Banking

(1) This Act may be cited as the Banking Act, No. 30 of 1988.

(2) The provisions of this Act other than Part V shall come into operation on such date as may be appointed by the Minister by Order published in the Gazette (hereinafter referred to as the ” appointed date”).

(3) The provisions at Part V of this Act shall come into operation on such later date as may be appointed by the Minister by Order published in the Gazette.

(1) On or after the appointed date, no basking business shall be carried on except by a company under the authority of a licence issued by the Monetary Board with the approval of the Minister,

(2) Where such company is a company incorporated outside Sri Lanka no licence shall be issued unless such company has complied with the provisions of Part XIII of the Companies Act, No, 17 of 1982.

(3) Any company which has been issued a licence under the provisions of this Part shall, hereinafter be referred to as a “licensed commercial bank'”.

(4) Notwithstanding the provisions of subsections (1) and (2) of this section and of section 3 of this Act, all commercial banks specified in Schedule I to this Act, which on the appointed date are carrying on banking business, shall be issued a licence in accordance with the provisions of this Act,

(5) Any company which carries on banking business in contravention of subsection (i) shall be guilty of an offence under this Act.

(6) For the purpose of this sections “company” shall have the same meaning as in section of the Companies Act, No. 17 of 1982, and include a company duly incorporated outside Sri Lanka, or body corporate formed in pursuance of any statute of any foreign country, Royal Charter or letters and a body corporate established by or under any written law and shall not include the Central Bank or a private company incorporated outside Sri Lanka except the banks specified in Schedule I to this Act.

(1) An application for a licence shall be made in writing to the Monetary Board in such manner as may be determined by the Monetary Board.

(2) Every application for a licence shall be accompanied by-

(3) On receipt of an application under subsection (1) by the Monetary Board, the Director of Bank Supervision may, where such Director considers it necessary, require the applicant to furnish to the Monetary Board such other documents, information or other particulars, in order to determine whether a licence should be issued or not.

(4) Where on consideration of the documents, information and particulars submitted to the Monetary Board under subsections (1), (2) and (3) and on such further investigations as it may consider necessary, the Monetary Board is satisfied that the application may be approved in principle, it may issue a Letter of Provisional Approval to the applicant. On receipt of the Letter of Provisional Approval, the applicant shall take all preliminary measures as may be required in terms of such Letter, prior to the issue of a licence under section 5, and specified in such Letter.

(5) The Letter of Provisional Approval issued under subsection (4) shall be valid for the period stated in such Letter. Such period shall however not exceed twelve months from the date of issue of such Letter and the period of validity may only be extended by the Monetary Board in writing, in exceptional circumstances.

(6) The Monetary Board shall cause a copy of each Letter of Provisional Approval issued under subsection (4) and of any communication extending the period of validity of such Letter under subsection (5), or any withdrawal in terms of subsection (7), to be sent to the Registrar of Companies.

(7) The issue of Letter of Provisional Approval under subsection (4) shall not bind the Monetary Board to issue a licence under section 5 to the company or the company to be formed for the purpose of carrying on banking business (hereinafter referred to as a “proposed company”), in respect of which the Letter of Provisional Approval has been issued, and the Monetary Board may, on the basis of investigations carried out by it under subsection (10) withdraw such Letter or refrain from issuing a licence under section 5 on any one or more of the following grounds :-

Provided however, the Monetary Board shall before withdrawing a Letter of Provisional Approval issued in terms of the provisions of this subsection to an applicant in terms of subsection (4), or if a decision is taken by the Monetary Board under this subsection to refrain from issuing a licence, give sufficient notice in writing to the applicant stating the grounds for such withdrawal or decision to refrain from issuing a licence and shall afford him an opportunity of being heard.

(8) A company or a proposed company in respect of which a Letter of Provisional Approval has been issued under subsection (4) shall not commence banking business before the issue of a licence under section 5. Every advertisement, prospectus, notice or other publication issued by the company or proposed company before the issue of the licence shall be required to specify that it has not been issued a licence to carry on banking business under the Act.

(9) A licence shall not be issued under section 5 to a company formed and incorporated under the Companies Act, No. 17 of 1982 unless –

(10)

(11) Any person who submits information or particulars in an application for a licence or in any other document submitted in connection therewith or in the course of any inquiry or investigation conducted to ascertain the suitability of the company or the proposed company to be issued with a licence under this Act, which to the knowledge of the person is false or misleading in any material particular, shall be guilty of an offence under this Act.

(1) The Monetary Board may require any company or body corporate incorporated outside Sri Lanka, which has applied for a licence under section 3, to undertake to remit to Sri Lanka, prior to the commencement of their business in Sri Lanka, a sum of money, determined with the approval of the Minister, in United States Dollars, or its equivalent in any designated foreign currency. The amount so remitted may form part of the assigned capital of such company or incorporated body and shall be kept as a deposit with the Central Bank or in such other manner as may be determined from time to time by the Monetary Board.

(2) The Monetary Board may, where such Board considers it necessary or expedient to do so in the interest of national economy, from time to time, make further determinations as regards the remittance of money after the expiry of a period of sis months from the date of the last of such determinations.

(3) A determination made under this section shall apply uniformly to all companies and bodies corporate incorporated outside Sri Lanka which apply for a licence after each such determination.

(1) Where the Monetary Board is satisfied that a licence may be issued to a company or a proposed company to carry on banking business, it may, with the approval of the Minister, issue a licence to the company or proposed company to carry on banking business in Sri Lanka subject to such terms and conditions as may be imposed by the Monetary Board.

(2) The licence issued under subsection (1) shall specify

(3) Every licensed commercial bank shall display a copy of the licence issued to it under subsection (1) in a conspicuous place at its principal place of business in Sri Lanka and each of its branches.

(1) Subject to the provisions of section 17. no licensed commercial bank shall

(1) Every licensed commercial bank shall pay to the Central Bank an annual licence fee as may be determined by the Monetary Board, having regard to the different classes of banking business carried on by such bank.

(2) The Monetary Board shall inform each such licensed commercial bank the amount payable as licence lee, and the manner in which such fee shall be paid.

(3) Where a licence fee is determined in respect of classes of banking business such fee shall apply to all banks carrying on such classes of business.

(1) Where the Monetary Board is satisfied that any licensed commercial bank has –

the Monetary Board may give notice that it would cancel the licence issued to such bank and shall communicate such notice to such licensed commercial bank.

(2) A licensed commercial bank may tender objections in writing to the Monetary Board against the notice of intended cancellation under subsection (1), within fourteen days of the date of receipt of such notice, giving reasons why the licence issued to it under section 5 should not be so cancelled.

(3) The Monetary Board may, within thirty days from the last date for tendering objections under subsection (2), after considering the objections if any, tendered to it under that subsection and after hearing the licensed commercial bank in support of its objections, either withdraw the notice given under subsection (1) with or without conditions or cancel the licence issued to the licensed commercial bank, and shall notify the bank in writing accordingly.

(4) A licensed commercial bank aggrieved by a decision of the Monetary Board made under subsection (3) to impose conditions on the withdrawal of the notice given under subsection (1) or to cancel its licence, may within fourteen days of the date of receipt of the notification given under that subsection, appeal against such decision to the Court of Appeal.

(5) Until rules are made under Article 136 of the Constitution relating to appeals under this section, the rules made under that Article relating to the hearing of applications by way of revision to the Court of Appeal, shall apply to every appeal made under this section.

(6) The Court of Appeal may on appeal made to it under subsection (4) confirm, reverse, modify or set aside the decision against which the appeal is made and may make any other order as the interests of justice may require.

(7) Without prejudice to subsection (1); the Monetary Board may, where it is satisfied that any licensed commercial bank incorporated outside Sri Lanka has had its licence or authority to operate in the country in which such bank was incorporated cancelled or withdrawn by the appropriate authority or regulatory body of that country, cancel the licence issued to the bank under this Part and shall notify the bank accordingly.

(8)

(9) Where a cancellation of a licence of a licensed commercial bank has taken effect under paragraph (a) or paragraph (b) of subsection (8), the Monetary Board shall, as soon as possible publish once in the Gazette in Sinhala, Tamil and English languages and once in a Sinhala, Tamil and English daily newspaper circulating in Sri Lanka, a notification of the cancellation of such licence.”.

(1) Where notice for the cancellation of a licence has been issued by the Monetary Board under subsection (1) of section 9, the Board may give directions to the licensed commercial bank

(2) Whereas a licensed commercial bank has failed to comply with the directions issued under subsection (1) the Monetary Board may further direct

(3) Where the Director of Bank Supervision takes charge of all books, records and assets under subsection (2) and the Monetary Board withdraws the cancellation unconditionally, the Monetary Board shall direct the Director of Bank Supervision to deliver forthwith to such bank the books, records and assets taken into his custody.

