but not out —Pramuka boss
By Amantha Perera
At around five o’clock
in the evening of October 25, CEO, Pramuka Bank, Rohan Perera received a
letter from the head of the Bank Supervision Division of the Central
Bank. On the last business day of the week, Perera was informed that the
Central Bank had decided to suspend Pramuka’s operations and carry out
a thorough investigation of its books.
With the letter,
Central Bank staff moved in to Pramuka’s one and only office in
Kollupitiya to commence the investigation. Within five days, close to 20
officers from the supervision division were pouring over the books, and
admittance into the bank had been restricted to outsiders as well as
Pramuka’s 150 staff members.
The letter according to
Perera was the first indication that he got of the Central Bank’s
unprecedented action. The officers who carried out the Central Bank’s
decision however, have a different opinion. “We have been in constant
touch with Pramuka and have been telling them about the state of their
loans and asking them to take action,” a very senior officer at the
supervision division told The Sunday Leader.
Apparently officers from
the Central Bank had been going through Pramuka’s books during
weekends before the suspension.
He added that Pramuka
should have at least had an indication that the Central Bank was not
satisfied with the state of the books, especially the ratio of
Non-Performing Loans (NPL).
The difference of opinion
between Pramuka and the Central Bank however, do not end at the start of
the biggest banking scandal in recent times. On almost all the
contentious points, the two sides have varying viewpoints.
According to Deputy
Governor, Central Bank, Manik Nagahawatte, Pramuka is ill-liquid and
insolvent. Pramuka’s NPL contingent is a staggering Rs. 2.5 billion.
That of a cash possession of Rs. 3.5 billion.
Nagahawatte told The
Sunday Leader that the figures were what
Pramuka itself indicated. Banks have to forward a report on their
assets and liabilities to the Central Bank every month.
Perera however disagrees.
“The NPL ratio is a very subjective issue,” he replied when
questioned as to what Pramuka’s actual NPL ratio was last week.
He argued that the Central Bank considers loans that have
defaulted for three-months as NPL. “What they don’t realise is that
these are not inactive loans. Repayment schemes come in to effect.”
The supervision division
of the Central Bank does not think so. “These are not rules that apply
to Pramuka only, all other banks adhere to them.”
NPL’s are categorised
under three categories, three to six months, six -12 months and 12
months and above. The Central Bank officer said that the bank was aware
of the specific details of Pramuka’s NPL portfolio.
All banks will have a
proportion of NPLs — if it is at a manageable level, the Central Bank
does not move in the manner as in the Pramuka case. “Only if the ratio
is alarming, will we suspend operations,” said the Central Bank
Perera did neither deny
nor confirm the NPL ratio claimed by Nagahawatte. Instead, he gave
reasons for bad loans to proliferate in the books.
The biggest obstacle that
lies in Pramuka’s path when it needs to recover NPLs according to
Perera, is that the license does not allow it to execute parate action.
What it means in essence is that when a debtor defaults, the bank cannot
recover the costs from the properties kept as security.
“We are running a race
with one hand tied behind,” Perera lamented, but when it received the
license in 1997 the operating ground rules were clear to the bank.
Perera found himself in a tight corner, having to go after prospective
loans while knowing well that parate execution was a no-go zone.
But seeking clients
aggressively, Pramuka did. When the Central Bank suspension came,
Pramuka was offering returns as high as 18.5% (at maturity) on its five
year bonds and at a rate of 14% per month. It was not deterred by the
fact that it could not open branches. Pramuka was canvassing deposits
through business development executives.
The Pramuka Bond was
offered at an increasing interest rate of 0.5% every six months for an
initial investment of Rs. 50,000. Such offers made others level
criticism that Pramuka was offering unsustainable rates. A charge that
Perera rejects flatly.
The CEO said that the
return rate was not that high compared with rates offered by other
banks. The ‘catch’ according to him was that in its five year
existence, Pramuka had to deal with a very wide band of interest rate
fluctuations on Treasury Bonds, the bread and butter investment for
banks. “It was extremely wide, between 10.5% and 21.5%.”
