Sri Lanka debt relief: borrowers need not pay interest at once: Central Bank

ECONOMYNEXT – Borrowers who had got a moratorium from banks and leasing companies can demand when the interest is charged, Deputy Central Bank Governor Nandalal Weerasinghe said.

Under a debt moratorium borrower can defer up to six installments (principle and interest) on which a maximum of 7 percent interest could be charged according to a central bank direction.

Under the moratorium extends the loan period is extended by the number of installments.

“The borrowers can ask the bank when to charge that interest,” Deputy Governor Nandalal Weerasinghe said.

“A loan agreement is signed and the borrower has the right to ask whether to pay the interest early, or in stages later.”

“Sometimes small borrowers are not aware and they do not bargain.”

There had been complaints that extra large premiums or installments were charged when payments resumed, as banks recovered the interest.

Weerasinghe explained that banks had to pay interest to borrowers on the funds during the period so interest had to be eventually charged.

He said interest rates in the country had fallen in recent weeks and bank’s cost of funds would also fall when deposits are renewed.

Borrowers who are able could also negotiate on the rate, since market rates are now lower than when the circular was issued, he said.

Weerasinghe said there had been problems when borrowers signed leasing documents without reading. The central bank had said earlier it would examine leasing contracts. (Colombo/July10/2020)