(4) Not withstanding anything in any written law for the time being in force, no action or proceedings may be instituted by any licensed commercial bank in any court in respect of any directions given bona fide under this section, and any loss or damage incurred or likely to be incurred or alleged to be incurred by reason of any such direction.

(1) Where a licence of a licensed commercial bank is cancelled, the Monetary Board shall direct the licensed commercial bank forthwith to suspend its business in Sri Lanka and, in the case of a licensed commercial bank incorporated or established within Sri Lanka, the business both within and outside Sri Lanka, and shall also direct the Director of Bank Supervision to take charge of its business and its books, records and assets and to take such steps as may be necessary to prevent the continuance of the business of banking by such bank. It shall be lawful for the Director of Bank Supervision to take such action as he may be deem necessary to comply with the directive of the Monetary Board. ‘

(2) Where the cancellation of a licence of a licensed commercial bank incorporated or established within Sri Lanka by or under any written law for the time being in force, has taken effect under paragraph (a) of subsection (8) of section 9, proceedings for the compulsory winding-up of the licensed commercial bank shall commence in accordance with the provisions of Part VIII of this Act.

(3) Where the cancellation of a licence of a licensed commercial bank incorporated outside Sri Lanka has taken effect under paragraph (a) or paragraph (b) of subsection (8) of section 9, the Director of Bank Supervision shall forthwith inform the head office of such bank to honour the written undertaking submitted under paragraph (a) of subsection (2) of section 3 and take such steps as may be necessary to enforce such undertaking and to close down the business of the bank in and with respect to Sri Lanka, in accordance with the provisions of Part VIII of this Act.

(4) Notwithstanding the provisions of section 9 or any other written law for the time being in force, the Monetary Board may, in any of the circumstances referred to in paragraphs (a) to (g) of subsection (1) of section 9 without proceeding to cancel the licence issued to a licensed commercial bank in terms of section 9, make order which may include any one or more of the following :-

(5) Notice in writing of any measures taken under subsection (4) shall be given to the licensed commercial bank and to any director, manager or controller referred to in paragraph (e) of subsection (4) and such measures shall become effective from the date of the receipt of such notification or such other date as may be specified in the notice.

(1) The written approval of the Monetary Board given with the concurrence of the Minister, shall be required

(1A). Application for approval of an acquisition under paragraph (c) of subsection (1) or a merger or consolidation under paragraph (e) of subsection (1) shall include –

(1B) An approval under paragraph (c) of subsection (1), or paragraph (e) of subsection (1), or subsection (lc) shall not be granted, unless the Monetary Board is satisfied that such acquisition or merger or consolidation is in the interest of promotion of a safe, sound and stable banking system, and the fair competition prevailing in the banking industry. When granting approval for an aquisition under subsection (lc), to an individual or a corporate body, the Monetary Board shall, in determining whether such individual or the directors of such corporate body as the case may be, are fit and proper persons, have regard to the criteria set out in subsection (2) of section 42.

(1C)

(2) The approval under this section may be granted subject to such terms and conditions as may be specified by the Monetary Board with the concurrence of the Minister.

(1) The Monetary Board may, with the approval of the Minister, on a report by the Director of Bank Supervision, by order made in writing, withdraw the approval or vary the terms and conditions of an approval granted under section 12, including the closure of a branch, agency or office of a licensed commercial bank. Notice of the decision of the Monetary Board shall be communicated by the Director of Bank Supervision to such bank which shall carry out all the obligations and meet all the liabilities of the branch, agency or office.

(2) Any licensed commercial bank to whom notice has been issued under subsection (1) may within thirty days of the date of such order, tender objections In writing to the Monetary Board giving reasons why such approval should not be withdrawn or the terms and conditions varied.

(3) After the expiration of sixty days from the date of the notice and after considering the objections placed before the Board under subsection (2), the Monetary Board shall, with the approval of the Minister

(4) Where the order for the closure has been made under subsection (1), the Monetary Board shall direct the Director of Bank Supervision to take all steps as may appear necessary in the circumstances, to satisfy himself that all persons who have deposited moneys in that bench, agency or office are given the opportunity to withdraw such moneys expeditiously and to ensure that such measures as would safeguard the interest of such depositors are taken. It shall be lawful for the Director of Bank Supervision to take such steps accordingly.

(1) Notwithstanding the provisions contained in paragraph (a) of subsection (1) of section 12, the Deputy Governor may on, guidelines issued by the Monetary Board for such purpose, grant approval for the establishment of mobile banking units, subject to such terms and conditions as he may determine, from time to time.

(2) The Deputy Governor may on a report of Director of Bank Supervision, by order made in writing withdraw the approval granted under subsection (1) or vary the terms and conditions of such approval, and notice of the decision shall be communicated to the relevant licensed commercial bank”.

(1) Where the Governor of the Central Bank has reasonable grounds to believe that any persons is carrying on banking business in contravention of the provisions of this Act, the Governor may direct the Director of Bank Supervision or any other officer of the Central Bank to examine the books, accounts and records of such person for the purpose of ascertaining whether such person has contravened, or is contravening, any of the provisions of this Act.

(2) The Director of Bank Supervision or such other officer so authorized by the Governor in terms of subsection (1) may require such person or the bank to furnish to him such information or to produce for inspection any books, minutes, accounts, cash, securities, vouchers, other documents and records as he may consider necessary to obtain for the purpose of such examination, and it shall be the duty of such person or bank to furnish such information and to submit to such officer for examination such books, minutes, accounts, cash, securities, vouchers, other documents and records, as the case may be, when so required.

(3) Any person who fails to furnish such information or to produce any books, minutes, accounts, cash, securities, vouchers, other documents and records when required to do so under subsection (2) shall be guilty of an offence under this Act,

(4) Any refusal by any person or commercial bank to furnish such information or to submit such books, minutes, accounts, cash, securities, vouchers, other documents and records in contravention of the provisions of subsection (2) shall be prima facie evidence of such person or bank carrying on banking business without a licence,

(1) No company other than a licensed commercial bank or a licensed specialised bank shall, except with the prior written approval of the Monetary Board, use as part of its name or its description any of the words “bank”, “banker” or “banking”, or any of its derivatives or its transliterations, or their equivalent in any other language and no licensed commercial bank or a licensed specialized bank shall carry on business in Sri Lanka unless it uses as part of its name at least one of such words :

Provided however, a licensed commercial bank or a licensed specialised bank incorporated outside Sri Lanka which does not have the word “bank”, “banker” or “banking” in any language in its name may carry on business in Sri Lanka notwithstanding the omission of these words in its name;

(2) No firm, individual or group of individuals, shall, except with the prior writes approval of the Monetary Board, for the purpose of carrying on any business, use as part of its or his name or description any of the words ” bank”, ” banker ” or ” banking ” or any of its derivatives, or its transliterations, or their equivalent in any other language

(3) Nothing in this section shall apply-

(1) A licensed commercial bank incorporated or established in Sri Lanka shall not have as its subsidiary a company which is not a licensed commercial bank:

Provided however, such bank may, with the written permission of the Monetary Board, have a subsidiary which carries on any one or more of the following businesses-;

(2) A licensed commercial bank shall not accord to any of its subsidiary companies, treatment which is more favourable than the treatment accorded to other constituents of the bank, carrying on the same business as any such subsidiary company.

(3) For the purposes of this Act a company shall, subject to the provisions of subsection (4) of this section, be deemed to be a subsidiary of another if, and only if

(4) In determining whether one company is a subsidiary of another

(5) For the purposes of this Act, a company shall be deemed to be another’s holding company if, and only if, that other is its subsidiary.

(6) In this Part the expression ” equity share capital” in relation to a company, means its issued share capital excluding any part thereof which, neither in respect of dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution-

(1) subject to the provisions at sub-section (2), a licensed commercial bank shall not acquire or hold shares in any company, and

Provided however a licensed commercial bank may, without exceeding the limit! specified above, acquire shares in a public company other than a listed company, if such acquisition becomes necessary for the purpose of rehabilitating such company to make it financially viable.

(2) The provisions of subsection (1), shall not apply to-

(3) for the purpose of this section “listed public company ” means any public company which has its securities listed or quoted in a stock exchange licensed under the Securities and Exchange Commission Act, No. 37 of 1987.”.

(1) Subject to the provisions of sub-section (3), every licensed commercial bank-

(2)” equity capital” shall mean-

(3)

(4) In the case of a licensed commercial bank incorporated or established in Sri Lanka by or under any written law, the limit of foreign participation in the capital of such bank, shall at no time exceed the limit, established from time to time, by the Monetary Board.