On the issue of NPLs,
Perera also attributes general reasons, like the 9/11 attack on the
heels of the attack on the Katunayake Airport, global recession , power
cuts and drought. But according to Central Bank sources none of the
other banks are showing such levels of NPLs as reflected in Pramuka’s
books. On top of all that, according to the supervision division, late
last week the Central Bank was not looking into Pramuka’s books to
figure out how much the NPL ratio was, that they said was established.
“We are not examining the ratio of NPLs. We are trying to determine
whether to allow it to re-open or go for liquidation,” the senior
supervision officer said.
Nagahawatte declined to
comment on the exact nature of the Central Bank findings and what the
final result would be.
Whatever the outcome,
Pramuka would have to weather another storm to reach even keel. “There
can be a run on the bank with depositors removing money soon after it is
re-opened,” Perera said, adding that Pramuka would need help from
The Banking Act gives far
reaching powers to the Central Bank (see box). But it also allows the
bank to intervene to salvage a sinking financial institute. “We can
intervene, but the Central Bank will not put money, and it will be on
the Central Bank’s terms,” the Central Bank official said. The
Central Bank can seek a dissolution of the board and the appointment of
a new board. Other options open are to re-organise the bank, look for
new capital infusion and the final option — go for liquidation.
The Central Bank options
are not the ones high on Perera’s agenda. He wants Pramuka back, and
is confident that he can bring in new funds and capital infusions
provided there are changes made to the Banking Act allowing Pramuka to
execute parate acts. Perera
observed that the Central Bank investigation would show that the NPLs
are tied to immovable property.
He in fact has been
lobbying authorities for a change in the regulations since Pramuka’s
inception, with little results.
Perera has on and off
levelled charges of discrimination against his bank that he says is the
only 100 per cent Sri Lankan bank. There have been suggestions that
discrimination was partly being influenced by another bank. Whatever the
truth behind the allegations, it is Pramuka that found itself back to
the wall last week with not a single word of support from others in the
Pramuka’s 15, 495
deposits are stuck in the middle of the controversy. During the initial
couple of days after the suspension, customers kept coming to the
Pramuka premises at Kollupitiya wanting information on their funds. The
main entrance to the premises was under police guard as well as Central
Bank security and the nervous depositors could not make it beyond the
Neither the Central Bank
nor Pramuka could give them definite information while both resorted to
telling the public not to panic. The Central Bank even placed a
advertisement in the newspapers on Friday.
“We are moving as fast
as we can, but it is very difficult to give a time frame,” Nagahawatte
If Pramuka cannot be
revived, then the depositors are in for a raw deal. If assets are not
available with the bank, then there is no way that the money can be
returned. And liquidation procedures in the past have not concluded with
the depositors being the beneficiaries. Ask anyone who had invested in
the finance companies that went belly up about a decade back.
(1) In any case where the Director of Bank Supervision is
satisfied after examination by himself or by any officer
authorised by him of the affairs of a licensed specialised bank,
or upon information received from the bank, that it is insolvent
or is likely to become unable to meet the demands of its
depositors or that its continuance in business is likely to
involve loss to its depositors or creditors, the Director of Bank
Supervision shall make a report accordingly to the Governor of the
Central Bank for submission to the Monetary Board; and if such
Board, upon review of the facts and circumstances, is of opinion
that action should be taken as hereinafter provided, the Monetary
Board may make an order directing the bank forthwith to suspend
business and direct the Director of Bank Supervision to take all
measures as may be necessary to prevent the continuation of
business by such bank. Any person who obstructs the Director of
Bank Supervision from taking such measures to prevent the
continuation of business by the company shall be guilty of an
offence under this Act.
Notwithstanding anything in any other law, no action or proceeding
may be instituted in any court for the purpose of securing the
review or revocation of any order made in good faith under
subsection (1) or in respect of any loss or damage incurred, or
likely or alleged to be incurred by reason of such order.
