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Sri Lanka banks allowed to count overdue SOE credit, EPF cover bad loans as liqudi assets

ECONOMYNEXT – Sri Lanka has eased liquid asset rules for banks until June 30, 2021 as the island battles a Coronvirus crisis, allowing banks to count early bad loans to state enterprises, provident fund backed credit and arrears from the central government.

An interest subsidy due from the government on a senior citizens deposit could be counted towards a statutory liquid assets ratio.

Early overdue loans to state owned enterprises backed by government guarantees (SLFRS 09: Stage 01) with a maturing below a year could also be counted with a 10 percent hair cut.

Money due from the Employees Provident Fund for loans could also be counted.

In Sri Lanka people take housing mortgages against part of the balance of Employees Provident Fund and defaults on them as a method of taking out their pension early.

The EPF then settles the bank with a lag.

Fixed deposits given by one bank to another could also be counted.

If the maturity is less than two year up to 80 percent could be counted. If it is three years, 70 percent could be counted.

A part of loans given with deposits as security could also be counted.

(Colombo/May14/2020)