Central Bank Governor Dr. Nandalal Weerasinghe has warned that businesses accepting money from the public under the guise of plantation and cultivation investments could inevitably collapse if they rely on funds from new investors to repay earlier investors.
Responding to questions about recent action against several companies, Dr. Weerasinghe said entities that do not have legal authority to accept public deposits are violating the law, regardless of whether the funds are described as investments in cultivation or other business activities.
He said companies promising annual returns of around 40% while also guaranteeing the return of the original investment would not be able to sustain such payments through cultivation activities alone.
The Governor explained that such schemes would need a continuous flow of funds from new investors to meet their obligations to existing investors.
He said the decline in new investments following increased public awareness had exposed the underlying problem, with some companies now facing difficulties in repaying existing investors.
“When new deposits stop coming in, naturally, as we have seen in previous cases, these businesses will collapse,” he warned.
The Central Bank recently issued freezing orders covering six companies and their directors under the Finance Business Act. The Colombo High Court subsequently confirmed and extended the orders.
The companies are Kasagala Green Plantation (Pvt.) Ltd, Ceylon Green Life Plantation (Pvt.) Ltd, Singhe Capital Investment Ltd, Pro Shop Advertising Holdings (Pvt.) Ltd, Athens International Education Centre (Pvt.) Ltd, and Eyon Lanka Investment & Film Production International Company (Pvt.) Ltd.
