ECONOMYNEXT – Sri Lanka has extended Coronavirus debt moratorium which was to expire in September till December 31, the central bank said.
Distressed borrowers who have performing loans can request the moratorium on top of earlier ones.
Borrowers wanting the extension have to apply before 21 September.
However they will have to pay interest on the period.
The loans will be extended at on interest rate of Treasury bill plus 1 percent and all previous extensions rolled into one loan, in a direction issued to banks.
Download the full direction here Covid-Moratorium-Sep-Dec
Extracts are reproduced below:
CONCESSIONS FOR COVID-19 AFFECTED BUSINESSES AND INDIVIDUALS
Considering the new surge in COVID-19 outbreak in Sri Lanka, requests from many concerned parties were received by the Central Bank of Sri Lanka (CBSL) to consider extending the concessions granted to the affected borrowers/customers under the Circular No. 05 of 2021 dated 25 May 2021. Accordingly, with a view to facilitating to meet the challenges faced by businesses and individuals due to the ongoing COVID-19 pandemic, CBSL requests licensed commercial banks and licensed specialised banks (hereinafter referred to as licensed banks), to extend the concessions granted under Circular No. 05 of 2021 dated 25 May 2021 as specified below. Further, licensed banks may offer additional concessions to businesses and individuals affected due to the COVID-19 pandemic, on their request, in a way that the overall benefits to the borrower/customer are not less than the benefits offered under this Circular.
This Circular is issued to give effect to the Scheme in a consistent manner across all licensed banks, with a view to easing the burden on the borrowers of banks that are affected by the current disruption in business /income generating activities to duly repay their loans. This Circular is not appliable for borrowers in the tourism sector, who are eligible to obtain concessions granted for the tourism sector.
1. Deferment or restructuring of existing credit facilities in the performing category as at 01 September 2021
(a) Licensed banks shall defer recovery of capital, interest or both of the existing performing credit facilities of borrowers who are affected by COVID-19, on case-by- case basis, during the period up to 31 December 2021, considering the financial difficulties faced by such borrowers, including loss of job, loss or reduction of income/salaries or sales, reduction or impairment business operations or the closure of business, etc.
(b) Licensed banks shall prioritise accommodating the requests for concessions made by borrowers in the Micro, Small and Medium Enterprises (MSME) sector.
(c) The deferment of capital, interest or both shall be granted for one or more of the existing credit facilities granted in Rupees and/or in foreign currencies, considering the financial difficulties and repayment capacity of the eligible borrowers.
(d) Licensed banks shall amalgamate the amounts fallen due during the previous moratorium/deferment schemes (i.e., capital, interest and applicable interest for the respective moratorium/deferment period on the respective moratorium/deferred amount) and the amounts falling due during the current scheme (i.e., capital and interest) in to one new loan. Licensed banks may charge an interest rate as stated in 1 (e) below commencing from 01 September 2021, on the new loan referred above and for the agreed period of repayment as referred in 1 (I) and (g) below, based on a separate loan amortization schedule for this period.
(e) In the case of Rupee facilities considered for the above deferment, licensed banks may charge an interest rate not exceeding the latest available 364-days Treasury Bills auction rate as at 31 August 2021 plus l per cent per annum (i.e., 5.93% + 1% — 6.93%). In the case of foreign currency loans, licensed banks may charge a concessionary rate of interest. Further, interest for the remaining capital outstanding balance, excluding the deferred capital amount of the existing facility will continue to accrue at the contracted interest rate after the end of the deferment period.
(f) In the case of installment loans including lease facilities, a licensed bank and the respective borrower need to agree on a repayment period commencing from 01 July 2022, up to 6 months, to settle the new loan referred to in 1 (d) above, considering the financial difficulties faced by such borrowers as stated in 1 (a) above. The borrower may commence the repayment of the new loan at an earlier date, if the borrower wishes to do so. However, the borrower shall commence repayment of existing facilities from 01 January 2022.
(g) In the case where a borrower requests for a period beyond 6 months to settle the new loan referred to in 1 (d) above, the borrower and the bank need to agree on a concessionary interest rate beyond the 6 months period.
(h)Licensed banks shall explain the benefits of commencing early repayment and the implications of extending the repayment period to the borrower, in order to encourage the borrower to commence early repayment of deferred amount.
(i)Alternatively, licensed banks may restructure the existing credit facilities, on case-by- case basis, over a longer period, considering the repayment capacity of the borrower