By T.Rusiripala

These days there is spot light focus on the performance of S.O.Es in general and few such institutions in particular.  Business editions of National Newspapers have narrowed their focus to the area.  Hence the readers have got the opportunity of sharing authentic and responsible versions of certain facts remained as so far as gossipy allegations.  This Sunday a leading newspaper carried the subject headline in their Business edition along with another news article published side by side titled “SOE losses to increase further”. These disclosures, although they do not fall into the category of any new revelations due to expositions made earlier, are receiving the public attention as never before.


SOEs in this country have become public liabilities unlimited.  So much so the politicians who created them with much pomp and fan-fare have started branding them as virtual white-elephants.  The irony of the matter is that these so called white-elephants from the time of their creation have been under the purview control, surveillance and counseling of these political god-fathers.  Barring a negligible few the majority of the SOEs are either in the red, bankrupt, delinquent or in dire straits.


In a careful examination of these institutions, one will not fail to notice the nexus leading their connections to the State Banks and in particular the Peoples Bank, for the survival support extended to them, in some cases as the last oxygenate.


State Banks are managed and controlled by the politically appointed directorates with Chairmen functioning as virtual CEOs, unlike in the olden days where they were meeting on a regular basis for the approvals and authentication, of operational activities and to decide on policy matters.  The involvements of the political appointees in the day to day affairs of the Banks have become more ramified proliferating into several areas in the administration.

Some of the political green-horns, who have entered the arena after the precipitation of this complex situation, take up a defense by stating that the Boards are conducting their affairs under autonomy granted to them for which they only are responsible. This however is an obstinate excuse to shirk the responsibility.  Do they expect the public to accept that under this autonomy the Boards of SOEs have powers to take unilateral decisions affecting the golden shareholder disregarding any governing regulations, treasury directives, supervisory controls ,procurement guidelines and good-governance ethics?


Can the politicos dissociate themselves from their accountability to the public, Ministerial or otherwise, in the event of any violation, mismanagement or misconduct taking place in the SOEs? The truth of the matter is, this autonomy cannot override the controls by the Treasury and the Ministries under whose purview the SOEs fall.

In such a situation “Probe on Peoples Bank GM’s Increment Package” becomes a totally futile exercise leading nowhere. There are several other issues that need to be investigated into. The remuneration package is just one insignificant appendage of the calamity the Peoples Bank is in. There are a number of contract employees other than the GM holding high and strategic positions in the PB enjoying extravagant remuneration packages inclusive of fringe benefits that cost the state enormously.

According to reports, amounts exceeding Rs. 38 Billion have been granted as facilities to SOEs such as Mihin Air, Sri Lankan, Sathosa and Paddy Marketing Board. Most of these facilities are not granted on any commercial considerations.  From this it appears that the banks have acted on some directives from the political authorities regardless of the commercial viability of such lending.

It is now established due to revelations made at the Bond Commission inquiry  that the then Minister of Finance, Ravi Karunanayake had persuaded  State Banks including PB (to GM himself) to bid low at the  Central Bank Treasury Bond Auctions  to be held  on 29th and 31st March, 2016.

This direction was carried out by the State banks paving the way to the acquisition of major share of these Bonds, by Perpetual Treasuries as was intended.

The autonomy of the banks, which the politicians often refer to, is only a scapegoat to shun their own accountability.  Therefore the norm is not the autonomy but a hybrid management culture with political influence plus. What the SOEs are experiencing today is a combined ill effect of those factors.


If a Probe is to be carried out it should cover the following areas:


  1. Who made the decision to recruit contract employees to the PB and when?
  2. What were the underlying reasons?
  3. Were they given any targets at the time of enlistment? Have they fulfilled those?
  4. Were these engagements for any specific periods or were they taken in for indefinite periods?
  5. Did the contract employees possess any special or extra ordinary qualifications or experience?
  6. Who decided their emolument package and were the amounts paid commensurate with the degree of expected performance?
  7. How were they recruited? This applies to all heavily paid contract executives?
  8. What were their contracts? Were they subject to any form of specific contractual obligations towards the Bank?
  9. If they were recruited through an outside agency was the process transparent to the extent that the best could be chosen for the specific areas?
  10. How were their emoluments paid? Direct or to the recruitment agency?
  11. Is there a difference between the amounts they actually received and the amounts paid on their behalf to the recruitment agency by the Bank?
  12. Were they entitled to prolonged employment in the bank and to be absorbed subsequently to the permanent cadre of the Bank according to these contracts?
  13. Has there been an independent assessment of their performance during their tenure of office?


