Business
Banks alarmed by suspension of parate process at behest of a few individual defaulters – SLBA
The unilateral decision by the government to suspend debt recovery via parate laws is a knee-jerk response to intense lobbying by a few individual defaulters that do not represent the wider business community, and will have a far-reaching negative impact on the banking sector, which functions as the heart and lifeblood of the economy, the Sri Lanka Banks Association (SLBA) said today.
The Association, which represents all banks licensed by the Central Bank of Sri Lanka (CBSL) including state banks, public listed companies and branch offices of international banks, said it is alarmed over state intervention to curb debt recovery laws, pointing out that there had been no consultation with the banks, and cautioning that the cost of borrowing will increase for all borrowers as a result of the government decision.
It also emphasized that the suspension of parate execution would not will not preserve a mortgaged asset of a defaulter, as banks will continue to exercise mortgage action through the courts of law. “The ‘parate’ execution provision is only one option available to banks in the debt recovery process, that mitigates the impact of the delays in the process,” the SLBA pointed out.
Until existing laws are amended by Parliament, banks will, where appropriate, use the parate remedy as a last resort, prior to going to court. The process requires each individual case to be put to the banks’ boards of directors and the publication of notices in the media. It is not a process that can be implemented at the whim of any bank officer.
Some of the key points made by the SLBA in its statement are:
A handful of defaulters are lobbying to amend existing debt recovery laws
Access to funding for good borrowers will be impacted as banks turn cautious
The cost of borrowing will increase for all borrowers as banks add risk premiums
This will have a negative impact on the Banking sector’s efforts to support national economic revival
Bank’s deploy depositors’ funds when lending to the public, and the inability to recover money due from defaulters or extended delays in recovery, will potentially place public deposits at risk
The suspension of parate action will interrupt and stall ongoing initiatives of international agencies such as the IMF, World Bank Group, and the ADB as well as the Central Bank which are working with the banks to establish a resolution process that includes revival of distressed debt of banks by helping borrowers towards rehabilitation and preservation of residual value of such business assets
The banks have already absorbed the cost of extending relief to borrowers specially MSMEs during recent crises affecting the economy including the April 2019 terror attacks, COVID Pandemic and on-going economic crisis where the parate process was suspended for as long as possible
The SLBA said its members have observed with alarm, the statements attributed to a decision made by the Cabinet of Ministers, that the debt recovery remedies available to banks, under the current laws may be amended.
“This decision and the wide publicity appear to be in response to strong lobbying by a small group of individuals who have defaulted on their debt obligations for a prolonged period. It is the view of the SLBA that this lobby group does not in anyway, represent the wider business community of Sri Lanka,” the statement said.
“Banks use the ‘parate’ laws as an option of last resort in order to expedite debt recovery from loan defaulters with a view to protecting the interests of the banking system and the depositors who provide funds for such loans.”
“The banks believe that the reported unilateral intervention by the Cabinet of Ministers is unnecessary and will weaken the strength of banks in performing their role in supporting economic revival of the country.”
“The SLBA member banks aim is to assist is maintaining stability of the banking system within the regulatory policy framework that supports national economy and protects public depositors. In this context the member banks object in the strongest terms, to the reported interference to amend the existing laws relating to debt recovery and urge policymakers to make decisions based on data and the national economic interest of the entire country, instead of being swayed by the lobbying of a small group of loan defaulters.”
“Public deposits continue to be the main source of funding of banks for lending and granting of credit. These loans include the loan amounts in the names of non-paying borrowers. When the ‘parate’ remedy and/or courts procedures are resorted to by the banks, these borrowers strenuously obstruct and delay resolution. This is detrimental to the legitimate users of the banking system.”
“Depositors must not be made to feel that their deposits are unsafe in banks. The rising proportion of non-performing loans is a warning that non-paying borrowing businesses must be expeditiously revived if they are commercially viable. If they are not viable, they must be expeditiously liquidated in an orderly manner with no continuing diminution of asset values.”
