Sri Lanka’s businesses and individuals affected by the COVID-19 crisis will be provided with some relief by the government providing flexibility to Licensed Commercial Banks and Licensed Specialised Banks.
The Monetary Board of the Central Bank has decided to introduce several extraordinary regulatory measures towards this end.
In deciding these measures, the Monetary Board took note of the overall resilience of the banking sector especially due to the already built-up capital buffers.
It has also considered the current and future liquidity levels, potential upsurge in the rising trend in non-performing loans due to the inability of majority of borrowers to service their loans as usual and extraordinary disruptions to the functioning of the economy, Central Bank announced.
Accordingly, the Monetary Board has decided to allow Domestic Systemically Important Banks (D-SIBs) and non D-SIBs to drawdown their Capital Conservation Buffers by 100 bps and 50 bps, respectively, to facilitate smooth credit flows to the economy and COVID-19 affected borrowers to sustain their businesses in the immediate future.
It has been decided withdraw the requirement to classify all credit facilities extended to a borrower as nonperforming when the aggregate amount of all outstanding non-performing loans granted to such borrower exceed 30% of total credit facilities.
Banks will be allow recovering loans in Rupees, as the last resort, in circumstances where recovery of loans in foreign currency is remote, subject to banks ensuring certain conditions are met.
Banks will also be permitted to give an extension of 60 days, to borrowers who are not entitled to any other concessions, to settle loans and advances which are becoming past due during March 2020 and not to consider such facilities as past due until the end of this 60 day period.
It will allow to consider all changes made to payment terms and loan contracts from 16.03.2020 to 30.06.2020, due to challenges faced by customers amidst the COVID-19 outbreak
(LI)