The Hon. Wasantha Samarasinghe - Minister of Trade, Commerce, Food Security and Co-operative Development

¶ 01 Mr. Presiding Member, this proposal concerns co-operative rural banks. In Sri Lanka we have registered Regional Development Banks (RDBs) and also co-operative rural banks and thrift and credit co-operative societies. Members who spoke, including the Hon. Rohana Bandara, stressed the need for a monitoring system to safeguard the rural banking network. From the outset, our Government focused on this because of serious wrongdoings, as the Hon. Sooriyaarachchi said, in Avissawella and elsewhere.

¶ 02 Some speak of “Saubhagya Banks.” A bank cannot operate without meeting statutory prerequisites. To run banking business, one needs a licence under the Central Bank with capital adequacy, deposits placed with the Central Bank, fit-and-proper directors, proper audits and disclosures. Some entities have exploited gaps in co-operative law to run financial businesses while presenting themselves as co-operatives. That cannot continue. If anyone wants to take deposits and lend like a bank, they must register with the Central Bank. We will strengthen oversight, auditing, and impose clear regulations on branch openings, staffing through the Co-operative Employees Commission, and reporting.

¶ 03 Across co-operative rural banks and thrift and credit societies, there are about 4,900 branches. They vary by district federations and societies beneath them. Under the 13th Amendment, Provincial Councils register co-operatives. Some have used “co-operative” as cover to take public deposits without authority. For example, as per reports up to 31 March, certain so-called Saubhagya entities have accepted around Rs. 872 million in deposits. This is a serious issue.

¶ 04 In Colombo District alone, Maharagama Co-operative reportedly faces a shortfall of about Rs. 1,100 million; Dehiwala–Mount Lavinia about Rs. 1,300 million; Seethawaka (Avissawella) about Rs. 980 million; Gampaha about Rs. 1,500 million—public monies of co-operatives. We are tracing and recovering these funds. Our aim is to maintain a genuine co-operative rural banking system for people who need small loans for daily life, not a parallel unregulated bank sector. Where the co-operative label is misused, we will monitor and regulate, not merely observe. Get licensed or cease deposit-taking.

¶ 05 We will establish stricter auditing and monitoring frameworks, with legal amendments where necessary. On policy matters like interest, the Hon. (Dr.) Anil Jayantha will address. Using “co-operative” cannot be a gateway for money laundering or abuse. Co-operatives must follow rules: contribute 10% of profits to the Co-operative Development Fund, keep audited accounts, obtain approvals for recruitment, etc. Past political decisions diluted co-operative stakes in People’s Bank from 51% to near nil; nevertheless, we will work with State banks to strengthen the genuine co-operative banking network and eliminate mafias and misuse—including by any co-operative officers involved in illicit recoveries. We are not registering new “banks” under co-operative names; instead, we will strengthen genuine co-operative banks and investigate illicit entities established for political ends and take action to protect the system.

¶ 06 Thank you.