CENTRAL BANK OF SRI LANKA COVID19 RELIEF MEASURES
Pursuant to decisions taken by the Government of Sri Lanka, the Central Bank has introduced several relief measures aimed at supporting businesses and individuals affected by the Covid19 pandemic.
Decisions, Directives and Circulars
1. Reduction of Standard Deposit Facility Rate [SDFR] to 6% and Standard Lending Facility Rate [SLFR] to 7% – CB Press Release of 03.04.2020 https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_202004 03_the_central_bank_of_sri_lanka_further_reduces_policy_interest_rates_e1.pdf
2. Monetary Board Circular No. 4 of 2020 of 24.3.2020 – Relief measures for Covid19 affected businesses and individuals https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/mb_circular_ no_4_of_2020_e.pdf
3. Monetary Board Circular No. 5 of 2020 of 27.3.2020 – Rs. 50 billion refinancing facility to support Covid19 hit businesses and individuals https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/bsd_circular_ no_5_of_2020_e1.pdf
4. Explanatory Note No. 1 of 2020 [for Circular No. 4 of 2020]
5. Banking Act Directions No. 1 of 2020 – Measures to curtail imports and foreign currency investments
6. Measures taken to provide flexibility to Non-Bank Financial Institutions (NBFIs) to support businesses and individuals affected by Covid19 – by the Monetary Board of the Central Bank of Sri Lanka – Central Bank News item dated 12th April 2020
Summary of Central Bank Relief Measures [as at 9th April 2020]
In response to the adverse economic impact of the Covid19 pandemic, the Central Bank of Sri Lanka has introduced several relief measures to support affected businesses, the self-employed and individuals. The following is a summary of such relief measures.
A. Reduction of Interest Rates
By its press release of 03.04.2020, reduced interest rates as follows:
Standard Deposit Facility Rate [SDFR] by 25 basis points to 6%
Standard Lending Facility Rate [SLFR] by 25 basis points to 7%
B. Debt Moratorium on capital and interest and other concessions for existing performing and non-performing facilities for eligible businesses/individuals
Introduced by Circular Nos. 4 of 2020 and 5 of 2020
The above Circulars were issued to licensed specialised banks, licensed commercial banks and leasing companies [registered finance companies], collectively referred to as ‘financial institutions’
Requirements for obtaining concessions
The above concessions introduced by the relevant scheme do not become automatically applicable for or on eligible facilities/entities. Customers wishing to avail themselves of the relevant concessions must make a request/application for same from the relevant financial institution on or before 30.04.2020. The relevant financial institution is required to finalise the application within a period of 45 days.
The request/application can be made through online facilities or other communication arrangements. Customers should check with the relevant financial institution on how and to whom the request/application should be made.
Pending the processing of requests, financial institutions are expected to suspend the recovery of facilities from the relevant customers.
Concessions for Performing loans [i.e. facilities that are not in default]
1. Eligible facilities and entities for debt moratoriums
i. Leasing facilities on three-wheelers, school vans, lorries, small goods transport vehicles, busses and related assets such as motor bicycles and taxies operated by self-employed/owners – six-month moratorium on leasing rentals
ii. Personal loans granted to all private sector non-executive employees – Moratorium until 30.05.2020
iii. Personal loans and leasing facilities where the amount granted is less than Rs. 1 million – three-month moratorium
iv. Affected industries in small and medium enterprises, tourism, apparel, plantation, IT and related logistic service providers – six-month debt moratorium
v. A six-month debt moratorium for the following eligible businesses/sectors:
(a) Tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers that have been adversely affected by work disruption and overseas lockdowns resulting from COVID19
(b) Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorised domestic pharmaceutical suppliers with turnover below Rs. 1 bn.
(c) Self-employment businesses and individuals who have lost their jobs or income due to the outbreak of COVID19
(d) Foreign currency earners (individuals and corporates) who have to repay loans in foreign currency and whose incomes/ businesses have been adversely affected due to the outbreak of COVID19
The tenure of all facilities in respect of which a debt moratorium has bee granted will be extended by the relevant moratorium period.
2. Permanent Overdraft Facilities falling due for settlement or maturing or are reviewed during the period up to 25.03.2020 – to be extended up to 30.09.2020
Temporary Overdraft Facilities as at 25.03.2020 – expiry to be extended by 2 months for eligible borrowers
Interest rates on such facilities is to be capped at 13% during the extended period
3. Eligible trade finance facilities falling due for settlement or maturing or were under review during the period up to 25.03.2020 – to be extended up to 30.09.2020
4. Pawing facilities falling due for settlement or maturing during the period up to 25.03.2020 – to be extended up to 30.09.2020
