Financial institutions to immediately suspend parate execution, forced repossession of leased assets up to 31 March next year and cancel all penalties imposed
Debt moratorium since July 2020 worth Rs. 780 b slated to end this year
Banking sector additionally extended Rs. 165.5 b in concessionary working capital financing
The Central Bank on Friday revealed plans to write off Rs. 15 billion worth of accrued interest of COVID-hit enterprises. The move is to give relief and empower their businesses to rebound faster as the country looks to a higher growth trajectory with stability following rapid vaccination and easing of COVID pandemic-induced restrictions.
Due to the COVID pandemic since March last year, the Government and the Central Bank extended a debt moratorium worth Rs. 780 billion to all impacted enterprises and individuals. Both capital and interest recovery were suspended.
The moratorium implemented from July 2020 onwards has been extended multiple times and is slated to expire on 31 December 2021. Under the CBSL-supported COVID-19 Saubhagya Refinance Scheme, the banking sector extended Rs. 165.5 billion (1.1% of GDP) as concessionary working capital at 7% interest rate.
CBSL Governor Nivard Cabraal said at the unveiling of the short-term Road Map that moratoria will be phased out gradually and devise long-term plans to support businesses affected by the pandemic-related lockdown.
“We provide liquidity support of up to Rs. 15 billion to finance interest accrued in loans that have been given the moratorium so that financial institutions could deal with the moratorium effect in a sustainable manner,” Cabraal said.
“Very soon, enterprises, especially SMEs, will have to start paying the old loans and old interests as well as new loans and new interests. This can be very challenging,” Cabraal said. “We will work out and announce the modalities soon,” he added. “During the transition period, we will put in place an Emergency Lending Facility framework.”
CBSL has directed financial institutions to immediately suspend parate execution and forced repossession of leased assets up to 31 March next year for pandemic-affected borrowers as well as cancel all penalties imposed during the moratorium period.
Banks are also required to set ‘post-COVID revival units’ to assist customers tide over pandemic-related difficulties and consider alternative financing models to support equity participation in businesses under moratorium or non-performing categories with a view to reviving such businesses.
(FT)