Central Bank requests bank loan borrowers to seek relief before July 31

ECONOMYNEXT –Sri Lanka’s central bank requests bank loan borrowers to apply to a concession scheme it has introduced to businesses adversely affected by the ongoing economic crisis who were already aggravated by the COVID-19 pandemic before July 31.

Affected borrowers must apply to the concession in writing or through electronic means on or before July 31st, 2022 to their respective banks.Banks are required to respond to the applicants within one month of the receipt of the request.

“Considering the current macroeconomic challenges …CBSL has requested the licensed banks to provide appropriate concessions, for a period of six months, to borrowers whose income or businesses have been adversely affected due to the current macroeconomic and/or COVID-19 pandemic while preventing any undue stress on the banking sector stability,” a statement from the central bank said.

“These concessions are provided on a case-by-case basis depending on the future repayment capacity of the individuals and the viability of businesses/ projects.

CB said that if the application of a borrower is rejected, the respective bank should inform the applicant the reasons for the rejection.The rejected borrower has the opportunity to appeal against such rejection to the Director, Financial Consumer Relations Department of the Central Bank of Sri Lanka.

Central bank has also directed licensed banks to set up post COVID-19 revival units to assist under-performing and non-performing borrowers affected by the pandemic.The concessions are offered under eight categories.

Some features of the scheme include a 6-month grace period for performing loans, licensed bank advised not to take recovery action on non-performing loans, and repayment plans, among others.

a. Concessions for performing credit facilities: Borrowers can avail of appropriate concessions (i.e., grace periods for capital or interest or both capital and interest or part of the capital or interest, re-structuring of credit facilities, or any other concession) for a period of six months.

b. Concessions for non-performing credit facilities: Borrowers can request for rescheduling of existing non-performing credit facilities over a longer period. Further, licensed banks are requested to suspend recovery actions against credit facilities classified as non-performing after 01.01.2020. SME paddy millers are given further concessions subject to conditions.

c. However, these concessions are not available for wilful defaulters, defaults due to diversion of funds, misuse of funds, mismanagement and/ or frauds and unviable projects.

d. Repayment plans: In the case of regular instalment loans, the new instalment amount should not exceed the contracted instalment value of the existing loan. In the case of other credit facilities, the licensed bank and the borrowers should mutually agree on an appropriate repayment plan.

e. The interest rate applicable for the amount for the period of concession: In the case of Rupee credit facilities, the interest rate to be charged on the amount for the period of concessions, should not exceed the latest contracted rate of interest (i.e., in the case of variable interest credit facilities, the latest repriced interest rate as at 07.07.2022 or in the case of fixed interest credit facilities, the interest rate agreed at the time of granting the facility) or the current Standing Lending Facility Rate (i.e., 15.5%), whichever is higher. With regard to foreign currency facilities, the licensed bank and the borrowers should mutually agree on the rate of interest.

f. Opportunity to settle the loans early without any additional cost: Licensed banks have been requested to consider, on case-by-case basis, the requests made by borrowers to settle their credit facilities early, without paying any additional fee. In the case of lease facilities, recovery of future interest will also be waived off. Borrowers who intend to avail the early settlement options should make such a request to the bank on or before 30.09.2022.

g. Licensed banks have been requested not to decline the new loan applications from eligible borrowers under this scheme solely based on adverse CRIB records.

Details on the loan concessions can be obtained at this link: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/bsd_circular_no_2_of_2022 _e.pdf

Details on the COVID-19 units: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/bsd_circular_no_1_of_2022 _e.pdf