(5) A licensed commercial bank shall not reduce its equity capital without the prior written approval of the Monetary Board,

(6) A licensed commercial bank shall not create any charge upon any unpaid capital of such bank and any such charge created in contravention of these provisions shall be null and void-

” (7)

(9) Where the equity capital or capital funds of a licensed commercial hank have become deficient in terms of the provisions of the preceding subsections the Monetary Board may, grant a reasonable period of time for the rectification of such deficiency.

(1) Every licensed commercial bank shall maintain a reserve fund and shall, out of the net profits after the payment of tax of each year, before any dividend is declared or any profits are transferred to the head office or elsewhere, transfer to such reserve fund-

Provided, however, that an amount not less than twenty-five per centum of the net profits shall be utilised for setting off such intangible assets as may be determined by the Monetary Board, before such profits are transferred to the reserve fund.

(2) The reserve fund of any licensed commercial bank shall not be reduced nor impaired: Provided, however, that the Monetary Board may, specify circumstances in which the reserve fund may be reduced, and shall permit a reduction when a transfer is made for the purpose of increasing the paid-up or assigned capital, as the case may be. The Monetary Board shall permit an impairment of the reserve fund when it is the only means of preventing an impairment of paid-up of assigned capital, as the case may be, subject to the condition that within a given period of time, the deficiency shall be rectified.

(1) Every licensed commercial bank shall maintain liquid assets in such amount as may from time to time be determined by the Monetary Board having regard to the nature of the business carried on by such bank, which shall not in a daily average each month, be less than such percentage of the total of its liabilities, less its liabilities to the Central Bank and to the share holders, to the holders of non-redeemable debt instruments and its liabilities on repurchase agreements in relation to treasury bills or securities issued or guaranteed by the Government of Sri Lanka, or on such other assets as determined by the Monetary Board.

Provided, however, the percentage determined by the Monetary Board shall not be less than twenty per centum and not more than forty per centum of the total of its liabilities, less its liabilities to the Central Bank and to the share holders, to the holders of non-redeemable debt instruments and its liabilities on repurchase agreements in relation to treasury bills or securities issued or guaranteed by the Government of Sri Lanka, or on such other assets as determined by the Monetary Board.

(2) The Director of Bank Supervision may, by notice in writing, require every licensed commercial bank to furnish to him such return or returns as he may deem necessary for the purposes of satisfying himself that the provisions of subsection (1) have been complied with, and every licensed commercial bank so noticed, shall furnish such return or returns as may be required.

(3) Any licensed commercial bank which fails to com ply with the provisions of subsection (1) shall, within such time as may be determined by the Monetary Board, pay to the Central Bank a charge on the amount of the deficiency calculated at such rate as may be determined by the Monetary Board.

(4) Any licensed commercial bank which fails to comply with the provisions of subsection (3) shall be guilty of art offence under this Act.

(1) All off-shore operation of a licensed commercial bank under this Part, shall be carried on by its off-shore unit, and subject to the provisions of subsection (2), Parts III, V and VI of this Act, shall not apply in respect of such off-shore banking business.

(2) The Monetary Board may by notice published in the Gazette declare, that all or any of the provisions contained in Parts III, V and VI of this Act shall apply in respect of all off-shore banking business of a licensed commercial bank in general or in respect of its off-shore banking business with residents only.”.

(a) accept savings, time and demand deposits from any non-resident in any designated foreign currency provided that, in the case of time deposits the value of such deposits shall not be less than ten thousand United States dollars or its equivalent in any other designated foreign currency or such higher amount as may be determined by the Monetary Board : and provided that funds in any account maintained in an off shore unit shall not be with drawable by cheque.

(b) borrow any sum in a designated foreign currency from any non-resident;

(c) extend accommodation to any non-resident in any designated foreign currency;

(d) engage in any transaction in. any designated foreign currency with any other off-shore unit; and

(e) engage in any other transaction authorized by the Monetary Board with the approval of the Minister, in arty designated foreign currency.

(a) a balance sheet as at the last working day of each financial year of such licensed commercial bank;

(b) a profit and loss account in respect of such year.

(1) Subject to the provisions of subsection (2). the provisions of Parts III, VI and VII of Chapter V of the Monetary Law Act shall net apply in respect of off-shore banking business of a licensed commercial bank.

(2) The Monetary Board may, by notice published in the Gazette declare that all or any of the provisions of Parts III, VI, and VII of Chapter V of the Monetary Law Act (Chapter 422), shall apply in respect of the off-shore banking business of a licensed commercial bank in general or in respect of its off-shore banking business with resident only.

(1) Every commercial bank engaged in off-shore banking business, shall appoint annually, a qualified auditor to audit the accounts of its off-shore unit and such auditor shall submit a report to such licensed commercial bank in respect of the accounts, balance sheet and profit and loss account of such off-shore unit. The auditor shall state in his report whether in his opinion, the balance sheet and profit and loss account are full and fair and properly drawn up and whether they exhibit a true and correct statement of affairs of the licensed commercial bank,

(2) A certified copy of the report shall be sent to the Monetary Board, and if. the Monetary Board is of the opinion that the auditor has not discharged his duty to the best of his ability the Board may, order the licensed commercial bank to appoint another auditor for the purpose of preparing a fresh report

(1) It shall be lawful for the Director of Bank Supervision or any officer of the Department of Bank Supervision or any officer authorized under section 31

(2) It shall be the duty of every director, officer or employee of any off-shore unit to afford to the Director of Bank Supervision or to any officer of his department or any officer authorized under section 31 whenever required so to do, in terms of subsection (1), the fullest opportunity to examine books, minutes, accounts, cash, securities, vouchers, other documents and records in his possession containing or likely to contain any such information,

(3) If any books, minutes, accounts, cash, securities, vouchers, other documents and records are not produced or information not furnished in accordance with the provisions of subsection (2), the officer so defaulting shall be guilty of an offence under this Act.

(1) Every officer of a licensed commercial bank operating a numbered account on behalf of a customer and every person, who by reason of his capacity or office, has any access to the records, registers, correspondence or any other material of such bank relating to such numbered account shall keep absolute secrecy with regard to the contents thereof, in the interests of the customer to whom the account relates.

(2) Where a licensed commercial bank has opened a numbered account on behalf of a customer, the identity of the owner of the numbered account shall be absolutely inviolate and every officer of such licensed commercial bank and every Other person referred to in subsection (1) shall not give, divulge or reveal any information whatsoever regarding the name or identity of the owner of such numbered account to any individual, corporation, bank, court, institution, entity, department, official, agent, representative of the Government of Sri Lanka or any other government or to any other legal or natural person, judicial or military authority, unless

(3) For the purpose of this section ” numbered account” means an account opened with a licensed commercial bank authorized by the Monetary Board under repealed section 34A, that is identified only by a number, code, word or such other means as was determined by the Monetary Board.’.

(a) a balance sheet as at the last working day of such financial year; and

(b) a profit and loss account in respect of such year,

(1) The balance sheet of a licensed commercial batik shall set out the state of affairs of such bank as at the end of the financial year to which such balance sheet relates.

(2) There shall be shown in the balance sheet or in any statement annexed thereto

(a) the amount charged to revenue by way of provision for depreciation, renewals or diminution in value of fixed assets;

(b) the amount charged to revenue for Sri Lanka income tax and other Sri Lanka taxation on profits and distinguishable from such accounts, the amounts, of material, set aside or proposed to be set aside for liabilities in respect of tax due in the current year of taxation or a succeeding year ;

(c) the aggregate amount of dividends paid or proposed to be paid;

(d) the amount of remuneration of auditors ;

(e) the amount charged to revenue representing the aggregate amount of the emoluments of directors;

(f) the amount set aside or proposed to be set aside to, or withdrawn from, reserves ;

(g) under separate headings, the profit or loss or the income and expenses arising from transactions such as are not usually carried on by banking companies and are carried on owing to circumstances of an exceptional or non recurrent nature or by a change in the basis of accounting ;

(h) except in the case of the first profit and loss account after the coming into force of this Part of this Act the corresponding amount at the end of the immediately preceeding financial year for all items shown in the profit and loss account.

(1) Every licensed commercial bank incorporated or established within Sri Lanka by or under any written law shall transmit within five months after the close of its financial year to the Director of Bank Supervision, and publish at least once within that period in a Sinhala, Tamil and English daily newspaper circulating in Sri Lanka, its audited balance sheet as at the close of the financial year, and its profit and loss account for such financial year in respect of its business in and outside Sri Lanka including its off-shore banking business and exhibit them in a conspicuous place at each of its places of business until the balance sheet and profit and loss account for the succeeding financial year are prepared and exhibited.