An order made by the Monetary Board under subsection (1) in
respect of any licensed specialised bank shall cease to have
effect upon the expiration of a period of 60 days from the date on
which it is made and it shall be the duty of the Monetary Board as
soon as practicable and in any event before the expiration of such
To make an order permitting the bank to resume business, either
unconditionally or subject to such conditions as the Monetary
Board many consider necessary in the public interest; or in the
interest of the depositors and other creditors of the bank; or
To cancel the licence issued to such licensed specialised bank,
Where the licensed specialised bank is a company within the
meaning of Section 449 of the Companies Act. No. 17 of 1982,
direct the Board of Directors of such company to apply for winding
up of the company under the supervision of court in accordance
with the provisions of Part IX (other than Section 347) of such
senior teachers from Sri Lanka's premier school - Royal College, have
written to President Chandrika Kumaratunga, Prime Minister Ranil
Wickremesinghe and the cabinet of ministers complaining against the
violation of child and teacher rights by the present Principal, H. L. B.
letter dated September 30, 2002, charges that Gomes is no longer fit to
be Principal of Royal College as he is also guilty of committing anti
social acts, corruption and mal- administration.
letter was sent a month before Gomes received a further extension of his
term as Principal, Royal
eight page letter is signed by Sectional Head (A/L Commerce), Gamini
Wanigaratne, B. A. Gunewardena, and Teacher, A/L Commerce and Editor,
student newspaper, The Royalist, Gamini Senapathi.
teachers are appealing to the President and the Prime Minister to enact
a solution that will they say, "save Royal College from total
degradation and humiliation."
teachers claim they have no personal grudge with Gomes but are seriously
concerned about saving the bona fides of "this great institution
from an unprecedented disaster. - "For us, principals are secondary
while the college is primary," they said.
the appeal made by these teachers, the parliamentary ombudsman has
commenced his investigations under Act No. 17- 1981 and has called for a
full report on the subject from relevant authorities.
addition to this, under the charges of violation of human rights such as
obstructing duties, discontinuing services and transferring for
malicious reasons a teacher who had been of great service and an asset
to the college the principal has been reported to the Human Rights
Commission (HRC). The HRC is in the process of conducting an
investigation into the matter and Gomes was summoned on Thursday,
October 31 for an inquiry.
the Sectional Head, A/Level Commerce Section, Gamini Wanigaratne has
lodged three entries at the Cinnamon Gardens police station alleging
that Gomes has intimidated, insulted and humiliated him.
first complaint was made on August 25, 2002 and is filed under reference
number CIB/308/280. The
second made two days later on August 27, complains that Wanigaratne is
being obstructed in performing his duties at Royal College by Gomes and
is referred to under the police reference number CIB/331/301. The third
complaint made a day later on August 28, alleges having suffered
insults, humiliation and intimidation by Gomes and is filed under number
CIB/349/327 at the Cinnamon Gardens police station.
has also complained to the zonal director of education and the
provincial director of education. Wanigaratne has since been informed in
writing by the additional secretary, Ministry of Education on September
4, 2002 that necessary steps are being taken to bring the accused to
regard to charges of anti-social and anti-Royal acts committed by Gomes
the teachers have accused him of "disgracing the world's biggest
school, which accommodates 8000 students under one roof."
teachers angrily claim that not only did Gomes sanction a disgraceful
display of pornography at the Royal College 'stag nite,' he also graced
the event as well as allowed school boys from the upper school at Royal
College to also attend this event.
cabaret act performed in the nude by Russian and local women at the CR
& FC grounds was allegedly a show put on to collect funds for the
college. The show described as having been "loathsome" by
teachers and some old Royalists present was advertised in the Daily News
of March 7, 2002 and tickets for the show sold at the gates of the CR
& FC. Gomes by virtue
of being Principal of Royal College is also president of the Royal
College Union (RCU), which organises and funds this event.
is alleged that a girl as young as 15 was part of the nude cabaret act
at the Royal College 'stag-nite' where even the college flag was hoisted
and brought down by a nude Russian stripper. A lesbian act was also
enacted in front of Gomes, senior school students and old boys of Royal
Dissanayake an old boy of Royal College is furious that such an event
was allowed to take place. "It is not only disgraceful but a crime
as well since it was an obscene act committed in public for which money
was collected using the name of Royal College," he said.
