Colombo: Financial scandal at the National Development Bank rocks the government

A shortfall of 13.2 billion rupees has emerged, caused by staff within the bank. Criticism of the oversight system, with CEO Kelum Edirisinghe also under scrutiny. Analysts and experts describe it as a “failure” in “supervision”. A case reminiscent of similar instances of malpractice that have occurred in the past.

Colombo (AsiaNews) - A financial scandal worth 13.2 billion rupees (equivalent to approximately 35.5 million euros) within the National Development Bank (NDB) threatens to bring down the Colombo government, potentially leading to a mass resignation. Due to the sharp rise in the cost of money linked to transactions carried out via the Common Electronic Fund Transfer Switch (CEFTS), staff within the NDB exploited specific transaction windows, causing losses of four billion rupees in the first quarter of 2026. Analysts and experts warn that the overall impact is around seven billion rupees, for an institution that is 51% government-owned, with the remaining 49% in private hands.

During a press conference held in Colombo last week, CEO and Managing Director Kelum Edirisinghe revealed that ‘with hindsight’ it was a case of a ‘lack of vigilance’ rather than an ‘absence of controls’, compounded by ‘shortcomings’ from the past. For industry experts, this fraud cannot be classified under ‘IT problems or malfunctions’ to justify its scale, particularly given that ‘sophisticated protection systems act as vigilant, real-time guardians of the global banking sector’.

“As CEO,” the experts continue, “of a leading financial institution, it was an integral part of the prestigious role [held by Edirisinghe] to ensure, at the very least, that a critical review of the entire security process was maintained at all times.” Furthermore, the gaps and critical issues should have been “addressed as soon as they were identified” rather than being neglected “for two long years, which must seem like an eternity in today’s fast-paced world of cybercrime”.

When questioned by AsiaNews, financial analysts Nadeesha Hewawitharana and Shirantha Mayadunne asked: “Can the NDB afford to fund errors running into billions of rupees, especially following the discovery of a 13-billion-rupee fraud that had been going on for two years and led to the freezing of accounts?”. Although the institution has taken steps to operationally isolate the issue, they continue, “by suspending the employees involved, revoking access to the system, isolating the affected unit under new supervision and strengthening access controls, the bank claims to have a ‘capital base of nearly 990 billion rupees’”.

On the contrary, the chairman and the board of directors, including the chief executive, should have exercised greater diligence and taken on greater responsibility, instead of leaving such vast wealth – they accuse – exposed to temptations and misappropriation on an unimaginable scale”. “They have failed to realise the gravity of what has emerged. Should a ‘failure of supervision’ lead to a loss of investor confidence in the country, including the government? Although they have not yet disclosed the name of the suspect [or suspects] – they conclude – they will certainly be identified in the coming weeks or months.”

According to senior officials at the Central Bank of Sri Lanka (CBSL), the bank’s total assets “remain unchanged. Customer accounts are safe and the NDB’s capital adequacy ratios continue to exceed regulatory standards, despite an expected decline in Tier 1 capital”. In this regard, the Central Bank is reportedly “actively monitoring the financial situation of the National Development Bank”.

Lawyers Methlal Amarasinghe and Lihini Medcagoda point out that “every few years, Sri Lanka’s financial sector” is “in turmoil due to similar frauds”, starting with the Pramuka Savings and Development Bank, which “collapsed in 2002 due to serious mismanagement. The Golden Key Credit Card Company, a member of the Ceylinco Group, also went bankrupt four years later, after having raised – they add – substantial deposits at high interest rates, causing a major financial scandal and leading to significant regulatory reforms”.

In recent days, the police have arrested five people and the case is now in the hands of the Criminal Investigation Department (CID) for further investigation. The fraudulent activities were confined to a specific operational unit of the NDB and involved a number of suspended employees. Those acting in collusion had concealed and manipulated information. At least one bank assistant, one executive assistant and one manager were involved in this massive fraud.