(2) Every licensed commercial bank incorporated outside Sri Lanka shall transmit to the Director of Bank Supervision, within five months after the close of its financial year, its audited balance sheet as at the close of the financial year and its profit and loss account for such financial year in respect of its business in Sri Lanka including its off-shore banking business and shall publish such balance, sheet and its profit and loss account at least once in a Sinhala, Tamil and English daily newspaper circulating in Sri Lanka within such time as may be required by the Director and shall exhibit them in a conspicuous place at each of its places of business until the balance sheet and profit and loss account for the succeeding financial year are prepared and exhibited.

(3) The Monetary Board may specify the form of the balance sheet and profit and loss account referred to in this Part including any disclosure requirements to be made and where such form is specified, the balance sheet and the profit and loss account of every licensed commercial bank shall be prepared in such form as may be specified.

(4) Every licensed commercial bank shall within six months of the date of closure of its financial year, exhibit in a conspicuous place in each of its places of business the consolidated balance sheet as at the end of such financial year setting out the state of affairs of such commercial bank and of its subsidiary companies and associate companies until the consolidated balance sheet for the succeeding financial year is prepared and exhibited.

(5) The provisions of subsection (3) and subsection (4) of section 17 and the provisions of paragraph (c) of subsection (1) of section 46, as the case may be, shall apply in determining for the purpose of subsection (4) of this section, whether a company is a subsidiary company or an associate company of a licensed commercial bank.”.

(1) The Monetary Board may having regard to the need to ensure that experienced and competent qualified auditors are engaged in auditing the accounts of licensed commercial banks, issue guidelines to the Director of Bank Supervision who shall select from time to time in accordance with such guidelines, such number of qualified auditors to” audit the accounts of licensed commercial banks and transmit a list of such selected qualified auditors to all licensed commercial banks.

(2) It shall be the duty of all licensed commercial banks to select their auditors for purpose of auditing its accounts from and out of the list transmitted under subsection (1).

(1) Every licensed commercial bank shall appoint annually from and out of the list issued by the Director of Bank Supervision under section 38A, a qualified auditor to audit the accounts of such bank. The duties of such auditor shall be

(2) Every such report, which shall be completed within three months of the end of the financial year, shall contain a statement by the auditor as to whether in his opinion the balance sheet and profit and loss account contain a full wad fair and properly drawn up statement and whether they represent a true and correct statement of the bank’s affairs, and if the auditor has called for as explanation or any Information from the officers or agents of such licensed commercial bank whether such explanation or information Is satisfactory,

(3) The report of the auditor made in accordance with subsections (1) and (2) shall, in the case of a licensed commercial bank incorporated or established within Sri Lanka by or under any written law, be read together with the report of the Board of Directors of the licensed commercial bank at the annual general meeting of its share-holders, and; in the case of a licensed commercial bank incorporated outside Sri Lanka, be transmitted to the head office of such licensed commercial bank. A copy of such report shall be transmitted to the Director of Bank Supervision. Where the Director of Bank Supervision is not satisfied with the report of the auditor, he may make a request to the Monetary Board for the appointment of a new auditor to submit a fresh report.

(3A) Notwithstanding the provisions of subsection (3), the Director of Bank Supervision may, on receipt of the report referred to in that subsection, call upon the auditors to-

(4) If a licensed commercial bank fails to appoint an auditor under subsection (1) or the Director of Bank Super vision has made a request to the Monetary Board in terms of subsection (3), the Monetary Board shall have the power to appoint an auditor for such licensed commercial bank.

(5) Every auditor appointed under subsection (1) or (4) shall have a right of access at all times to the books, accounts and vouchers and all documents and records belonging to the licensed commercial bank, which he considers necessary for the performance of his duties, and he shall be entitled to require from the officers of such bank such information and explanations as He thinks necessary for the performance and proper discharge of his duties and functions as auditor.

(6) The remuneration of the auditor, whether appointed by the licensed commercial bank or by the Monetary Board, shall be paid by the licensed commercial bank and, in the case of an auditor appointed by the Monetary Board under subsection (4), he shall be paid such amount as may be determined by the Monetary Board.

(7) No person having an interest in any licensed commercial bank or any director, officer, employee, agent of such licensed commercial bank shall be eligible for appointment as auditor for that licensed commercial bank. Any person appointed as auditor who shall after such appointment acquire any interest in or become a director, officer, employee or agent of such licensed commercial bank shall forthwith cease to act as such auditor.

(8) Nothing contained in this section shall apply to the audit of the accounts of any licensed commercial bank which is a public corporation.

(1) The Monetary Board shall, from time to time, cause an examination of any licensed commercial bank or any of its subsidiaries, to be made by an officer duly authorized by it, whenever it appears to the Board that such examination is necessary or expedient in order to examine whether such licensed commercial bank is in a sound financial condition and whether the carrying on of business by the licensed commercial bank has been in accordance with the provisions of this Act or any other written law.

(2) Every licensed commercial bank and any subsidiary of such licensed commercial bank referred to in subsection (1) shall permit the officer authorized by the Monetary Board, to inspect at any time as requested by such officer all books, minutes, accounts, cash, securities, vouchers other documents and record relating to its business and shall be required to furnish such information concerning its business as may be requested by such officer.

(3) If any books, minutes, accounts, cash, securities, vouchers, other documents and records are not produced or information not furnished in accordance with the provisions of subsection (2) or if any information furnished or item produced is false in any material particular the defaulting licensed commercial bank or subsidiary or both, as the case may be, shall be guilty of an offence under this Act.

(1) No person shall be appointed, elected or nominated as a director of a licensed commercial bank or continue as a director of such bank unless that person is a fit and proper person to hold office as a director of such bank and if he is not prevented from doing so by any provision of this Act or of any other written law.

(2) In determining whether a person would, for the purposes of subsection (1) be considered to be a fit and proper person, the following matters shall be taken into consideration:

(3)

(4) Every licensed commercial bank shall notify the Director of Bank Supervision in such form as may be determined by the Director, the name, address and occupation of –

(5) The Director of Bank Supervision may, having regard to the matters specified in subsections (1), (2) and (3), approve or refuse to approve the proposed appointment, election or nomination as the case may be as a director of the licensed commercial bank of the person referred to in paragraph (a) of subsection (4) and shall, within thirty days after submission of the name of such person under that subsection, notify the bank of such approval or refusal, giving reasons therefor. It shall be the duty of the bank to communicate such notification to the person to whom it relates.

(6) A person aggrieved by the refusal of the Director of Bank Supervision under the provisions of subsection (5) to approve his proposed appointment, election or nomination as the case may be, as a director of the relevant bank, may within fourteen days of the date of receipt of the communication sent by the bank under subsection (5) tender written objections against such refusal to the Monetary Board. Upon receipt of such objections, the Monetary Board shall after considering the reasons given by the Director of Bank Supervision in his notification and the objections of the aggrieved party, and such other matters which in its opinion merit inquiry, decide either to confirm the refusal made by the Director of Bank Supervision or approve the proposed appointment, election or nomination as the case may be, of such person as a director of the bank.

(7) A licensed commercial bank shall not appoint, elect or nominate as a director of the bank, a person whose appointment, election or nomination as the case may be has not been approved under subsection (5) or subsection (6) :

Provided that a person whose name has been submitted to the Director of Bank Supervision for approval under subsection (5) may be appointed, elected or nominated as the case may be as a director of the bank at any time before the notification of the decision of the Director under that subsection. Where however the Director refuses to grant such approval under that subsection and notifies the bank accordingly and the bank notifies such person accordingly, the person shall on the receipt of the notification by the bank, cease forthwith to hold office as a director of the bank subject to any decision made by the Monetary Board under subsection (6).

(8) Where the Director of Bank Supervision, having regard to the matters specified in subsections (1), (2) and (3) is satisfied at any time that a person appointed, elelcted or nominated as the case may be as a director of a licensed commercial bank is not a fit and proper person or that he is otherwise ineligible for appointment, election or nomination as the case may be or that the election, appointment or nomination as the case may be of a person as a director of a licensed commercial bank contravenes the provisions of subsection (3) or subsection (7) the Director shall submit a report to the Monetary Board. The Board may, if it is satisfied on consideration of the report and such other matters which in its opinion merit inquiry, that the person is not a fit and proper person or the election, appointment or nomination as the case may be of the person contravenes the provisions of subsection (3) or subsection (7)-

and the bank shall within the period specified in the direction remove such person from the office of the director and notify such person in writing of his removal from the office of director, and shall take such steps as are necessary to inform the shareholders of the bank and the Registrar of Companies of such removal. The removal of a director in accordance with the directions given under paragraph (a) shall take effect from the date of receipt by the director of the notification of removal given by the bank, notwithstanding the provisions of any other law or the Articles of Association of the bank.

