pay compensation to the depositors under Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) Regulations subject to a maximum of Rs. 1.1 million.

CIFL is one of six finance companies whose licence under the Finance Business Act No. 42 of 2011 (FBA) was cancelled by the CBSL during the past decade due to insolvency caused by mismanagement and fraudulent business practices. These six finance companies are CIFL, The Standard Credit Finance Ltd., TKS Finance Ltd., The Finance Company PLC, Swarnamahal Financial Services PLC, and ETI Finance Ltd.

According to the CBSL Annual Report for 2022, the SLDILSS has paid Rs. 30.5 billion to 72,641 depositors, in relation to the above six companies, up to end-2022. The quantum of compensation paid was 86.57% of the total insured value of Rs. 35.3 billion.

Although CBSL cancelled the licence of CIFL only in 2018, it was aware as far back as 2011 that a crisis was imminent for the finance company. According to an internal report prepared by the CBSL in 2011 regarding the results of an on-site examination into CIFL, it was identified that CIFL was facing significant challenges, with a high risk of future losses and insufficient resources. 

Shockingly, a substantial 61.4% of its assets generated no earnings. The report highlighted that CIFL was operating as a ponzi scheme, relying solely on new deposits to cover its expenses and repayments, which is a fraudulent practice that pays existing investors with funds collected from new investors.