  1. Did the Bank pursue any action or procedure to replace them with employees in the permanent cadre under a succession plan?
  2. When these contract employees were subsequently promoted or placed in positions of the permanent cadre, did they compete with the other members of the staff vying for these positions?
  3. What was the procedure followed by the Bank when granting increments, salary revisions and offering special perks to these contract employees?
  4. Several large loans granted during the tenure of office of these contract

Employees are now transferred to Non-Performing category.

Recovery of some is extremely doubtful. Who is responsible for those

lending activities? According to an exposure by a whistle blower the

Position is reported to be as follows;


According to the leaked report 22 advances with amounts exceeding Rs.100 Million are transferred recently as non performing (NP Section) in the Corporate Banking Division.  Some of these carry outstanding balances exceeding the amount originally granted indicating that no repayments have been made!


These 22 advances are classified into;

10 with outstanding balances over 100 Million

5 advances with O/S balances of over 200 Million

3  over  3oo Million

1  over 400 Million

1  over 700 Million

2  over 1 Billion



17.2. Strategic positions in the credit line operations of the Bank such as Risk management, Investment banking, Executive credit, Finance, IT and Audit were held by the contract employees.

17.3. There are other revelations about large facilities being granted to

Directors of the Bank who are considered as key management persons

alleged to be tainted with conflicts of interests, exceeding credit

authorities etc.


  1. These point to the fact that the credit line officials have to be held responsible for this state of affairs. The Contract GM is at the top of the line. Therefore a probe into these affairs becomes more important than a mere probe into the remuneration package.
  2. Risk Management, Executive Credit, Investment Banking and Audit , IT & Finance Areas came under the contract employees. It is clear from the lending operations that there have been serious lapses in these functionalities, which warrants investigation due to the adverse financial impact?

In the above circumstances before terminating the contracts those responsible should be subject to an investigation and probe while still under contract. They should be suspended from their duties. An investigation or a probe will not be meaningful while they are still holding positions at the helm of affairs.

 Those who are under investigation should be prevented from leaving the country learning from the bitter experiences of the Ex-Governor who has become a fugitive today.



  1. A sum exceeding Rs. 5 Billion has been written off as the Hedging Transaction losses from the profits of the Peoples Bank. The incumbent GM was the officer who has recommended the hedging proposal to the Board and he was summoned to give a statement to the FCID in the Hedging Probe. The indictment is still pending referred to the Attorney generals department.

The GM of Peoples Bank was required to file an affidavit in the Arbitration case of the Hedging transaction which was decided against the CPC.

  1. Two contract employees have been appointed as heads of two subsidiary companies of the Bank after the termination of their contracts with the PB. Mr. Sabry who functioned as the Risk Manager & Credit Controller of the PB during his contract service has been appointed as the CEO of Peoples Leasing Co and Mr. Deepal Abeysekera who was another contract employee of the PB who worked as the head of Marketing (Advertising) has been appointed as head of Peoples Insurance Co.
  2. GM’s role and responsibility for approving a new facility of Rs. 2.5 Billion to Mendis & Co, which has now been transferred to NPL section is another matter that should come under an investigation. This company is another member of the group that owned Perpetual Treasuries Ltd.. and the Facility has been granted after the exposure of the involvement of Perpetual Treasuries in the  Central Bank Bond Scam.
  3. Questionable investments made under the directives of the GM in stocks of outside companies by the PB as equity security is another area that should be focused in a probe. The decision making process of these investments appear to fall short of prudent commercial assessments due to the fact that  the overall  fair market values  falling below investment costs.

Bank annual report for 2017 shows a cost of 602 millions leading to an estimated fair value of 548 millions.

  1. Bank has invested Rs 500 million in debentures issued by a company where a Director of the Peoples bank was the Executive deputy Chairman. This Company is today in serious trouble. All its borrowings are in the risk category. The decision to invest in such a company appears to have been influenced by factors beyond normal investment criteria of a prime banking institution like the PB. It has to be probed to determine whether this investment was not irregular.


Under such circumstances confining a probe into the remuneration package of the contract General Manager of the PB will be a dubious step to deviate from bringing to the notice of the public the serious lapses, shortcomings, miss-management and questionable operations by those responsible impacting the financial position of the PB. Therefore in the public interest and in the future interest of the institution, a complete probe and investigation should be launched immediately;


  • After suspending all contract employees
  • By an independent competent panel of inquiry
  • Into all areas of activities engaged into by the GM and other contract employees.
  • To estimate and quantify the losses and damages caused due to the reprehensible acts of those responsible and with a view to recover such amounts.



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