_1LwJClMHK1.jpg)
Summary of the Article
Nation Lanka Finance PLC (NLFP) is a licensed finance
company. Which offers a range of financial services, including accepting public
deposits and providing loans. Over the years, NLFP has faced significant
challenges due to undercapitalization, poor asset quality, recurring losses,
and inability to repay the depositors on demand or at maturity. A failure like
this poses a serious threat to depositor security and could undermine public
confidence, potentially triggering panic and widespread instability across the
financial sector.
This article presents the recent move taken by the Central
Bank of Sri Lanka (CBSL) to commence a formal resolution procedure of NLFP
under the Banking (Special Provisions) Act No. 17 of 2023. It will discuss the causes
of why the government acted, describe
the actions it is undertaking (including the appointment of an Administrator), an evaluation of the
impacts on depositors and creditors, and finally provide a conclusion with the
wider implications
Background on Nation Lanka Finance PLC (NLFP)
Nation Lanka Finance PLC is a licensed finance company
operating under the Finance Business Act No. 42 of 2011. It offers a range of
financial services, including deposits, loans, and leasing. However, in recent
years, NLFP has been struggling to maintain financial health.
Some data-driven point reviewed the 2024 Annual Report of
Nation Lanka Finance PLC (NLFP).
 |
| Key financial insights from the 2024 annual report |
- According to the 2024 Annual Report, NLFP’s Tier 1 capital ratio stood at -9.92%, far below the regulatory minimum of 8.5%. This negative capital position signals insolvency, justifying CBSL’s resolution action
- A staggering 83% of NLFP’s loans were classified as non-performing, exposing a deep failure in credit risk management.
- Despite earning LKR 328 million in interest income, NLFP posted a net loss of over LKR 307 million in just one quarter, highlighting severe operational inefficiencies and income volatility.
- NLFP held over LKR 5.5 billion in customer deposits, but its available cash was barely 2% of that amount a clear sign of liquidity stress and inability to honor withdrawals.
- Shareholder equity was nearly wiped out, with net assets per share falling to just LKR 0.11 a signal of a company at the brink of collapse.
- CBSL had already imposed deposit and lending restrictions in 2019, highlighting long-standing issues that NLFP failed to address despite years of regulatory breathing space
CBSL’s Resolution Action
On 4th July
2025, the Central Bank of Sri Lanka (CBSL) took formal resolution action
against Nation Lanka Finance PLC (NLFP) under the Banking (Special Provisions)
Act, No. 17 of 2023. This law allows CBSL to intervene in financially
distressed finance companies to protect depositors and preserve financial
system stability.
 |
| Key implications. |
CBSL’s intervention was triggered by NLFP’s worsening financial condition, including a negative Tier 1 capital ratio of –9.92%, 83% of loans classified as non-performing, and its inability to repay depositors. Despite previous regulatory measures including lending and deposit caps imposed in 2019 NLFP failed to recover or comply with essential financial rules.
As part of the resolution, CBSL appointed Mr. P.W.D.N.R. Rodrigo as Administrator for a period of six months starting from 4th July 2025. He has been granted full control over NLFP’s assets, liabilities, and business operations, with the aim of stabilizing or restructuring the company in the best interest of depositors and creditors.
Personal analysis
The action by CBSL to resolve NLFP was important yet maybe
too late. The pre warning signs increases in non-performing loans and negative
capital ratios were clear way ahead of 2025. Though the restrictions had been introduced by CBSL
in 2019, the even more decisive and earlier action would have minimised the
damage that followed. The
case gives a very big lesson to other finance firms that going by the books,
proper governance and timely reprieves are the key factors in ensuring not only
short term survival but also have a long-term reputation. It also points to the
necessity of improved depositor protection systems, including specific
insurance programs of non-bank financial institutions and more rapid regulation
when indicators show that the institutions are in trouble.
Conclusion
The recommendation by the Central Bank of Sri Lanka to bring
Nation Lanka Finance PLC (NLFP) under administration is ground-breaking in the
process of safeguarding the depositors and creditors of the company and the
entire financial system. NLFP, even after various regulatory support and
extensions did not make necessary amends to serious financial and regulatory
disparity including capital inadequacy, poor asset quality and multiple
non-compliance. CBSL has demonstrated methodological resolution of failing
financial institutions by appointing an administrator under the new Banking
(Special Provisions) Act No. 17 of 2023. This will help stabilize the company
and recover its assets and see the possibility of recapitalizing the company or
liquidating it at some point without going overboard but also without
compromising transparency and the public confidence representing the banking
system.
References
https://economynext.com/sri-lankas-troubled-nation-lanka-finance-placed-under-administration-228693/
https://www.cbsl.gov.lk/en/news/execution-of-resolution-action-on-nation-lanka-finance-plc
https://cdn.cse.lk/cmt/upload_report_file/368_1723691531160.pdf
Published by : Abdullah.MFM
Are you in a financial crisis, looking for money to start your own business or pay bills?, PAY LATER, Loans all types of loans from €5,000 to €1,000,000 with a low interest rate of 2% Apply now by email to: ( paylaterloan1960@aol.com )
ReplyDelete