“The existing Parate laws provide a structured and legal means for banks to recover long outstanding debts of borrowers. Banks proceed with Parate Action as a last resort. This is when they have been unable to persuade borrowers to cooperate in reaching workable debt repayment rationalization plans (such plans sometimes necessitate stronger expense discipline and disposal of non-core, non-income producing assets). Continuation of an irretrievable business is not a good policy in the national interest and most importantly cannot be funded long-term by the bank depositors.”
“The public trust reposed in the banking system depends on the banks being able to continue meeting their obligations to depositors to repay as agreed, the interest earned on the deposits and also to repay the principal deposit on maturity.”
Business
Inflation curbed by govt. fuel subsidy introduction and surcharge on vehicle import tax – CBSL Governor
By Hiran H. Senewiratne
The government’s decision to introduce the fuel subsidy and the surcharge on the vehicle import tax helped curb inflation to a great extent, Central Bank Governor Dr. Nandalal Weerasinghe said.
‘The government this week approved a Rs. 40 billion fuel subsidy for the next three months on top of Rs. 57 billion provided from April-June, Governor Weerasinghe told the media yesterday at the Central Bank head office in Colombo at the CBSL’s monthly monetary policy review meeting.
‘If not for fuel subsidy and surcharge on the vehicle import tax, the inflation would have been higher than the current level, the Governor said.
‘There could have been higher imports and reserve building up would have been difficult. Inflation has risen beyond the Central Bank’s upper band of 7 percent since July, he said.
‘The country’s inflation hit a 37-month high of 8 percent in August after the government raised fuel prices more than 50 percent following the Middle Eastern escalation by end February, Dr Weerasinghe said.
The Central Bank’s inflation target for the past three years have been 5 percent with lower band of 3 percent and higher band of 7 percent, Governor said.
The Governor added: ‘The government provided Rs.57 billion as a fuel subsidy mainly for diesel. The latest Rs.41 billion has been allocated only for diesel as it is used for public transport.
‘The government also imposed a temporary 50 percent surcharge on Customs Import Duty on new personal vehicles on May 16 and has extended it until December 31, a move that will help to prevent outflow of foreign currency.
‘The Central Bank also tightened the monetary policy in May, raising the key monetary policy rate by 100 basis points, to curb excess demand in the economy to control demand-driven inflation.’
Meanwhile, head of the CBSL’s Economic Research Department L.R.C. Pathberiya said, ‘Credit growth has slowed to 24.5 percent year on year in August from a higher level of 30 percent a few months ago, after the Central Bank’s monetary policy tightening in May.
‘However, the Central Bank is optimistic about the current credit growth, he explained.
Pathberiya added: ‘The credit to the private sector from commercial banks has slowed, but we believe it is sufficient for economic growth.
‘The nation’s economic growth slowed to 4.2 percent year-on-year, its lowest in 11 quarters’’.
Business
PM warns Sri Lanka’s waste crisis is a ‘disaster waiting to happen’
By Ifham Nizam
Prime Minister Dr. Harini Amarasuriya warned that Sri Lanka’s worsening waste-management crisis, particularly the uncontrolled accumulation of plastic waste and poorly managed landfills, was a “disaster waiting to happen”, urging scientists, researchers and policymakers to help the government find practical solutions before the problem reaches a critical point.
Addressing the launching of the Open University of Sri Lanka organized, ‘International Conference on Plastics, Innovations and Environmental Sustainability’ (ICPIES 2026) as Chief Guest, at the Cinnamon Lakeside Hotel yesterday she said waste management, waste reduction and recycling had become national priorities, with the government placing greater emphasis on the issue in its preparations for the 2027 Budget.
‘This is becoming a critical issue and something that, at any moment, if we don’t manage it properly, could become a huge disaster. It’s a disaster waiting to happen, Dr. Amarasuriya said.
