Sri Lanka’s banking sector is facing heightened scrutiny after former Finance Minister and Committee on Public Finance member Ravi Karunanayake wrote to President Anura Kumara Dissanayake calling for an urgent, internationally supported investigation into the massive fraud at National Development Bank PLC (NDB). The letter warns of deep regulatory failures and delayed responses that allowed the alleged Rs 13.2 billion fraud to go undetected.
Karunanayake has urged the President to initiate an independent forensic investigation with international assistance, arguing that domestic systems alone may not be sufficient to fully uncover the extent of wrongdoing. He stressed that the issue reflects broader weaknesses in Sri Lanka’s financial governance structure, not just a single institution.
A key point in the letter is that at least two commercial banks reportedly informed the Financial Intelligence Unit about suspicious activity nearly 16 months before the fraud became public. Despite these warnings, no decisive action was taken, raising questions about the Central Bank of Sri Lanka and related regulatory bodies.
The letter also highlights major structural weaknesses, including weak transaction monitoring systems, the lack of automated reconciliation between CEFT and RTGS systems, and outdated technological infrastructure that failed to flag anomalies in real time.
Karunanayake further questioned whether the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange properly supervised NDB’s Rs 16.2 billion debenture issuance, raising concerns over disclosure and compliance failures.
He recommended seeking assistance from international institutions such as the Reserve Bank of India, Bank of England, and Monetary Authority of Singapore. He also suggested formally informing the International Monetary Fund about corrective actions being taken to restore financial stability.
Additional recommendations include reviewing the Central Bank’s regulatory framework, strengthening audit committee oversight, and reassessing the qualifications of key banking governance officials. He also called for recovery of tax revenue losses arising from the fraud.
Meanwhile, the Criminal Investigation Department has intensified its investigation, arresting several suspects including senior IT and managerial staff. A parallel forensic audit is being carried out by Deloitte Touche Tohmatsu India LLP under Central Bank oversight.
The case has triggered widespread debate on regulatory failures and delayed intervention, with Karunanayake’s letter now forming a central reference point in calls for urgent financial sector reform and stronger accountability mechanisms.