With the outbreak of the COVID-19 pandemic, the Central Bank of Sri Lanka (CBSL) has introduced several concessional schemes since March 2020, to assist affected borrowers. These concessions include concessional debt moratoriums, loan restructuring/rescheduling, suspension of recovery actions, low-cost working capital loans, and waivers of fees and charges for certain banking transactions.
These concessions were granted to individuals, including private sector employees and small and medium-sized enterprises (SMEs) and other businesses engaged in tourism, transportation, manufacturing, services, agriculture, construction , clothing, IT and related logistics services. Thus, the last phase of the moratorium granted to borrowers affected by COVID-19 ended on 31.12.2021, while the last phase of the moratorium granted to the tourism sector ended on 30.06.2022. In the meantime, CBSL has instructed licensed banks to set up post COVID-19 recovery units in licensed banks to identify and assist underperforming and non-performing borrowers affected by the pandemic with the aim revive viable businesses with the potential to contribute to national economic growth, thus facilitating the end of the moratorium in a sustainable manner. In view of the current macroeconomic challenges and the demands made by several stakeholders, including government institutions, CBSL has requested licensed banks to grant appropriate concessions, for a period of six months, to borrowers whose incomes or businesses have been affected due to the current macroeconomic and economic situation. / or due to the COVID-19 pandemic while avoiding undue pressure on the stability of the banking sector. These concessions are granted on a case-by-case basis depending on the individuals’ future repayment capacity and the viability of the businesses/projects. The main features of concessions are summarized below.
a. Concessions for performing credit facilities: Borrowers may benefit from appropriate concessions (i.e., grace periods for principal or interest or both principal and interest or part of the principal or interest, restructuring of credit facilities or any other concession) for a period of six months.
b. Concessions for non-performing credit facilities: Borrowers can request rescheduling of existing non-performing credit facilities over a longer period. In addition, licensed banks are advised to suspend recovery actions against credit facilities classified as non-performing after 01.01.2020. Rice SMEs benefit from additional concessions subject to conditions. vs. However, these concessions are not available for willful defaulters, defaults due to embezzlement, misuse of funds, mismanagement and/or fraud, and unviable projects. D. Repayment plans: For regular installment loans, the new installment amount must not exceed the contractual value of the existing loan installment. In the case of other credit facilities, the approved bank and the borrowers must mutually agree on an appropriate repayment plan. e. Interest rate applicable to the amount for the concession period: in the case of credit facilities in rupees, the interest rate to be applied on the amount for the concession period must not exceed the last interest rate contracted ( that is to say, in the case of variable interest credit facilities, the last interest rate revised on 07.07.2022 or, in the case of fixed rate credit facilities, the interest rate agreed on the time the facility was granted) or the current rate of the standing loan facility (i.e. 15.5%), whichever is greater. For foreign currency facilities, the approved bank and the borrowers must agree on the interest rate. F. Possibility of prepaying loans without additional costs: Approved banks have been asked to consider, on a case-by-case basis, requests made by borrowers to prepay their credit facilities without paying additional costs. In the case of finance lease facilities, future interest recovery will also be waived. Borrowers who intend to avail themselves of the prepayment options must apply to the bank no later than 30.09.2022. g. Approved banks have been instructed not to deny new loan applications from eligible borrowers under this program solely on the basis of unfavorable CRIB records. h. Request for concessions: the borrowers concerned are requested to request the above concessions no later than 31.07.2022, in writing or electronically. Applicants will be duly informed of the decision of the respective authorized bank within one month of receipt of the application. In the case of a rejected application, the authorized bank must inform the applicant of the reasons for the rejection and the possibility of appealing the rejection to the Director of the Consumer Financial Relations Department of the Central Bank of Sri Lanka.
Licensed banks and borrowers should collaborate in the implementation and use of these concessions during these trying times to ease the stress on individuals and ensure the sustainability of businesses that should meet the current challenges and support the economic recovery.
Further details on the COVID-19 Recovery Units and the concessions available to affected borrowers can be obtained from Circular No. 1 of 2022 on Guidelines for the Establishment of Post COVID-19 Recovery Units in authorized banks and Circular No. 2 of 2022 on concessions to affected persons. Borrowers amid the prevailing extraordinary macroeconomic circumstances, respectively, accessible via the following links:
https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/bsd_circular_no_1_of_2022_e.pdf
https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/bsd_circular_no_2_of_2022_e.pdf