She said unregulated and poorly managed landfills, particularly in and around Colombo, posed serious environmental and public risks, while increasing urbanisation was extending the waste-management challenge beyond the capital to other parts of the country.
‘As a member of Parliament for the Colombo District, I can tell you that one of the biggest challenges we are facing is waste management and actually managing the recycling of waste, and particularly of plastic products. This is something that we are battling every day, she said.
The Prime Minister said the government could not regard economic development as meaningful if it came at the expense of the country’s environment and natural resources.
‘If we are to speak of a beautiful life, we must first ensure that the air we breathe, the water we drink, the soil on which we live, the food we eat is clean and secure, she said.
She pointed to the scale of the global plastics crisis, noting that around 400 million tonnes of plastic waste are generated worldwide each year, while between 19 and 23 million metric tonnes of plastic waste enter natural ecosystems annually.
Plastic waste eventually breaks down into microplastics, which can enter aquatic organisms and subsequently the human food chain, she said.
Dr. Amarasuriya also linked plastic consumption and environmental degradation to the wider climate crisis, warning that the consequences of climate change were already being experienced by communities around the world.
She referred to devastating floods and landslides in the Himalayan region and said the impacts of climate change demonstrated that environmental damage could have consequences far beyond national boundaries.
Coastal clean-up projects and other waste-separation and recycling initiatives are also being implemented, while the government is working with the Western Provincial Council on a refuse-derived fuel project at Karadiyana.
The third ICPIES, held under the theme “Eco-Driven Innovations,” brings together researchers, policymakers, industry representatives and other stakeholders to examine plastic pollution, microplastics, circular-economy approaches, waste-management policy, technological innovation, artificial intelligence and smart environmental monitoring. The conference ends today.
Senior Professor P. M. C. Thilakarathne, Vice Chancellor of the Open University of Sri Lanka, was the Guest of Honour.
Business
Mention of possible future inflation dampens investor appetite
By Hiran H. Senewiratne
Stock investors were worried yesterday following Central Bank Governor Dr. Nandalal Weerasinghe’s mention at the CBSL monthly monetary policy review meet of possible future inflation pressures that may impact the economy.
The All Share Price Index went down by 4.89 points, while the S and P SL20 rose by 16.1 points. Turnover stood at Rs 1.55 billion with four crossings.
Those crossings were; Access Engineering crossed 1.5 million shares to the tune of Rs 119.8 million; its shares traded at Rs 79.60, Sampath Bank 450,000 shares crossed tfor Rs 63 million; its shares sold at Rs 140, Sunshine Holdings 750,000 shares crossed to the tune of Rs 21.4 million; its shares traded at Rs 28.50 and Softlogic Life 290,000 shares crossed for Rs 20.4 million; its shares sold at Rs 70.40.
In the retail market companies that mainly contributed to the turnover were: Access Engineering Rs 150 million (1.9 million shares traded), JKH Rs 113 million (six million shares traded), Softlogic Life Rs 80 million (one million shares traded), Softlogic Capital Rs 64.7 million (6.7 million shares traded), Lanka Realty Rs 64.3 million (1.3 million shares traded), Colombo Dockyard Rs 53.7 million (452,000 shares traded) and Sierra Cables Rs 50 million (1.43 million shares traded). During the day 58.9 million share volumes changed hands in 13536 transactions.
It is said that mixed market reactions were noted especially in manufacturing while banking, insurance and FMCG sectors performed well. Further, construction sector counters, especially Access Engineering, and banking sector counters, especially Sampath Bank, performed well.
People’s Leasing & Finance PLC announced its allotment basis for 100 million listed debentures it issued to raise Rs 10 billion, after receiving applications for the full amount.
Yesterday the rupee was quoted at Rs 330.68/75 to the US dollar in the spot market from Rs 330.70/90 the previous day, while bond yields were quoted steady to lower, dealers said.
An auction of Rs 80,000 million Treasury bills was ongoing.
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