H. Kumarasinghe, former principal, Royal College is equally dismayed.
"While it is customary for the principal of Royal College to grace
what is called the 'stag nite' it is also customary for him to leave
before the scheduled cabaret act," Kumarasinghe said.
Senapathi, a senior school teacher at Royal College reiterated angrily
that Gomes has by attending this event degraded the "distinguished
qualities and standards of an exemplary and glorious institution."
He adds that Gomes in fact promoted this pornographic cabaret act
together with a group of money minded and corrupt old boys as part of a
well-calculated plan to discourage rural students from joining Royal
pointed out that a large number of students at Royal College are those
who enter after achieving the best results at the year five scholarship
examinations and at the G. C. E.O/L exams.
said these students are at the mercy of a handful of petty minded and
lewd old boys who covertly try to reserve Royal College exclusively for
boys from Colombo's social elite.
the letter to the President and Prime Minister these teachers have
charged that at this 'stag nite' a baila composed with filthy words was
sung in abusive language in front of Gomes, making fun of him and his
advisory board. Gomes, they say, helplessly watched the disgusting
display fearing that if he objected worse would follow.
teachers say that Lakshman Gomes in fact lied when he on October 4, this
year, wrote a letter to all parents whose sons are at Royal College
stating that neither he nor the Royal College Union had anything to do
with the organisation of the event referred to as the 'stag nite 2002.'
Sunday Leader is in possession of the advertisement which appeared on
March 7 in the Daily News which clearly stated the 'stag nite' is being
organised by the Royal College Union.
meanwhile has in this letter denied having attended such a function, nor
he says were any present day students allowed to attend.
only did Gomes attend the 'stag nite' he sanctioned and helped organise
the event as well as turn a blind eye to senior school students
attending and watching the pornographic cabaret acts.
Senapathi, upper school teacher says that some of his own students have
confessed to having bought tickets and attended the stag nite.
Sunday Leader in fact has documentary evidence to prove that audited
accounts in relation to the stag nite have to be submitted to the
finance committee of the Royal College Union.
angry teachers have also accused Gomes of encouraging indecent, cheap,
crude entertainment during and after the Royal-Thomian cricket and rugby
encounters where some old boys and senior school students from Royal
College use foul language and on one occasion even insulted the
senior school teachers also charge that Gomes slanders, insults and
humiliates lady teachers at staff meetings displaying a jaded sense of
Dissanayake who is also a life member of the RCU, asserts it is
important to note that Royal College does not belong to the Old Boys
Union. The principal, whoever he happens to be, cannot become a puppet
propped up by the Union for its own gains, he said, adding, the school
does not exist for a few corrupted to prosper.
teacher who requested anonymity said that Gomes recently brushed
aside a case of sexual harassment when a year six student was
almost molested by an old boy of Royal College. Caught nearly red
handed by prefects of the school, Gomes hurriedly hushed up the
incident and when later quizzed by teachers gruffly retorted
saying, "these things happen in boys' schools and is no big
man for the job"
63 year old Lakshman Gomes, Principal, Royal College when quizzed
on the contents of this letter said there are about five misfits
among 280 teachers at Royal College.
He responded to the charges asserting that these teachers
are angry and annoyed that he has been granted yet another
extension as Principal of Royal College by this government and
that this is the reason for their false accusations.
I so wish, I could get 275 teachers at Royal College to sign a
petition saying, I am the best man for the job," Gomes
of the principal
Minister Dr. Karunasena Kodituwakku, said he is totally unaware of
any serious incidents of in-discipline at Royal College. He
reiterated however that if it is so, "then it is for the
Principal to deal with it and not me."
game of checkmating each other
had the dust settled on the volatile incidents in the east - involving the Muslim
community - when their brethren rose in anger in the heart of Colombo
Muslim-Sinhala clash at Dematagoda and Maligawatte last Wednesday has
little or no connection with the Muslim cause in the Eastern Province.
