NDB Bank fraud probe raises concern as critics question why Central Bank has not suspended the board after Rs. 13.2 billion scandal.
NDB Bank fraud has triggered a heated debate over how the Central Bank of Sri Lanka is handling the investigation into one of the largest scandals reported in the country’s banking sector.
The controversy has drawn sharp criticism from lawmakers, financial experts, and good governance activists, who are questioning whether the regulator is taking an unusually cautious and lenient approach.
Despite strong public pressure after the discovery of an alleged internal fraud amounting to Rs. 13.2 billion, the Central Bank has still not suspended NDB Bank’s Board of Directors or appointed an independent Competent Authority to take control of the bank.
Instead, the regulator has chosen to impose restrictions only on selected operational activities while allowing the existing management structure to continue functioning.
The Central Bank has defended its position mainly on technical and prudential grounds.
Officials argue that although a financial loss has occurred, NDB Bank still meets the minimum regulatory capital requirements.
They also maintain that liquidity indicators remain above mandatory limits and that customer deposits are not at risk.
On that basis, the Central Bank’s position is that immediately removing the Board of Directors would be a disproportionate step that could destabilize the institution.
However, this softer approach has now become deeply controversial.
Banking and governance experts argue that financial stability alone cannot be the only test for regulatory intervention.
They say that when long-term governance weaknesses have allegedly allowed such a massive fraud to continue for more than a decade, stronger corrective action is necessary.
According to critics, temporarily suspending the Board of Directors and appointing an independent authority to supervise institutional reforms would be essential to restore public confidence.
The matter came under intense scrutiny during recent parliamentary hearings before the Committee on Public Finance.
Lawmakers questioned Central Bank officials on how major discrepancies in NDB Bank’s financial reporting had escaped supervision for years.
Particular attention was drawn to certain balance sheet items that had reportedly grown abnormally from around Rs. 1.5 billion to more than Rs. 12 billion without triggering any regulatory warning.
The issue became even more controversial after it was revealed that NDB Bank itself had initially been involved in shaping parts of the forensic audit scope.
Critics argued that allowing the very institution under investigation to influence its own investigative framework severely damages public trust.
Although Central Bank officials insisted that they retained final authority over the audit, that explanation failed to remove the suspicions raised by lawmakers.
Instead of directly intervening in management, the Central Bank imposed several sanctions.
These included suspending dividend payments, restricting discretionary expenses, halting expansion plans, and ordering independent reviews of operational controls.
While some observers have described these measures as balanced and legally defensible, critics argue that they are inadequate when compared with the scale of the governance failure.
The crisis has also drawn international attention.
The International Monetary Fund has referred to this incident in its reviews of Sri Lanka’s financial sector, stressing the need for stronger operational risk management and anti-money laundering controls.
Ultimately, this debate now goes beyond NDB Bank.
It has become a wider question of how regulators should respond when major governance failures occur inside systemically important financial institutions.
The outcome of this case could redefine regulatory accountability and public expectations over banking supervision in Sri Lanka.
SOURCE:- SL LEADER
