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CBSL says interest waiver on loans and leases could undermine stability of fiscal system

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‘Moratorium related to payment of installments on capital borrowed ‘

by Suresh Perera

Notwithstanding protests over charging interest on repayment of loans and leases based on the one-year Covid-19 related moratorium, a senior Central Bank of Sri Lanka (CBSL) official said there’s no question of reversing the decision as neither banks nor other financial institutions can afford to absorb the negative impact of a waiver on interest on the capital, particularly at a time of an economic crunch.

“With the country facing a financial crisis largely due to the fallout of the pandemic, the government cannot be expected to offer further relief by reducing the interest component on the due repayments”, he stressed.

In terms of a Central Bank directive, all banks have been authorized to levy seven percent interest per annum on the total outstanding of loans and leases up to March 31, 2021, while finance companies can charge 11.5 percent.

Under the moratorium, credit facilities and leasing arrangements secured by key economic sectors hit by the outbreak of coronavirus were initially given a six-month grace period on repayments with effect from April 1, 2020. It was later extended by another six months as the worsening pandemic situation continued to cripple economic activity.

“The grace period related to payment of installments on the capital borrowed to fund loan and leasing facilities. Where the interest payments were concerned, a rate was agreed upon after a discussion with the stakeholders”, the official noted.

How can financial institutions, particularly finance companies, run their day-to-day operations and honor their commitments towards investors if there’s no return on borrowings?, he queried.

This can be done only if there is a situation where they don’t have to pay interest on investor holdings, he pointed out. “If they were to offer a return to one segment, while being denied their due revenue from the other, mounting losses are bound to push them towards insolvency”.

Financial institutions have to also absorb the cost of funds, as for example, a customer who has to repay a loan installment of Rs.10 million per month, holds back a repayment of Rs. 120 million during the one-year moratorium, the official explained.

With 50% of their funds disbursed as loans, the cash flow of these institutions have taken a big hit”, he said.

Under the circumstances, it is reasonable that at least the due interest on the borrowings are settled on time to ensure the survival of the financial sector in these difficult times, he said.

The tourism industry is still tottering. In this scenario, their loan installments are unlikely to roll in even after the grace period ends on March 31, 2021, he remarked.

He said that in the event of a natural disaster, the government can be expected to disburse funds to provide relief. However, a bail out on the interest payable by borrowers is too much to demand at a time of an economic downturn.

“We have received a plethora of complaints on this matter, and certainly understand that there are difficulties, but a perfect solution to please everybody is difficult to find”.

“Levying 11.5 percent interest on the total capital outstanding is unacceptable”, protested D. Nalaka Lankapurage, secretary of the All Ceylon Vehicle Leasing and Installment Payers Collective (ACVLIPC).

“We don’t mind paying reasonable interest on the monthly premium, but when it comes to the total capital outstanding, the commitment is too much to bear as business is slack across the board”, he complained.

With interest calculated on the basis of the total capital outstanding, even small-time borrowers are asked to pay Rs. 50,000 to Rs. 60,000 per month, which is next to impossible with business at a low ebb, he noted.

“Financial institutions even decline to give us a breakdown of the payments. When they demand, we are expected to duly pocket out with no questions asked”, Lankapurage asserted.

Many of these institutions have made billions of rupees in profits over the years. Can’t they offer us a degree of relief even at a time the pandemic has ripped apart life and livelihoods in the country?, he asked.

“We admit that financial establishments cannot give loans gratis. All what we are asking for is a reasonable rate of interest on the monthly premium; not on the total capital outstanding”, he continued.

Lankapurage said that those who have leased vehicles have to also shoulder the added burden of paying insurance and meeting running costs.

Members of the ACVLIPC staged a protest opposite the Presidential Secretariat recently against what they termed a “rip-off by banks and other financial institutions”.

A memorandum addressed to the President, which set out their grievances, was handed over to a Presidential Secretariat official during the agitation.



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AG says no legal impediment to Bathiudeen attending Parliament

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Public Security Minister: Those detained under PTA shouldn’t be allowed in

By Shamindra Ferdinando

Attorney General Dappula de Livera, PC, says there is no legal impediment to Opposition MP Rishad Bathiudeen attending Parliament while being detained in terms of the Prevention of Terrorism Act (PTA).

The CID arrested the leader of the All Ceylon Makkal Congress (ACMC) in the early hours of April 24 for aiding and abetting the 2019 Easter Sunday suicide bombers.