(9) A licensed commercial bank which fails to comply with any direction given under paragraph (a) of subsection (8) within the period specified in such direction and a director who has been served with a notice under paragraph (b) of section (8) who continues to function as a director, shall each be guilty of an offence and shall be liable on conviction after trial before a Magistrate to a fine of rupees five hundred thousand and shall – (a) be liable in the case of the bank, to a further fine of rupees one hundred thousand, in respect of each day the bank fails to comply with such direction after such conviction; and (b) be liable in the case of a director of the bank, to a further fine of rupees one hundred thousand in respect of each day such director continues as director after such conviction.

(10) Any person who is aggrieved by the removal of such person from the office of director of a licensed commercial bank under subsection (8), may appeal in writing against such removal to the Monetary Board and the Monetary Board shall after considering the appeal, either confirm such removal or issue new directions to the bank to reappoint him to his former office as a director of such bank.

(11) Where any written law, other than this Act, provides for the appointment of a person as a director of a 1icensed commercial bank by virtue of an office the person holds, the preceding provisions of this section shall not apply to the appointment of that person as a director of such bank.

(12) The responsibilities of the Board of Directors shall include the overseeing of the management of the affairs of the Bank”.

(1) No person shall be appointed as Manager, Secretary or other official of a licensed commercial bank and any person appointed as Manager, Secretary or other official of such bank shall be removed from office if he

(2) No person who has been a director or has been a chief executive officer of a licensed commercial bank which has been wound up by an Order of court shall, without the written approval of the Monetary Board, as a director or chief executive officer of a licensed commercial bank.

(3) No licensed commercial bank shall employ or be managed by a managing agent other than an employee of such licensed commercial bank.

(1) The Chief Executive Officer and such other officers of a licensed commercial bank performing executive functions as may be determined by the Monetary Board shall be fit and proper persons and the provisions of subsection (2) of section 42 shall, mutatis mutandis, apply in determining whether the Chief Executive Officer and such other officers performing executive functions are fit and proper persons.

(2) The provisions of subsections (5) (6), (8), (9) and (10) of section 42 shall apply to the Chief Executive Officer and officers performing executive functions referred to in subsection (1) of this section and to the licensed commercial bank of which such person is a Chief Executive Officer or an officer performing executive functions as they apply to a director of a licensed commercial bank and to the licensed commercial bank of which such person is a director.

(1) Where the Director of Bank Supervision is satisfied that a licensed commercial bank-

the Director of Bank Supervision may, subject to subsection (2) issue an order directing the licensed commercial bank,

within such period as may be specified in the order.

(2) An order issued under subsection (1) shall –

(3) Any licensed commercial bank aggrieved by an order issued under subsection (1) may, before the expiration of thirty days of the date of service of the order, appeal to the Monetary Board and the Monetary Board shall, within thirty days of the date of receipt of the appeal confirm, vary or revoke such order.

(4) Without prejudice to anything contained in section 9, and notwithstanding that an appeal has been tendered to the Monetary Board under subsection (3), a licensed commercial bank which fails to comply with an order under subsection (1) within the period specified in the order, shall be guilty of an offence under this Act and shall be liable on conviction upon trial by a Magistrate to a fine of one million rupees and to a further fine of one hundred thousand rupees for each day of non-compliance with the order after the conviction, provided that, where an appeal has been tendered under subsection (3), proceedings shall not be instituted before a Magistrate until the decision of the Monetary Board is conveyed to the licensed commercial bank.”.

(1) In order to ensure the soundness of the banking system, the Monetary Board may issue directions to licensed commercial banks or for reasons to be stated in writing to any one or more of them regarding the manner in which any aspect of the business of such bank or banks is to be conducted and without prejudice to the foregoing, may, also issue directions specifying –

For the purposes of this Act a company is deemed to be an “associate company” of another company where not less than twenty per centum and not more than fifty per centum of its shares are held by that other company.

(2) A direction issued under subsection (1) shall have effect notwithstanding that such direction will require a licensed commercial bank to effect a change in the nature or amount of any of its assets or liabilities, whether acquired or incurred before or after the date of the coming into operation of this Act, provided that a licensed commercial bank which is required to so effect a change, is afforded a period of twelve months from the date of such direction or such longer period as may be granted by the Monetary Board in which to comply with that requirement.

(3) In order to comply with a direction issued to it under paragraph (d) of sub-section (1), a licensed commercial bank may direct a person holding shares in such bank to reduce the number of shares held by such person in such bank, whether such shares were acquired by such person before or after the appointed date, within, such period as may be specified in such direction; and it shall be the duty of such person to comply with such direction.

(4)

(1) The provisions of this section shall apply wily to licensed commercial banks carrying on domestic banking business.

(2) A licensed commercial bank shall not grant accommodation for the purchase of its own shares nor grant accommodation against the security of-

Provided that nothing in this section shall be taken to prohibit the provision by the licensed commercial bank, in accordance with any scheme for the time being in force, of money for the purchase of or subscription for fully paid shares in the licensed commercial bank being a purchase or subscription by Trustees of or for shares to be held by or for the benefit of employees of the licensed commercial bank:

Provided further that the amounts of money so provided and the aggregate principal amount of such accomodation outstanding at any one time, shall not exceed the equivalent of ten percentum of the total nominal amount of the subscribed and paid up share capital of the bank or ten percentum of the unimpaired capital funds of the bank, whichever is greater.

(3) A licensed commercial bank shall not grant any accommodation to any of its directors or to a close relation of such director unless such accommodation is sanctioned at a meeting of its Board of Directors with not less than two-thirds of the number of directors constituting the Board of Directors (other than the director concerned) voting in favour of such accommodation and, except where such accommodation is provided by the issue of a credit card, such accommodation is secured by such security as may from time to time be approved by the Monetary Board.

(4) Accommodation granted by a licensed commercial bank to a director or to a close relation of such director shall not exceed such limit as may be approved by the Monetary Board from time to time by Order published in the Gazette.

(5) A licensed commercial bank shall not grant any accommodation to a concern in which any director of the licensed commercial bank has a substantial interest, being an interest acquired either before or after the appointment as the director, unless such security as may from time to time be approved by the Monetary Board is given and such accommodation is sanctioned at a meeting of the Board of Directors of the licensed commercial bank by the votes of not less than two thirds of the number of its directors other than the Director concerned.

(6) Where any accommodation has been granted by licensed commercial bank to a person or a close relation of a person or to any concern in which the person has a substantial interest and if the person is a director of that licensed commercial bank on the appointed date or is appointed a director after the appointed date, steps shall be taken to obtain such security as may be approved for that purpose by the Monetary Board, within one year from the appointed date or from the date of appointment as director, whichever is applicable:
Provided that the provisions of this section shall not apply to a director who at the time of the grant of an accommodation, was an employee of the bank and the accommodation was granted under a scheme applicable to the employees of such bank.

(7) Where such security has not been, provided as specified in subsection (6), the licensed commercial bank shall take steps to recover any amount due on account of any accommodation together with interest, if any, due thereon

(8) Where no security has been provided within the period specified in subsection (6), or the amount due has not been repaid in tense of subsection (7) in respect of an accommodation granted to a director or to a concern in which the director has a substantial interest such Director shall be deemed to have vacated office on the expiry of the period specified in subsection (7).

(9) Every director of a licensed commercial bank, who is in any manner whatsoever, whether directly or indirectly, Interested in any accommodation or proposed accommodation from that licensed commercial bank, shall as soon as is practicable, declare the nature of his interest to the Board of Directors and the Secretary or Manager of such licensed commercial bank shall cause the declaration to be circulated forthwith to all the directors,

(10) A director shall not take part in any deliberations or decisions of the Board with regard to any business trans acted or proposed to be transacted by a licensed commercial bank in which the director or a close relation of the director, or a concern in which the director has a substantial interest, is interested, and the director shall withdraw from the meeting of the Board at which such business is discussed or transacted while the deliberation is in progress or decision is being made.

(11) No accommodation granted by a licensed commercial bank under subsection (3) or subsection (5) or any part of such accommodation or any interest due thereon shall be remitted without the prior approval of the Monetary Board and any remission without such approval shall be void and of no effect.

(11A) Where any accommodation is granted by a licensed commercial bank under subsection (3) or subsection (5) during the course of any financial year, such accommodation shall be disclosed in the accounts for that financial year and for each subsequent financial year till such accommodation has been repaid or settled in full.

(12) Any director who contravenes the provisions of sub sections (9) and (10) shall be guilty of an offence under this Act.

