SL Central Bank assures to protect 57 mn bank accounts amid DDR

Colombo, June 30 Clearing doubts and speculations that domestic debt restructuring (DDR) would not affect the country’s banking system, Sri Lanka Central Bank assured that 57 million bank deposits would be protected as withdrawing deposits from banks would lead to an economic collapse.

Central Bank Governor, Nandalal Weerasinghe, on Thursday emphasised the importance

of relieving burden on the banking system caused by the already excessive 50 per cent taxes with the ongoing economic crisis.

The Governor was highlighting the importance of ensuring the IMF requirement with regard to internal and external debt restructuring.

Sri Lanka announced five-days banking holidays starting from Thursday until the Parliament which is to be summoned during the weekend approve the DDR.

Weerasinghe said that recently there were rumours about bank collapses, and concerns were raised regarding the safety of deposits.

“Withdrawing deposits from banks would lead to an economic collapse,” he warned.

“Protecting the banking system and ensuring the safety of depositors' funds are crucial

responsibilities. The banking system plays a vital role in the economy, as evidenced by the 57 million bank accounts holding deposits from a population of around 20 million. Any harm to these funds would have a severe impact on the banking system,” the Central Bank Governor said, adding, “as the Central Bank, our primary objective is to safeguard the banking system and the currency."

President Ranil Wickremesinghe had earlier assured that the restructuring would not lead to a collapse of the banking system.

The Cabinet approved the Central Bank’s proposal for the DDR and it is to be submitted to the parliament for approval over the weekend.

The Governor highlighted the severe repercussions that would result from a collapse in the country's banking sector.

“To prevent such a scenario, June 30 (Friday) was declared a bank holiday until the Parliament approves the restructuring of local debt,” the Central Bank Governor added.

In addition, Weerasinghe assured the people that the existing Employee Provident Fund

(EPF) which is over Sri Lankan Rs 3 trillion by the end of 2021, would remain untouched.

Additionally, he guaranteed a minimum interest rate of 9 per cent for the EPF.

Going through the worst-ever economic crisis since the independence, Sri Lanka has struck a deal with the IMF to secure nearly $3 billion and in turn had agreed to restructure both foreign debts around $41 billion and domestic debts of $42 billion as of March 2023.