NDB Board gets flack for ignoring high Rs. 12.3 b receivables arising from CEFT deals as governance concerns intensify following revelations of a multi-billion-rupee internal fraud linked to electronic fund transfers.
NDB Board gets flack for ignoring high Rs. 12.3 b receivables arising from CEFT deals amid fraud probe
NDB Board gets flack for ignoring high Rs. 12.3 b receivables arising from CEFT deals, with analysts and governance advocates raising serious concerns over oversight failures within National Development Bank PLC after a Rs. 13.2 billion fraud came to light. The issue has drawn attention to internal controls, risk monitoring, and accountability at the highest levels of the bank’s management.
According to the bank’s audited 2025 financial statements, “Other Financial Assets Gross” surged to Rs. 12.22 billion, a sharp increase compared to Rs. 3.1 billion in 2024. Historically, the average balance of such assets had remained around Rs. 1.4 billion in previous years, suggesting an unusual and sustained spike. A significant portion of these receivables is linked to Customer Electronic Funds Transfer (CEFT) transactions, prompting scrutiny over whether warning signs were overlooked.
Market analysts noted that CEFT-related suspense accounts typically maintain relatively stable balances, and such a substantial increase should have triggered internal alerts. The failure to act on these anomalies has led to criticism that finance, internal audit, and risk management functions may have inadequately monitored the situation. Governance activists have described the lapse as a clear violation of oversight responsibilities, particularly by board-level risk and audit committees.
Investigations indicate that the alleged fraud, estimated at Rs. 13.2 billion, may have been carried out over an extended period, potentially spanning around 18 months since mid-2024. Analysts pointed out that an additional Rs. 1 billion appears to have been siphoned between January and March 2026, suggesting continued activity despite growing discrepancies in financial records.
Insiders revealed that the alleged perpetrator exploited operational gaps within CEFT systems, particularly during weekends when transaction monitoring may have been less stringent. Reports indicate that large volumes of transactions—often capped at Rs. 5 million per transfer—were executed in quick succession, enabling the movement of substantial funds without immediate detection.
The controversy has intensified calls for stronger Sri Lanka banking governance standards, with experts emphasizing the need for enhanced internal controls, real-time transaction monitoring, and more robust audit mechanisms. The incident has also raised broader questions about how financial institutions manage operational risks in increasingly digital banking environments.
Despite the scale of the fraud, initial financial assessments suggest that the overall impact on the bank’s balance sheet may be contained. A research update by Softlogic Stockbrokers indicated that NDB has fully provided for the estimated loss, resulting in an unaudited loss after tax of approximately Rs. 4 billion for the first quarter of 2026. The net impact, after accounting for tax effects, is estimated at around Rs. 7 billion.
In context, the bank reported a profit after tax of Rs. 11 billion for the full year 2025 and Rs. 3.5 billion for the fourth quarter alone. With a total asset base estimated at Rs. 990 billion as of March 2026, the impact of the incident is projected to be around 0.7 percent, indicating relative resilience in financial terms.
However, capital adequacy ratios are expected to come under some pressure. Tier 1 capital is projected to moderate to between 9 and 10 percent, down from 12.35 percent, although still above the regulatory minimum threshold of 8.5 percent. Analysts expect a gradual recovery in capital buffers as profitability stabilises over the remainder of the year.
Regulatory intervention has also played a role in mitigating risks. The Central Bank of Sri Lanka directed the suspension of a planned cash dividend of Rs. 6.46 per share, preserving approximately Rs. 2.7 billion in capital. The regulator has confirmed that no customer deposits were affected by the fraud and that prudential ratios remain within acceptable limits.
In response to the incident, NDB has initiated a series of corrective measures aimed at strengthening its internal control environment. These include the suspension of implicated employees, enhanced access controls, improved transaction monitoring systems, and the appointment of an independent forensic auditor to conduct a comprehensive review.
The bank has stated that the fraud was confined to a specific operational area and involved collusion among certain employees. Law enforcement authorities have already taken action, including arrests, as investigations continue.
The unfolding situation underscores the critical importance of effective risk management frameworks within the Sri Lanka banking sector, particularly as institutions adopt more sophisticated digital payment systems. Experts argue that while financial resilience can absorb isolated shocks, governance failures can have longer-term implications for investor confidence and institutional credibility.
As NDB Board gets flack for ignoring high Rs. 12.3 b receivables arising from CEFT deals, the focus is likely to remain on how swiftly and transparently the bank addresses these shortcomings. The outcome of ongoing investigations and reforms will be closely watched by regulators, investors, and stakeholders seeking assurance that similar incidents can be prevented in the future.