(13) For the purpose of this section ” company ” shall not include a company incorporated outside Sri Lanka ; ” director ” shall not include a director of a licensed commercial bank incorporated outside Sri Lanka.

(1) Notwithstanding anything contained in any other written law or in any contract, no licensed commercial bank shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realization of security given to or held by it, or engage In any trade, or buy, sell or barter goods for others, otherwise, than in connection with bills of exchange received for collection or negotiation or with such of its business as is referred to in Schedule II or in any other law or in the Bank at Ceylon Ordinance (Chapter 387) or in the People’s Bank Act, No. 29 of 1961, where the provisions of these enactments are applicable.

(2) The provisions of the preceding subsection shall not apply to any such business as aforesaid, which was being carried on by a bank on the appointed date:

Provided that the said business shall be completed before the expiry of one year from the appointed date.

(1) Whereupon a report made by the Director of Bank Supervision, the Monetary Board is satisfied that any licensed commercial bank is unable to carry on banking business in Sri Lanka ; or is unable to meet the demands of its depositors and other persons who have had transactions with sue a licensed commercial bank (in this Part of this Act referred to as “the defaulting bank “) and that its continuance in business is likely to involve serious economic loss to, and to adversely affect, the monetary and banking system and the national economy, the Monetary Board may, notwithstanding the provisions of any other law to the contrary, by Order published in the Gazette, vest the business carried on by defaulting bank being a business which it is authorized to carry on by or under this Act or such part thereof as the Monetary Board may determine, in another licensed commercial bank (in this Part of this Act referred to as the “acquiring bank”) which consents to sub vesting.

(2) For the purpose of subsection (1), the “business carried on by a defaulting bank” includes-

(a) the Monetary Board is satisfied that the proposed acquiring bank, is capable of carrying on in a competent manner the business of the defaulting bank proposed to be vested, and of meeting liabilities of the defaulting bank to its depositors and creditors pertaining of relating to the business proposed to be vested;

(b) the proposed acquiring bank agreed writing to comply with such terms and conditions as may be specified by the Monetary Board relating to the manner in which-

(a) the acquiring bank shall have control and possession of the vested business of the defaulting bank, and become the transferee of the vested business of such defaulting bank;

(b) the licence Issued under this Act to the defaulting bank to carry on ,his buss ness vested in the acquiring ban! shall be modified to the extent necessary to enable the defaulting bank to carry on such part of its business as has not been vested to the acquiring bank;

(c) the acquiring bank shall comply wife such terms and conditions as are agreed to by such bank under paragraph (b) of section 49c and such other directions as the Monetary Board may give to such bank under this Act; and

(d) the licence issued under this Act to the defaulting bank to carry on banking business, shall where both domestic and off-shore banking business of such bank are vested to the acquiring bank, be deemed to be cancelled.

(1) For the purpose of ascertaining the value of the vested business of the defaulting bank on the day immediately preceding the relevant date, the Director of Bank Supervision shall cause an audit of such vested business to be conducted by a qualified auditor appointed by him with the approval of the Monetary Board.

(2) The auditor appointed under subsection (1) shall submit a report to the Director of Bank Supervision within three months from the date of his appointment and the Director of Bank Supervision shall forward such report to the Monetary Board and the Monetary Board shall consider the report and if necessary, require the Auditor to furnish any further information, or explanations as it may consider necessary.

(3) the auditor appointed under subsection (1) shall examine the accounts of the defaulting bank and ascertain the correctness of the balance sheet and furnish a report stating-

(4) the Monetary Board after considering the report of the auditor, shall direct the acquiring bank to pay in such manner and within such time as it may specify the value of the vested business to the defaulting bank or its liquidators or successors, as the case may be.

(5) The payment required to be made to the defaulting bank in pursuance of ” direction under subsection (4) and all payments required to be made to the auditor appointed under subsection (1), shall be made by the acquiring bank in accordance with such terms and conditions as may be determined by the Monetary Board.

(a) all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation, and other instruments of whatever nature pertaining, or relating to the vested business of the defaulting bank and subsisting, or having effect on the day immediately preceding the relevant date, and to which the defaulting bank is a party or which are in favour of the defaulting bank, shall be deemed with effect from the relevant date to be contracts, deeds, bonds, agreements, powers of attorney grants of legal representation or other instruments entered into or granted, as the case may be by the acquiring bank;

(b) all actions and proceeding of what ever nature instituted by or against the defaulting bank pertaining or relating to he vested business of the defaulting bank. and pending on the day immediately preceding the relevant date, shall be deemed with effect from the relevant date to be actions and proceedings instituted by or against the acquiring bank, and may be continued or prosecuted accordingly;

(c) all such officers and servants of the defaulting bank as are connected with such part of the business the defaulting bank as was vested or All the officers and servants of the defaulting bank whether entirety of the business of tin bank is vested, as the case may be, on the day immediately preceding the relevant date, who are not offered employment with the acquiring bank, shall be entitled to the payment of compensation.

(a) the licensed commercial bank is solvent and has sufficient liquid assets to repay its depositors and other creditors without delay ; and

(b) the liquidation has been approved by the affirmative vote of the shareholders of at least three-fourths of the outstanding shares entitled to vote at a meeting called expressly for this purpose :

Provided that if the liquidation is to be affected in whole or in part through the sale of any of the assets of the licensed commercial bank to, and the assumption of its deposit liabilities by, another licensed commercial bank, the Monetary Board may, upon a finding of imminent danger of insolvency, waive the requirement for shareholder approval:

Provided further, that the provisions of paragraph (c) of subsection (1) of section 12 shall not apply to such assumption of liabilities.

(a) immediately cease to carry on business, exercising only such powers as are necessary to effect an orderly liquidation;

(b) repay sums of money due to its depositors and other creditors;

(c) wind up all operations undertaken prior to the receipt of the authorization.

(a) all claims of depositors or other creditors or owners have been paid and, in the case of disputed claims, before the licensed commercial bask has transmitted to the Central Bank sufficient funds to meet any liability that may arise after a judicial decision;

(b) any funds payable to depositors, other creditors and owners who have not claimed them, have been transmitted to the Central Bank ;

(c) any other funds or property held by the licensed commercial bank which could not be returned to the rightful owner in accordance with the provisions of this section, have been dealt with in accordance with section 72.

(a) the assets of a licensed commercial bank whose voluntary liquidation, it has authorized, will not be sufficient for the full discharge of all its obligations ; or

(b) the completion of voluntary liquidation is unduly delayed, it shall forthwith take steps to revoke the licence issued to such bank and commence proceedings for the compulsory liquidation of such bank in conformity with the procedures set out hereunder.

(1) The Director of Bank Supervision shall be vested with the full and exclusive power of management and control of the affairs of any licensed commercial bank for the purpose of compulsory liquidation and shall have the power

(2) The Director of Bank Supervision may, engage the services of any professionally qualified person to assist him in relation to the excercise of the functions of the liquidator in a compulsory winding up of a licensed commercial bank.

(a) any term, statutory, contractual or otherwise, on the expiration of which a claim or right of the licensed commercial bank would expire or be extinguished, shall by she operation of this section, be extended by six months from the date of the commencement of the proceedings;

(b) any attachment or lien, except a lien existing six months prior to the date as specified in paragraph (A), shall be vacated, and no attachment of lien, except a lien created by the Director of Bank Supervision, in the application of the provisions of this Part, shall attach to, any property or assets of the licensed commercial bank in liquidation;

(c) any transfer of any assets of the licensed commercial bank made after or in contemplation of its insolvency shall be void,

(1) Within a period of six months from the date on which the cancellation of a licence becomes final, the Director of Bank Supervision may, subject to the provisions of any other law for the time being in force, terminate

(2) A lessor who shall have received ninety days notice that the Director of Bank Supervision is exercising discretionary powers to terminate the lease shall have no claim for rent other than rent accrued on the date of termination of the lease, not for damages by reason of such termination.

(1) Any safe deposit box, the contents of which have not been withdrawn before the date specified, shall be open ed to the manner prescribed by the Director of Bank Super vision. The contents and any unclaimed property shall be held by the licensed commercial bank as bailee, and

2. The money referred to in paragraph (a) and articles referred to in paragraph (b) shall be deemed to be abandoned property for terms of the provisions of Part IX. if the owner thereof) has, over a period of ten years from the date of deposit of such money or articles, as the case may be, not evidenced an interest In the same. The provisions of section 72 shall apply in. respect of such items as from the date of their transfer.

