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Saturday November 27th, 2021
Banking

Sri Lanka Central Bank issues circular on Stage III Covid linked bad loans

ECONOMYNEXT – Sri Lanka’s central bank has issued new circular to be effective from January 01, 2022 in classifying Stage III non-performing loans for provisioning.

The circular is issued to establish “consistent practices” under Sri Lanka Accounting Standards SLFRS 9, during amidst the Covid-19 pandemic the central bank said.

Banks with the approval of the Board of Directors were asked to set guidelines for loan impairment.

Banks could exercise “prudent judgment” to decide whether to classify loans as Stage III facilities (which draw higher provisioning or not.

Banks could consider the “borrowers inability to revive the business” after Covid restrictions are removed. They could also exercise judgment if a facility has been restructured “more than twice due to adverse economic consequences of the Covid-19 outbreak and/or the East Sunday Attack.”

Sri Lanka’s hotels and travel sector has been the hardest hit by the Covid pandemic, while other sectors such as cinemas, and shopping malls are also suffering.

Download circular here: Bsd-circular-stage-III

(Colommbo/Oct01/2021)

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