Sri Lanka, April 11 -- Despite the allocation of a massive Rs.450 billion by the government in 2024 for banks to close potential capital shortfalls, the funds were not required as the banks submitted recapitalisation plans instead to show that they were capable of raising capital by themselves, the Central Bank said.

In the lead up to the allocation of the Rs.450 billion from the 2024 budget for the licensed banks, the Central Bank along with the Finance Ministry developed what they call a 'bank recapitalisation strategy'.

The strategy included the size, timing, instruments, and terms and conditions for government recapitalisation of viable banks which at the time were unable to close their capital shortfalls from private sources.

"How...