(a) reject any claim if he doubts the validity thereof;

(b) determine the amount, if any, owing to each identifiable depositor or other creditor and the priority attaching to his claim under the provisions of this Act;

(c) prepare a Schedule of the scheme of work he proposes to take;

(d) notify each person whose claim has not been allowed in full, and publish once a week for three consecutive weeks, a notice in three daily newspapers in the Sinhala, Tamil and English languages, which contains on intimation of the date and place, where the Schedule of the scheme of work he proposes to take, will be available for inspection.

The date so intimated, shall be a date not sooner than thirty days from the date of the third publication in the newspaper, upon which the Director of Bask Supervision will file the Schedule in Court.

(1) The claims set out hereunder shall have priority as against the general assets of the licensed commercial bank in the order indicated below :-

(2) Alter payment of all other claims filed, with interest thereon calculated at a rate to be fixed by the Director of Bank Supervision, with the approval of the Court, any remaining claims which were not filed within the prescribed time shall be paid.

(3) If the amount available in respect of a particular category of claims is insufficient to provide payment in full,” the said amount shall be distributed pro-rata among the parties of that claim-

(1) When a licensed commercial bank incorporated outside Sri Lanka wishes to close down its business in Sri Lanka the approval of the Monetary Board for the closure shall be granted, subject to such terms and conditions as the Board may specify. Where approval is granted by the Board the affairs of the licensed commercial bank in Sri Lanka shall be wound up in accordance with the procedures set out in subjection (4),

(2) When a cancellation of the licence of a licensed commercial bank incorporated outside Sri Lanka has been made final under subsection (3) of section 9, the licensed commercial bank shall terminate its business in Sri Lanka and its affairs shall be wound up in accordance with the provisions of subsection (4).

(3) When liquidation proceedings in respect of a licensed commercial bank incorporated outside Sri Lanka are started at the place where the head office is located, the Monetary Board shall order the closure of the licensed commercial bank in Sri Lanka.

(4) When the business of the licensed commercial bank is closed down under subsections (1) or (2) or (8), the licensed commercial bank which is the subject of liquidation, shall retain only such powers as are necessary to wind up its affairs within Sri Lanka, which shall be done expeditiously and in an orderly manner. The Director of Bank Supervision shall supervise the winding up under subsection (1) or (2) or (3) of this section, in accordance with the provisions of subsections (1) and (3) of section 11, take all measures necessary to ensure that no assets owned by the licensed commercial bank, which is the subject of liquidation are removed from. Sri Lanka until all obligations and liabilities incurred by such bank, to which the undertaking referred to in paragraph (c) of subsection 2 of section 3 relates, have been met In accordance with the undertaking. The provisions of sections 63 and 68 shall apply to the winding up of the affairs under this section,

(5) Where the Monetary Board is of the opinion that the licensed commercial bank has discharged all the obligations referred to in the preceding provisions of this section. the name of such bank shall be removed from the list of licensed commercial banks.

(1) In addition to the articles referred to in sections 63 and 68 the articles enumerated in subsection (2) of this section, held by a licensed commercial bank other than such articles so held by an offshore unit of a licensed commercial bank, shall be presumed to be abandoned if the owner has, within a period of ten years immediately after the date of deposit, or payment of funds towards the purchase of shares or other interests, or issuing of instruments, or the date upon which funds held in a fiduciary capacity became payable, or capable of being distributed, or the expiration of the period for which the safe deposit box was rented, as the ease may be

(2) The following shall be the articles referred to in subsection (1) :

(1) Any licensed commercial bank holding any abandoned property referred to in section 72, shall make a report to the Monetary Board in such form as the Monetary Board may determine stating the nature of the articles held and in the case of money, the amount of money.

(2) Notwithstanding anything in any other law, all monies included in the report shall, if the Monetary Board directs, be transferred by the licensed commercial bank to a special account in the Central Bank and may be utilised by the Monetary Board for such purposes as may be determined by the Monetary Board after consultation with the Minister.

(3) The articles included in the report that do not fall under subsection (2) shall be referred by the Monetary Board to the Minister for such action as he shall prescribe.

(1) Where any person furnishes proof to the satisfaction of the Monetary Board that moneys lying to the credit of an account which was in his name or in the name of a person from whom he derives title, have been transferred to a special account in the Central Bank under section 73 shall, subject to such terms, conditions or restrictions as are imposed in respect of such money by or under any written law be entitled to the repayment of such moneys by the Central Bank together with the interest payable on such moneys upto the date of such repayment, in accordance with such rates and conditions as are applicable to the recount to the credit of which such money were lying before they were transferred to the special account in the Central Bank.

(1) from and after such date as may be determined by the Minister by Order published in the Gazette, the business of accepting deposits of money and investing and lending such money shall not be carried on except by a company which has an equity capital in an amount not less than fifty million rupees and under the authority of ” licence issued by the Monetary Board for such purpose under this Part of this Act:

Provided however, the requirement to obtain a licence shall not apply in respect of a company under Finance Companies Act, No.78 of 1988, a Co-operative Society registered under the Co-operative Society registered under the Co-operative Societies Law, No.5 of 1972, a building society incorporated under the National Housing Act (chapter 401) and to a company licensed as a licensed commercial bank under the provisions of this Act and to any organization established or registered under any written law, not being an organization established primarily for the purpose of making profit, which accepts deposits only from its registered members and has obtained permission in writing from the Monetary Board to accept such deposits and to invest or lend the monies so accepted.

(2) Where such company is a company incorporated outside Sri Lanka, no licence shall be issued under this Part of this Act unless such company has complied with the provisions of Part XIII of the Companies Act, No.17 of 1982.

(3) Notwithstanding the provisions of subsections (1) and (2) of this section and of section 76B, all institutions specified in Schedule III of this Act, shall be issued a licence in accordance with the provisions of this Part of this Act on or after the date determined by the Minister under subsection (1).

(4) Any company carrying on business contravention of subsection (1), shall be guilty of an offence under this Act.

(5) For the purposes of this section 449 of the Companies Act. No, 17 of 1982 and includes a company duly incorporated outside Sri Lanka, or a body corporate formed in pursuance of any statute of any foreign country Royal Charter or letters patent and a body corporate establishment by or under any law and shall not include a private company incorporated outside Sri Lanka ; and “equity capital” shall have the same meaning as in subsection (2) of section 19 of this Act and for that purpose, the reference in that subsection to a licensed commercial bank shall be deemed to be a reference to a licensed specialised bank.

(1) Any company which has been issued with a licence under this part shall be referred to as a licensed specialised bank .

(2) A licensed specialised bank may carry on such forms of business as are specified in schedule IV of this Act subject to such restrictions expressly stipulated in the licence or as may be imposed by our under any written law.

(3) The Monetary Board may authorise a licensed specialised bank which satisfies the requirements prescribed by regulations made by the Minister under section 82 to carry on offshore banking business in accordance with such off shore banking scheme formulated for licensed specialised banks by the Monetary Board and where a licensed specialised bank is authorised to carry on offshore banking business the provisions of Part IV shall, mutatis mutandis, apply to such licensed specialised bank as they apply to a licensed commercial bank.

(4) A licensed specialised bank shall not carry on its business in any place other than that specified in the licence except with the prior written approval of the Monetary Board.

(5) A licensed specialised bank carrying on business under the authority of a licence issued under this Part shall be deemed not to act in contravention of section 2 of the Finance Companies Act, No. 78 of 1988.

(6) Every licensed specialised bank shall pay to the Central Bank an annual licence fee as may be determined by the Monetary Board and the Monetary Board may determine different licence fees for different categories of licensed specialised banks.”.

(1) The provisions of section 9 shall, mutatis mutandis, apply in respect of a licensed specialised bank as they apply in respect of a licensed commercial bank and for that purpose any reference therein to a licensed commercial bank shall be deemed to be a reference to a licensed specialised bank, and any reference therein to section 5 shall be deemed to be a reference to section 76c, and any reference therein to banking business shall be deemed to be a reference to the business of accepting deposits of money and investing and lending such money.

(2) Nothing contained in subsection (1) shall in any way affect the powers conferred on the Monetary Board or the Director of Bank Supervision by section 76M.

(1) Subject to the provisions of subsection (3), every licensed specialized bank shall at all times maintain an equity capital in an amount not less than fifty million rupees or such other amount as the Monetary Board may, with the concurrence of the Minister, from time to time determine, having regard to the viability and stability of the banking system and the interest of the national economy.

(2) For the purpose of this section “equity capital” shall have the same meaning as is assigned to it in subsection (2) of section 19.

(3)

(4) In the case of licensed specialized bank incorporated or established in Sri Lanka by or under any written law, the limit of foreign participation in the capital of such bank, shall at no time exceed the limit, established from time to time, by the Monetary Board.

(5) A licensed specialized bank shall not reduce its equity capital without the prior written approval of the Monetary Board.

