Under the provisions of the Monetary Law Act it is mandatory for all licensed banks and registered finance companies to provide the Sri Lanka Deposit Insurance Scheme (SLDIS) for eligible depositors.
The initial capital of the Scheme of approximately Rs. 1.1 billion will be provided by the Central Bank.
According to the SLDIS, depositors will be compensated up to a maximum of Rs. 200,000 in case the license or registration of a member institution is suspended or cancelled by the Monetary Board.
The premium to be levied on eligible deposits will range between 0.10% and 0.15% per annum and will be required to be paid by member institutions on a monthly/quarterly basis.
The banks and finance companies will participate in this scheme on a mandatory basis from October 01 while the depositors will be entitled to benefits after 1st January 2012.
The Central Bank has decided to reduce the general provision on performing loans and advances and credit facilities in the special mention category from the current 1% to 0.5% by 31 December 2011 at a rate of 0.1% per quarter, over five quarters from the quarter ending on 31 December 2010.
The loan loss provision requirement was introduced in 2006 to provide a cushion against the meltdown of global economy.
With the domestic economy growing rapidly in a stable environment and the country's banks improving their asset quality over the past few months, the Central Bank says the need for provisions against future losses is substantially abated.
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