The Central Bank of Sri Lanka (CBSL) has requested licensed banks in the country to cut back non-essential expenditure while exercising diligence and prudence when incurring capital expenditure.

Having observed the varied views published recently on discretionary payments including payment of cash dividends by licensed banks, the CBSL has issued a clarification today (January 23).

On May 13 2020, the CBSL had decided to restrict certain discretionary payments of licensed banks, such as declaring cash dividends and repatriation of profits, engaging in share buybacks, increasing management allowances and payments to the Board of Directors until 31 December 2020 with a view to strengthening the liquidity and capital positions of licensed banks under exceptional circumstances amidst COVID 19 pandemic.

The CBSL has reassessed the restrictions, and on January 19 2021 permitted licensed banks to pay cash dividends and repatriate profits after completion of the audit of the financial statements for the year 2020.

CBSL states that when deciding payment of cash dividends and repatriation of profits for the year 2020, licensed banks are expected to consider assets growth, business expansion, and the impact of the COVID-19 pandemic.

Further, licensed banks were required to refrain from engaging in share buybacks and increasing non-essential expenditure, while exercising extreme due diligence and prudence when incurring capital expenditure until 30 June 2021, the CBSL said.