Sri Lanka’s National Savings Bank (NSB) is under scrutiny after COPE revealed Rs7.972 billion in non-performing loans, including an allegedly unauthorized $9 million facility to a Maldivian firm, raising concerns over governance and risk management.
COPE flags illegal foreign loan and delayed recovery at National Savings Bank
The Committee on Public Enterprises (COPE) has flagged significant non-performing loans (NPLs) at Sri Lanka’s state-owned National Savings Bank (NSB), including an allegedly unauthorized multi-million-dollar loan to a foreign company. According to COPE Chair Nishantha Samaraweera, the investigation covered outstanding loan balances exceeding Rs5 million as of September 30, 2025, revealing systemic lapses in credit management and recovery practices.
Out of a total lending portfolio of Rs96.046 billion, approximately Rs7.972 billion has been classified as non-performing. Among these, four major NPLs were identified, which collectively underscore both operational and compliance shortcomings.
A particularly high-profile case involves a $9 million loan granted in June 2018 to R P I Private (Ltd), a company registered in the Maldives. The facility was issued as a syndicated loan in collaboration with the state-owned Bank of Ceylon (BOC). According to NSB’s statutory mandate, it is not authorized to lend to foreign companies, raising questions over procedural compliance.
The loan, initially intended for hotel construction, has ballooned to $14.73 million due to zero principal repayments to date. Investigators reported that no construction activity had occurred on the proposed project site, suggesting a misuse of funds or poor monitoring mechanisms. COPE has described this as a clear breach of internal regulations and recommended immediate remedial action.
Beyond the Maldivian loan, COPE’s report highlighted losses from Bimputh Finance, a microfinance institution that entered liquidation in February 2025. Despite a winding-up order from the Colombo Commercial High Court, NSB reportedly failed to initiate timely recovery measures. Bimputh Finance had secured loans of Rs200 million in 2016 and Rs100 million in 2019 via corporate guarantees, and the company now owes the bank over Rs258 million in combined principal and interest. The delayed action exemplifies weaknesses in NSB’s credit recovery and legal follow-up mechanisms.
The report also listed other top non-performing exposures, including a Rs750 million facility extended to Techno-Park Development Company. In total, these four largest NPLs represent the most critical risk segments in NSB’s portfolio, combining substantial financial exposure with inadequate oversight.
COPE’s investigation emphasized several governance gaps. Among them are unauthorized extensions of grace periods for defaulting borrowers, weak recovery enforcement, and the absence of structured monitoring for high-value loans. The committee has recommended a specialized forensic audit to examine credit approvals, loan disbursement protocols, and the decision-making processes that permitted these irregularities.
The COPE report underscores broader concerns about public bank risk management, regulatory compliance, and accountability mechanisms. Non-performing loans at state banks not only affect financial stability but also reduce the capacity to fund new development initiatives. The combination of large NPLs, slow recovery, and unauthorized lending to foreign entities raises systemic governance questions that policymakers must address.
Experts suggest that NSB’s risk framework requires urgent reforms, including stricter credit approval oversight, independent monitoring of large exposures, and enhanced legal support for timely recovery. Implementing such measures can prevent further escalation of defaulted loans and restore public confidence in the institution.
Additionally, COPE’s findings could have implications for regulatory supervision of other state-owned financial institutions. Coordinated audits, transparent reporting, and stronger enforcement of statutory lending restrictions are essential to minimize exposure to high-risk borrowers and ensure adherence to the public mandate of such banks.
The report has attracted significant attention from parliamentarians, investors, and civil society stakeholders. Ensuring accountability, improving credit management systems, and enforcing compliance standards are crucial steps to safeguard public funds and enhance NSB’s operational efficiency.
With Rs7.972 billion in NPLs and specific cases of unauthorized lending under review, NSB faces an urgent need to overhaul its risk management, strengthen governance practices, and restore stakeholder trust. COPE’s recommendations for forensic audits and structured recovery action provide a clear roadmap for addressing these issues and mitigating financial and reputational risks.