Multiple blasts in different locations killed 270 people and wounded about 500.

The AG set the record straight in the wake of the CID failing to arrange for MP Bathiudeen to attend Parliament on May 4 and 5.

The Island learns that Police Headquarters recently consulted the AG as regards the legality of the Vanni District SJB MP attending parliamentary sessions and the SJB, on his behalf, requested the Speaker to facilitate the arrangements.

The ACMC contested the last general election on the SJB ticket. Its parliamentary group comprises four, including Bathiudeen.

The police sought the AG’s advice after having received a missive from Serjeant at arms Narendra Fernando in that regard. The AG has advised the police that MP Bathiudeen could attend parliamentary sessions.

However, Public Security Minister Rear Admiral Sarath Weerasekera has advised the police against the ACMC leader attending Parliament. The Minister has issued instructions in this regard having requested the Speaker Mahinda Yapa Abeywardena to prevent those detained under the PTA from attending parliament.

MP Bathiudeen has been detained for a period of 90 days pending investigations. His brother Riyajj too has been detained under PTA for 90 days.

 Minister Weerasekera, in Parliament yesterday (5) defended his decision to prevent MP Bathiudeen from attending parliament. Dismissing concerns raised by SJB MP Field Marshal Sarath Fonseka and TNA MP M.A. Sumanthiran about the ACMC leader being deprived of his right to attend parliament sessions, Minister Weerasekera emphasized that he was responsible for public security.

Minister Weerasekera reminded Speaker Abeywardena that he had requested him not to allow anyone detained under PTA to attend parliament pending conclusion of investigations.

Weerasekera said that the CID wouldn’t have detained the MP concerned without valid reasons.

Perhaps, Field Marshal Fonseka had no concerns for public security, the former Navy Chief of Staff said, emphasising that the government wouldn’t conduct investigations the way the former Army Commander and the TNA spokesman desired.

Bathiudeen earlier served in the Cabinets of President Mahinda Rajapaksa (2010-2014) and President Maithripala Sirisena (2015-2019). The ACMC switched its allegiance to SJB at the 2020 August parliamentary election after having backed Sajith Premadasa’s candidature at the 2019 presidential.

Bathiudeens’ lawyer Rushdhie Habeeb told The Island that the decision to prevent MP Bathiudeen from attending parliament was political. Habeeb said that the issue at hand would be raised vigorously, both here and abroad, and a media briefing would be called soon to explain the situation.

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MONLAR draws attention to ticking COVID time bomb in plantations

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By Rathindra Kuruwita

A large number of estate workers had been diagnosed with COVID-19, and given the generally congested living environment and lack of health facilities on plantations, the entire estate sector was a ticking time bomb, Moderator of the Movement for Land and Agricultural Reform (MONLAR) Chinthaka Rajapakshe said yesterday.

Rajapakshe told The Island  that the latest outbreak on the estates had occurred after the return of some persons from Colombo during the Sinhala and Tamil New Year.

“We had warned that this would happen. People kept on returning home although the preparedness of the plantation economy to face a COVID-19 outbreak was non-existent.”

 “If one person gets it, the entire line will get it, and therefore urgent steps should be taken to minimise COVID-19 spread,” Rajapakshe said, adding that such an eventuality would not only destroy lives but also cripple the plantation sector, causing an enormous loss to the state coffers.

 

 

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Clandestine dealings of fishers will precipitate spread of deadly Indian variant here – Expert

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By Rathindra Kuruwita

There was a risk of the deadly Indian COVID-19 variant spreading to Sri Lanka as well, Chief Epidemiologist of the Ministry of Health, Dr. Sudath Samaraweera told the media yesterday in Colombo.

Dr. Samaraweera said that Sri Lankan fishermen continued to interact with their Indian counterparts in mid-sea and therefore it was only a matter of time before the Indian variant entered Sri Lanka.

“We must be extremely vigilant. We have seen the devastation caused by this variant in India. These mid-sea interactions by the fishing community must be stopped.”

Dr. Samaraweera added that although the Dambulla Economic Centre

had been reopened for business yesterday morning, health officials had been compelled to close five shops as their owners violated the Covid-19 protocol.    

“This is a commercial hub where people from all parts of the country converge. So, if there are COVID-19 cases here, then it will spread across the country. Therefore, people have to act carefully and responsibly.”

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