This agreement was reached following the assurance given by Central Bank  to involve representatives of NBFIs in the process of devising new regulations and modalities pertaining deposit mobilisation at a meeting with CEOs of NBFIs in Colombo recently .

This process will take some time as he has no intention to take arbitrary action without consulting the stake holders, Chairman of Finance Houses Association of Sri Lanka, Ravi Yatawara one of the participants at the discussions said.

He said that several CEOs have brought to the notice of the authorities that the CBs proposal of following the Indian model of directing NBFIs to borrow funds from commercial banks cannot make workable in Sri Lanka.

Mr. Yatawara pointed out that NBFIs and banks are competitors in the financial sector and such arrangements are not pragmatic in the long run.

Some NBFIs were used to borrow from local banks earlier and it was now completely halted.

He revealed that they have also pointed out to the CB that even in the Indian model some well-established finance companies are allowed to mobilise public deposits.

Mr. Yatawara noted that if the Central Bank wants to adopt the Indian model then it should be changed to meet the needs of local finance companies.

He emphasised that funding will remain credit weakness ,as regulatory restrictions on retail deposit mobilization will force finance companies to rely on wholesale sources of funding.

On the other hand, banks will also find it difficult to lend money to its competitors playing on the same field, he added.

He reiterated that public confidence plays an important role in sustaining financial system stability.

“The regulation and supervision of finance firms, the promotion and use of standards of sound business and financial practice, explicit deposit protection and an effective disclosure mechanism all help to reduce the adverse consequences of a financial crisis”, he emphasised.