Commercial banks in sorry state; Cabraal rakes in their dollars to Central Bank!

The Governor of the Central Bank Ajith Nivard Cabraal has issued an order requiring 25% of all foreign transactions made by commercial banks in the country to be paid to the Central Bank on a weekly basis.

The order, effective from December 27, 2021, requires all commercial banks to retain 75% of their dollar holdings and sell the remaining 25% to the Central Bank on a weekly basis.

Commenting on the matter, SJB-MP Dr. Harsha de Silva said in a Twitter message that the Central Bank’s order would lead to a major crisis in the banking sector as the net foreign assets of the banks are already negative.

When inquired about this, Prof. Janak Kumarasinghe of the Faculty of Management, University of Sri Jayewardenepura stated that this order will further affect the importation of essential commodities and intermediate goods that are currently being restricted in the country. He pointed out that importers in particular would face serious problems in opening letters of credit through banks.

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