Despite calculation of system 88 million unusually repaid to PT: CB Official
Deputy Solicitor General Milinda Gunathilake today revealed to the Commission that the Perpetual Treasuries Ltd had obtained borrowings from CBSL and EPF again on April 4, 2016 when it was settling payments to the CBSL and EPF due on April 1, 2016 pertaining to the bids accepted in the bond auctions held on March 29, 30 and 31 in 2016.
Concluding leading evidence from Director in IT department of CBSL Wasantha Kumara Alwis, DSG explained to the Commission that the PT had borrowed Rs. 19.7 billion again from CBSL and EPF using ILF borrowings and REPO agreements to settle the Rs. 27.5 billion due amounts they required to settle on April 4.
In line with the bids accepted on the bond auctions held between March 29-31, 2016, the Perpetual Treasuries was required to settle the payments to the Central Bank on April 1, 2016.
The payment process was set in the systematic medium called Lanka Security System (LSS).
The Perpetual Treasuries then had obtained borrowings several times on the payment settling day (April1) using the ‘Intraday Liquidity Facility (ILF)’ of the Central Bank, which is given by the Central Bank to enable financial institutions to make payments in real time with the funds, which can be accessed during the particular business day keeping the securities provided by the institution to the CBSL as a safety.
However, the borrowings from the ILF should be settled within the same day of the payment process because it is regarded as more of free money given by the CBSL, since there was no any interest to the CBSL.
Even though, the settling payments on accepted bids at the bond auctions had been settled at the end of the payment process on April 1, the outstanding of borrowings obtained from the ILF by the Perpetual Treasuries to pay on bonds were not paid on the same date causing a default outstanding of Rs. 11.05 billion in the ILF account.
It was revealed yesterday that despite to the fact that the PT was not able to settle the ILF outstanding on April 1, they were again unable to settle the due amount on time before the official closing time of LSS.
However, they had settled the due amounts by 5 pm on April 4, 2016.
Further more, because of the Rs. 11.06 Billion outstanding in ILF borrowings on April 1, the system had calculated the increase of the market value of securities and had charged Rs. 88 million additionally from the PT on the basis that the increase of the market rate from April 1 to 4.
However, the witness revealed to the Commission that the calculated amount on the increase of the Market rate by the system was later repaid to the Perpetual Treasuries manually on the instructions of higher ranking officials at CBSL.
“Such manual intervention to repay the Rs. 88 million was an unusual and unprecedented occurrence, since the system generally calculated the increase rate, which the PT was owed to pay”, said Mr. Alwis.
It was also revealed that the PT was fined with Rs. 13.6 million by the CBSL over not settling the outstanding of ILF borrowings on April 1 and another fine of Rs. 7.8 million over a REPO agreement which PT had engaged with CBSL but could not furnish securities on time.
The witness was also cross examined by Nihal Fernando PC with Counsel Romali Tudawe.
Subsequently, the Commission comprised with Supreme Court Judges Kankanithanthri T. Chitrasiri, Prasanna Sujeewa Jayawardena and former Deputy Auditor General Kandasamy Velupillai to inquire into the Treasury Bond issue, decided to resume the inquiry on April 7.
Mahendran advised not to use mobile phone inside the Commission
By Shehan Chamika Silva
When the commission was functioning today with the evidence from Director in IT department of CBSL Wasantha Kumara Alwis, former Central Bank Governor Arjun Mahendran was advised not to use mobile phone inside the commission by Supreme Court Justice Kankanithanthri T. Chitrasiri, who is the president of the Commission.
The Justice instructed the Counsel who appeared for the former Governor and said that he had observed Mr. Mahendran was using his mobile phone inside the Commission and that better he be advised not to do such action which is not allowed.
Previously, the former Governor was allowed to be present inside the commission to listen the proceedings.
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