By a special correspondent
Sri Lanka’s financial sector is under intense scrutiny following a massive internal fraud at National Development Bank PLC (NDB), prompting intervention by the Central Bank of Sri Lanka and calls for urgent governance reforms. The unfolding crisis, involving an estimated Rs. 13.2 billion loss, has exposed deep-rooted weaknesses in internal controls, risk management, and regulatory oversight.
The issue gained national attention after the Committee on Public Finance (CoPF), chaired by Harsha de Silva, flagged “significant lapses in corporate governance” at NDB. The committee also pointed to supervisory gaps within the Central Bank and delays in disclosing material information related to the fraud, raising concerns about systemic vulnerabilities.
At the center of the scandal is a sophisticated internal scheme that went undetected for over 18 months. The fraud reportedly exploited weekend CEFT transaction windows, with insiders using unauthorized access and password manipulation to siphon funds. Early warning signs such as a sharp increase in CEFT-related receivables were overlooked by both management and oversight bodies.
The financial impact has been severe. NDB has already fully provided for the loss, resulting in an estimated Rs. 4 billion loss in the first quarter of 2026 and a broader net impact of around Rs. 7 billion. While the bank’s capital adequacy remains above regulatory minimums, it has been supported by measures such as dividend suspension and close CBSL supervision.
In response, the Central Bank is considering an extraordinary step: temporarily handing over management control to an experienced banking sector leader with both local and international expertise. This interim leadership, expected to last at least three months, aims to stabilize operations, restore depositor confidence, and implement urgent reforms.
Key priorities during this transition include strengthening internal controls, closing procedural gaps, and enhancing transparency. A forensic audit is already underway, alongside staff suspensions and tighter transaction monitoring systems. Observers note that such measures are critical not only for NDB but for maintaining confidence across the broader financial system.
Legal proceedings are also progressing. Several suspects, including a bank assistant manager alleged to be the main perpetrator, are in remand custody. Investigators from the Criminal Investigation Department have revealed links to cryptocurrency transactions routed through external entities, adding complexity to the case.
CBSL Governor Nandalal Weerasinghe has assured Parliament that a preliminary investigation is ongoing, with further updates to be provided. Meanwhile, the CoPF has pledged continued oversight to ensure accountability and prevent similar incidents.
The crisis at NDB underscores the importance of robust governance in Sri Lanka’s banking sector. As regulators step in to enforce discipline and restore trust, the coming months will be critical in determining whether the bank can recover its credibility or whether deeper systemic reforms are required.