(6) A licensed specialized bank shall not create any charge upon any unpaid capital of such bank and any such charge created in contravention of these provisions shall be null and void.

(7)

(8) Where the equity capital or capital funds of a licensed specialized bank have become deficient in terms of the provisions of the preceding subsections, the Monetary Board may, grant a reasonable period of time for the rectification of such deficiency.”.

(1) Notwithstanding the provisions any other law the Monetary Board may give directions to licensed specialised banks or to any category of licensed specialised banks regarding the manner in which any aspect of the business of such banks to be conducted and in particular-

(2) The maximum rates of interest Sixes by any direction under paragraphs (c) and (d) of subsection (1) shall, it so determined by the Monetary Board, apply In respect of any deposit accepted or is respect of any loan, credit facility or any other financial accommodation granted, before the date of inch direction :

Provided, however, that nothing in such direction shall-

(3) For the purposes of this Part at the Act, the Monetary Board may give directions where necessary to any particular licensed specialised bank in particular on such matters as are specified in subsection (1).

(4) The Monetary Board may in the discretion pay interest on any cash balance maintained by a licensed specialised bank In the Central Bank in pursuance of a direction issued to it under paragraph (I) of subsection (1) at such rate as may be determined by the Monetary Board.

(5) A licensed specialised bank which fails to act in compliance with a direction issued under this section or acts in contravention of such direction shall be guilty of an offence under this Act.

(1) The Director of Bank Supervision may at any time, examine or authorize any officer of his department to examine, the books and accounts of any licensed specialised bank.

(2) The report on any such examination shall be furnished to the Governor of the Central Bank by the Director of Bank Supervision as soon as such examination is completed. The Director of Bank Supervision may recover the costs of such examination from the licensed specialised bank.

(3) It shall be lawful for the Director Bank Supervision or any officer authorized by him-

(4) It shall be the duty of every director, manager, secretary, employee or any auditor of any licensed specialised bank to comply with any requirement imposed on him under this section and to afford to the Director of Bank Supervision or to any officer authorized by him or to any auditor authorized by him under paragraph (d) of subsection (3), access to all books and records of that licensed specialised bank including its cash balances, assets and liabilities whenever requested to do so by the Director of Bank Supervision.

(5) The Director of Bank Supervision may, where he considers it necessary to ascertain the true condition of the affairs of a licensed specialized bank and to ascertain whether such bank is carrying on business is a manner detrimental to its present or future depositors, by notice in writing require any person whom he considers to haw information relating to the licensed specialised bank, to furnish such information to him or to any officer authorized by him or to any auditor authorized by him under paragraph (d) of subsection (3) or to attend in person before hint or any officer authorized by him at such place and at such date and time as may be specified in such notice, so that the person may be examined on such matters as may be specified in such notice.

(6) For the purpose of ascertaining the true condition of the affairs of the licensed specialised bank, the Director of Bank Supervisor may if he thinks it necessary for the purpose of an examination under subsection (5), also examine the business of any company which is or has at any relevant time been-

and may exercise in relation to any such company, any of the powers conferred on him by the preceding provisions of this section.

In this subsection ” associate company” when used in relation to a licensed specialised bank, means a company in which the licensed specialised bank holds ordinary shares equivalent to twenty per centum or more but less than fifty per centum of the paid up share capital of the company.

(7) Any person who falls to comply with any requirement imposed on him by the Director of Bank Supervision under subsections (5) or (6) shall be guilty of an offence under his Act.

(1) In any case where the Director of Bank Supervision is satisfied after examination by him self 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 malts 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 manners to prevent the continuation of business by the company shall be guilty of a offence under this Act.

(2) 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 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.

(3) 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 six month 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 period-

“(3A) For the purpose of subsection (3), the “business carried on by a defaulting bank” includes-

(3B) With effect from the date on which the business carried on by the defaulting bank is vested in the acquiring bank in terms of sub-paragraph (i) of paragraph (b) of subsection (3) of section 76M-

(3C)

(3D) Notwithstanding anything to the contrary in this Act or any other written law, the settlement of liabilities in accordance with the terms and conditions of a Scheme formulated by the Monetary Board in terms of subsection (3C) hereof, shall extinguish the liabilities of the defaulting bank vested in the acquiring bank as herein provided.

(3E) The Monetary Board shall, in making an Order under sub-paragraph (i) (B) of paragraph (b) of subsection (3), take into consideration the capacity of such acquiring bank to discharge the obligations imposed on it in terms of the Scheme formulated by the Monetary Board and require the acquiring bank to communicate in writing its willingness to comply with such Scheme.

(3F) The Minister may, where it is necessary to do so in the interest of the national economy, by Order published in the Gazette, determine that any deposit liabilities of a defaulting bank or any part of such liabilities, to any government institution, Provincial Council or other body or authority functioning under the Provincial Council, a public corporation or other public institution or local authority, which have in terms of the aforesaid provisions vested in an acquiring bank, shall be liabilities to the Government.

(3G) For the purposes of subsections (3A) and (3B) “relevant date” means the date on which the defaulting bank is vested in the acquiring bank in terms of sub-paragraph (i) (B) of paragraph (b) of subsection (3)”.

(4) A licensed specialised bank incorporated or established within Sri Lanka may be voluntarily wound up and the provisions of Part VIII shall, mutatis mutandis, apply to such voluntary winding up.

(5) A licensed specialised bank incorporated outside Sri Lanka may voluntarily close down its business authorised under the licence issued under section 76A and the provisions of Part VIII shall, mutatis mutandis, apply to such closure.

(1) Notwithstanding the provision of this Act or of any other written law to that contrary or the Memorandum and Article of Association of a licensed specialised bank the Monetary Board may, Where the business of a licensed specialised bank has been suspended under subsection (1) of section 76(M) ;

(2) A shareholder who fails to comply with a direction given to him under paragraph (3) of subsection (1) shall be guilty of an offence.’.

(1) Every director, manager, officer or other person employed in the business of any licensed commercial bank or licensed specialised bank shall observe strict secrecy in respect of all transactions of the bank, its customers and the state of accounts of any person and all matters relating thereto and shall not reveal any such matter except-

(2) Every director, manager, officer or person employed in the business of a licensed commercial bank or licensed specialised bank shall before entering upon the duties, sign a declaration pledging himself to observe strict secrecy in accordance with subsection (1).

(3) The provisions of subsections (1) and (2) shall not prohibit a bank from providing in good faith to another bank on request an opinion or reference relating to a customer in accordance with customary banking practice.

(1) Any person who commits an offence under subsection (5) of section 2, subsection (11) of section 3, subsection (3) of section 14, subsection (3) of section 33, subsection (3) of section 41 or subsection (12) of section 47 of this Act, shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding one million rupees or imprisonment of either description for a term not exceeding three years or to both such fine and imprisonment.

(2) Any person who contravenes the provisions of subsections (1) and (2) of section 16, subsection (1) of section 17 or section 77 shall be guilty of an offence under this Act and shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding one million rupees or to imprisonment of either description for a term not exceeding three years or to both such fine and imprisonment.

(3) Any person who commits an offence under this Act other than an offence referred to in subsection (1) or subsection (2) above, shall be liable on conviction after summary trial before a Magistrate, unless where the punishment is otherwise provided for in this Act, to a fine not exceeding five hundred thousand rupees or to imprisonment of either description for a term not exceeding eighteen months or to both such fine and imprisonment.

(4) Any person who contravenes any provision of this Act or any order, direction, requirement, rule or regulation under this Act, other than those specified in subsection (2) or those that otherwise constitute an offence, shall be guilty of an offence under this Act, and shall be liable on conviction after summary trial before a Magistrate to a fine not exceeding five hundred thousand rupees or to imprisonment of either description for a term not exceeding eighteen months or to both such fine and imprisonment.

(5) In any proceedings against any person under subsection (2) for contravention of the provisions of section 77, it shall be a defence to prove that such person acted in good faith, believing himself to be acting in the performance of his duties or under a requirement of law.

(6) In any proceedings against a director, manager, officer or an employee of a licensed commercial bank or a licensed specialised bank for an offence under this Act it shall be a defence for the director, manager, officer or employee to establish that the offence was committed without the knowledge of such director, manager, officer or employee or that such director, manager, officer or employee exercised all due diligence to avoid the commission of the offence.

(1) The Director of Bank Supervision may with the approval of the Monetary Board and having regard to the circumstances in which an offence under this Act was committed, compound such offence for a sum of money not exceeding one million rupees.

(2) The compounding of any offence under this section shall have the effect of an acquittal of the accused-.

(1) Any person who, being a director, manager, officer or employee of a licensed commercial bank or licensed specialized bank as the case may be