Instead, the clashes are more localised between members of the
underworld in these areas, which are dominated by both Muslims and
the clashes may have been politically backed by anti Muslim factions
cannot be ignored. Abdul Latiff, an attorney-at-law insists the clashes
were totally unnecessary (over the building of a Muslim school for
religious teaching) - "I find it hard to believe that the Sinhalese
people in this area would object to a school of religious
is convinced the riots were politically motivated and more to do with
the life around these highly volatile areas. It also proves the
deterioration of law and order, he said.
however is convinced the "Muslims need to be prepared the next time
around." When asked to be more specific he would only say "we
need to be ready now for any eventuality."
words sound ominous in the face of recent events in the Eastern Province
where the Muslim community is insisting on a separate interim
administrative council that would cater to a Muslim identity and rights.
is even more serious is that the Muslim community not just in the east
but now in the south as well appear more and more frustrated with their
political leadership - choosing more often to take the law into their
own hands and carve out a niche for themselves.
recent incidents involving the Muslim community have served to only
further polarise them from the Tamils and now the Sinhalese to a certain
extent, which are resulting in attacks and counter attacks. Certainly,
the Muslims alone cannot be held responsible for what took place in
Central Colombo last week. Needless to say, the Sinhalese and their
leaders obviously lack the foresight to prevent or stop incidents of
Muslim community for various reasons today see themselves being
sidelined - as a political solution to address the needs and aspirations
of the Tamil community has taken precedence. This government however
cannot ignore a salient feature in the present struggle - and that is
that both the Muslim community and the Tamil community is fighting for
the same cause.
issue however has also served to polarise the Sri Lanka Muslim Congress
- forcing some of its members in parliament to adopt a populist line,
projecting themselves as the saviours of the Muslim cause.
SLMC led by Rauf Hakeem has unfortunately lost favour among many
factions within the Muslim community as it has managed to project an
image of power hungry politicos - solely interested in political perks
and opportunity rather than in ensuring or protecting the needs of the
success of the SLMC with its short history and immense political clout
has somehow sidetracked the SLMC from the basic principles on which it
was founded and the party instead has become more and more a party of
political opportunists, bargaining for office and perks for themselves
and their cronies.
M. M. Naoshaadh, hails from a political family in Samanthurai. He argues
that the Muslim community today should be looking at viable alternatives
which meets the aspirations of the Muslim people, whilst not in anyway
diluting the cause of the other parties to the conflict.
reiterated it is high time the SLMC addressed the fears of the Muslim
population in the east, who are afraid their future will be under the
leadership of the LTTE. That Muslim MPs from the east who are now
proclaiming to allay with this cause is purely a knee jerk reaction by
members of the SLMC who themselves have long betrayed their voters.
asserts that once again the leadership of the SLMC has chosen to ignore
the basic principles on which the party was founded and failed to get
the UNF of which it is a decisive partner to legitimise its call for a
separate identity, for which the people gave them a mandate.
in troubled waters the National Unity Alliance (NUA) which turned on the
heat on SLMC MPs in the east with their fiery speeches in Samanthurai
reminding the people of the bankruptcy of the SLMC to deliver on it
promises, have now declared support for the dissident SLMC MPs and
joined their boycott of parliament.
however has conveniently hidden the fact that they too are guilty of the
same crime, as far as failing to deliver on their promises made to their
people in the east is concerned. Naoshaadh is critical of the sincerity
of NUA. "In my view, the agitation by NUA is not in sympathy with
the Muslim cause but more an attempt at checkmating the SLMC
parliamentarians on the political chessboard before they will go before
the people once more and cry foul, should the SLMC MPs step down and
listen to reason."
is important for the Muslims to first weigh the practicality of their
demands. What is it that they are seeking? A separate Eastern and
Northern Province? A non-contiguous administrative unit encompassing all
Muslim majority divisional secretarial divisions? A power sharing
agreement signed between the MULF and LTTE in Madras? A South East
Provincial Council? A coastal administrative district?
parliamentarians when quizzed on these issues appear nonplussed.