While leading evidence from Director in IT department of CBSL, Wasantha Kumara Alwis, DSG Milinda Gunathilaka revealed to the Commission that the Perpetual Treasuries (PT) had caused a default amount of Rs. 11.05 billion in the process of settling the payment to the CBSL on April 1, 2016 regarding the bids accepted in the bond auctions held on March 29, 30 and 31 in 2016.
Deputy Solicitor General, who led the evidence, explained the Commission that 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. And, the payment process was set in the systematic medium called Lanka Security System (LSS).
According to the explanations made by Mr. Alwis, who was in charge of the operations in LSS, the Perpetual Treasuries had obtained borrowings several times on the payment settling day (April1) using the ‘Intraday Liquidity Facility (ILF)’ of the Central Bank, which is set up to bridge the gap between committed outflows and inflows in the transactions.
ILF 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 them.
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 was not paid on the same date.
The DSG informed the commission that the previous such outstanding was recorded at the amount of Rs. 353 million, but the default found at this incident was 34 times more to it.
Witness said that the system generally closes by 4.30 pm, but they could not close the ILF transactions due to the default in the ILF.
It was also revealed that the PT had engaged two reversal REPO agreements with the Employees Provident Fund (EPF) and had obtained Rs.6 billion in their payment process to the CBSL on April 1.
Additionally, the PT had also obtained 16.5 billion using REPO agreements with CBSL in their payment process on the same day and it was revealed that out of those REPO agreements, the PT could not place their promised securities in one particular agreement depriving government to inject inflow to the open market.
However, Nihal Fernando PC who appeared for the Perpetual Treasuries told the Commission that the so-called outstanding was later paid to the CBSL on April 4 and he is need of cross examining the witness after getting further instructions from his clients regarding the details put forward before the Commission in line with the payment process on April 1.
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 6.
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