Sri Lanka central bank issues SME moratorium rules

ECONOMYNEXT- Sri Lanka’s central bank in a circular outlined how banks should provide a debt moratorium for small and medium scale enterprises, in line with a request made by the President and Prime Minister.

“Based on discussions…had with the licensed banks, it is observed that the proposed scheme may not cause an undue level of stress or threaten the stability of the banking system,” the central bank said.

SMEs operating in manufacturing, services, agriculture and construction with an annual turnover between 16 to 750 million rupees for the 12 months ending December 2019 who have borrowings are eligible for the program.

Performing loans of up to 300 million rupees, and non-performing loans are covered under the facility. For loans over 300 million rupees, banks may consider in a case-by-case basis, the regulator said.

Credit for imports, other than machinery, are not eligible for the scheme, the central bank said.

Those wishing to avail of the facility should write to their banks before January 31, and banks are expected to provide the moratorium, even if the borrower has a poor CRIB record.

The principal payments of loans will be delayed for a year, while borrowers have to pay interest to remain eligible.

For performing loans, banks have the choice of giving a new five year loan with a one year grace period of up to 300 million per bank per borrower if a credible business plan is submitted, along with sufficient collateral.

For non-performing loans, penal interest rates accrued will be absorbed by banks, and the loans will be rescheduled to repay over twice the number of outstanding installments, following a one year grace period.

Non-performing customers may be given working capital loans to revive their business, with 75 percent of such loans guaranteed under a new credit guarantee scheme operated by the central bank.

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