Sri Lankan central bank chief cleared over bond scandal

Sri Lanka's central bank chief has been cleared of wrongdoing over allegations a family member benefited unduly from a $76 million bond auction, a government statement said Sunday. A government-appointed panel discovered several unspecified flaws in the conduct of the bond sale by the bank's Public Debt Department (PDD) but found no evidence that governor Arjuna Mahendran was directly involved. "The committee concluded that there was no evidence to the effect that the governor had direct participation with regard to the activities of the PDD and the tender board committee," the statement said. Mahendran, who was appointed by the government of new President Maithripala Sirisena, has been on leave since the panel's investigation started last month. The allegations against Mahendran risked damaging Sirisena, who won elections in January partly on accusations of cronyism and corruption against his predecessor. The bank sold 10 billion rupees ($76 million) of 30-year treasury bonds in February at a coupon rate of 12.5 percent, after earlier indicating to the market that one billion would be sold at 9.5 percent. The opposition and local media have alleged the bonds were issued at an above-market interest rate and that a company owned by Mahendran's son-in-law bought about half. They allege the relative benefited from inside information about the rate and volume of bonds the bank planned to issue. Sunday's statement said Mahendran had no direct role in deciding to accept bids over and above the one billion rupees stipulated in the bond tender. But the statement said the bidding pattern of his relative's company was unusual and "warranted a further investigation". The panel's 19-page report recommended measures for better transparency and governance at the bank, including a supervisory and monitoring mechanism for the PDD's activities.