Sri Lanka's Central bank says country's banking system stable

Sri Lanka's central bank on Thursday said that the island nation's banking system is stable after speculations that a state bank in the country had defaulted.

"The Ministry of Finance and the central bank of Sri Lanka wish to assure the public and all other stakeholders that the banking system is stable and that operations of the state banks are being carried out smoothly, contrary to statements made otherwise," the central bank said in a statement.

This comes after Member of Parliament Harsha de Silva from the political alliance of Samagi Jana Balawegaya (SJB) told the country's parliament that there were reports saying a state bank has defaulted.

"With great sadness, we are saying this," Samagi Jana Balawegaya legislator Harsha de Silva told parliament. "We have heard that a state bank has defaulted. Please look into this immediately."

The EconomyNext reported that banks of the South Asian country have faced counterparty limit cuts since a downgrade of the sovereign credit which has tightened, making it harder to rollover contracts.

State banks are also forced to give dollars for letters of credit to import oil, the report added.

Sri Lanka's State Minister of Regional Relations Taraka Balasuriya said that the government has decided to close down some nation's missions as a means of cutting down expenditure.

"There are around 65 Sri Lanka foreign missions abroad, and we have seen that some of these missions are not needed as Sri Lankan mission offices of countries close by can handle matters rather than having too many mission offices. This will also save funds," he said.

( With inputs from ANI )