The National Savings Bank (NSB) has come under intense scrutiny following the Auditor General’s revelation that the state-owned financial institution extended a $9 million loan to a private tourism company in the Maldives, in apparent violation of its legal mandate. The loan, issued in 2018 to RPI Private Limited, has been classified as non-performing and remains unpaid, raising serious questions about regulatory oversight, risk management, and governance within the NSB.
According to the Auditor General’s latest report, the loan was granted without a proper credit or risk assessment, a fundamental breach of banking best practices, particularly for a public savings institution. The funds were provided to finance the construction of villas by the Maldivian tourism company, an activity that falls well outside the scope permitted by the National Savings Bank Act. The law does not allow the NSB to provide loans for foreign construction projects, particularly those involving private tourism enterprises. Nevertheless, the loan was approved and disbursed.
To date, the borrower has not paid any part of the principal loan amount, nor any of the accrued interest. As of May 31, 2024, the outstanding interest alone amounts to $4.18 million. Despite the lack of repayment, the NSB extended the original one-year grace period multiple times, eventually stretching it until 2022. This leniency was extended without any corresponding repayment of capital or interest, and without evidence of any reassessment of the borrower’s financial position.
The audit also points out that the loan relief granted to the borrower was done under Central Bank Circular No. 5 of 2020, a regulation that does not apply to foreign companies such as RPI Private Limited. Still, the NSB used the circular to justify further loan relief, even though the company had not made any capital repayment as of December 31, 2023.
Adding to the concerns is the fact that no field inspection or independent assessment of the borrower’s technical capacity and competence has ever been conducted, the audit states. This further highlights the lack of due diligence in the initial stages of the lending process and during the ongoing management of the loan.
The report also reveals that of the total loans and advances issued by the NSB, Rs. 3,800 million were foreign loans. This total includes the full value of the $9 million loan to RPI Private Limited and its accumulated interest as of the end of 2023. While the NSB’s asset base showed a marginal increase from Rs. 1,687 billion in 2023 to Rs. 1,710 billion by October 2024 and its deposit base grew by 2.2 percent, the presence of such a high-risk, unauthorized loan on its books raises concerns about the bank’s lending practices and the potential misuse of public funds.
The entire episode has raised alarm over the bank’s deviation from its statutory obligations, as well as its failure to safeguard depositor interests. As a public institution entrusted with the savings of millions of Sri Lankans, the NSB is expected to uphold the highest standards of accountability, transparency, and legal compliance. However, the decision to provide a multi-million-dollar loan to a foreign tourism company with no proven repayment track record and no regulatory backing appears to defy those principles.
With the loan now firmly classified as non-performing, the matter has exposed a critical gap in the regulatory and managerial control of Sri Lanka’s state-owned financial institutions. The Auditor General’s report has not only laid bare the specific violations of the NSB’s legal framework but also highlighted the broader need for systemic reforms to prevent future breaches of this nature.