Concessions for Non-Performing Loans as at 25.03.2020
1. Penal interest charged up to 25.03.2020 to be waived.
2. Rescheduling of loans and advances [referred to as the ‘Scheme’]:
(i) Where borrower has repaid 50% or more of initial capital, 50% of accumulated and unpaid interest [after waiver of penal interest] on defaulted instalments up to date of consideration by financial institution to be deferred;
(ii) Where borrower has repaid less than 50% or more of initial capital, 25% of accumulated and unpaid interest [after waiver of penal interest] on defaulted instalments up to date of consideration by financial institution to be deferred;
(iii) Balance capital outstanding, balance portion of interest on defaulted instalments and future interest to be rescheduled over a three year period;
(iv) Balance capital outstanding to be repaid over a period of three years;
(v) balance portion of interest on defaulted instalments and future interest to be transferred to a suspense account and recovered over a period of three years;
(vi) a moratorium to be granted [on the above repayments] up to 30.09.2020;
(vii) if the borrower settles rescheduled loans in the manner provided in (iv) and (v) above, deferred interest will be waived.
3. Suspension of recovery actions
(i) In the case of eligible borrowers who are in the NPL category as at the date of the circular [i.e. 27.03.2020], if financial institutions have commenced or given notice of recovery action under the provisions of the Recovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990 or Mortgage Act No. 06 of 1949 as amended or Finance Leasing Act No. 56 of 2000, such recovery action will be suspended on condition that the concerned financial institution and the client reach a debt repayment agreement.
(ii) Financial institutions will defer passing new resolutions under the above Acts, for recovery of loans and advances in respect of borrowers participating in the above Scheme. In instances where resolutions for recovery have already been passed, auctioning of assets will be suspended until 30.09.2020 in respect of such borrowers who are participants in the Scheme.
(iii) In instances where there is on-going litigation in courts relating to recovery, borrowers to be permitted to participate in the Scheme upon entering into an agreement by submission of affidavit to Courts agreeing to comply with the requirements set out in the Scheme.
(iv) All financial institutions to suspend legal action against nonperforming borrowers who have been accepted under the Scheme.
C. New Working Capital and Investment Purpose Loans
Introduced by Circular Nos. 4 of 2020 and 5 of 2020
Working Capital Loans
1. Eligible borrowers [performing and non-performing] – borrowers in affected industries in small and medium enterprises, tourism, apparel, plantation, IT and related logistic service providers
2. Conditions –
(a) Borrower must submit credible business plan
(b) Amount that can be obtained,
From banks – Rs. 25 million per bank per borrower or 2 months working capital requirement, whichever is higher
From other financial institutions – Rs. 10 million per institution per borrower or 2 months working capital requirement, whichever is higher
(c) Interest rate – 4% per annum
(d) Repayment – over 2 years
Investment Purpose Loan
(a) Can be granted only by banks
(b) Can be granted only to performing borrowers
(c) Amount to not exceed Rs. 300 million per bank per borrower
(d) Interest rate – maximum of AWPLR + 1.5%
(e) Repayment – over 5 years
D. Credit Card Repayments
(i) Maximum interest rate of 15% on local credit card transactions of a value up to Rs. 50,000
(ii) Minimum monthly payments to be reduced by 50%
(iii) Repayment of all credit cards below the limit of Rs. 50,000 to be extended until 30.04.2020
E. Measures to provide flexibility to Non- Bank Financial Institutions
The Monetary Board of the Central Bank of Sri Lanka has issued a notice to Licensed Financial Companies (LFCs) and Specialised Leasing Companies (SLCs) facilitating them to support affected businesses and individuals:
The following regulatory requirements have been relaxed on an urgent basis:
(i) Reduction of maintenance of liquid asset requirement for time deposits, savings deposits and borrowings to ease liquidity stress faced by LFCs/SLCs due to sudden withdrawal of cash by depositors and delay of repayment of loan rentals.
(ii) An extension of one year to comply with minimum core capital requirements.
Time line of 01.01.2020 and 01.01.2021 already set for the enhancement of capital up to Rs.2bn and Rs.2.5bn will be extended until 31.12.2020 and 31.12.2021, respectively.
(iii) Enhancements of minimum capital adequacy requirements due by LFCs/SLCs on 01.07.2020 and 01.07.2021, have been deferred for a further period of one year until 01.07.2021 and 01.07.2022, respectively.
(iv) Relax deadlines on submission of statutory returns and accordingly all LFCs/SLCs are informed to submit statutory returns to the Department of Supervision of Non-Bank Financial Institutions within two weeks of the commencement of normal business operations of such LFCs/SLCs.
NBFIs have been advised to take all possible measures to minimize their operational costs and to provide the benefits to the needy people who have affected with this Covid-19 pandemic, and to revive their businesses.
14th April 2020
While we have endeavoured to ensure the accuracy of the information contained herein, we do not and cannot guarantee the accuracy or adequacy of such information, and we accept no responsibility and shall have no liability for any loss or damage that may result from using or relying on the said information. We encourage independent verification of the information prior to acting on same.
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