Sri Lanka extends coronavirus debt moratorium until December 31
ECONOMYNEXT – Sri Lanka has extended the moratorium on coronavirus-related debt which was due to expire in September until December 31, the central bank said.
Distressed borrowers who have performing loans can apply for the moratorium in addition to the previous ones.
Borrowers wishing the extension must apply before September 21.
However, they will have to pay interest over the period.
The loans will be granted at the Treasury bill interest rate plus 1% and all previous extensions will be combined into a single loan, in the sense of issuance to banks.
Download the full direction here Covid-Moratorium-Sep-Dec
Excerpts are reproduced below:
CONCESSIONS FOR COMPANIES AND INDIVIDUALS AFFECTED BY COVID-19
In view of the new outbreak of the COVID-19 epidemic in Sri Lanka, requests from many affected parties have been received by the Central Bank of Sri Lanka (CBSL) to consider extending concessions to affected borrowers / clients under Circular No. 05 of 2021. dated May 25, 2021. Accordingly, in order to facilitate the challenges facing businesses and individuals due to the ongoing COVID-19 pandemic, the CBSL requests authorized commercial banks and authorized specialized banks (hereinafter referred to as authorized banks), to extend the concessions granted under Circular 05 of 2021 dated May 25, 2021 as specified below. In addition, licensed banks may offer additional concessions to businesses and individuals affected by the COVID-19 pandemic, at their request, so that the overall benefits to the borrower / client are not less than the benefits offered. under this circular.
This circular is issued to give effect to the scheme consistently across all licensed banks, with a view to alleviating the burden on borrowers of banks who are affected by the current disruption of business / income-generating activities to properly repay their loans. This circular does not apply to borrowers in the tourism sector, who are eligible to obtain concessions granted for the tourism sector.
1. Postponement or restructuring of existing credit facilities in the performing category as of September 01, 2021
(a) Authorized banks will defer, on a case-by-case basis, the collection of principal, interest or both of the existing performing credit facilities of borrowers affected by COVID-19 during the period up to December 31, 2021, taking into account from the financial situation the difficulties encountered by these borrowers, including loss of employment, loss or reduction of income / wages or sales, reduction or depreciation of business operations or closure of a business, etc.
(b) Authorized banks should give priority to receiving requests for concessions made by borrowers in the micro, small and medium-sized enterprises (MSMEs) sector.
(c) Deferral of principal, interest or both will be granted for one or more of the existing credit facilities granted in rupees and / or foreign currency, taking into account the financial difficulties and the repayment capacity of the eligible borrowers.
(d) Authorized banks must merge amounts due during previous moratorium / postponed regimes (i.e. principal, interest and interest applicable for the respective moratorium / deferment period on the moratorium / respective deferred amount) and amounts due during the current period (i.e. principal and interest) into a new loan. Authorized banks may apply an interest rate as indicated in point 1 (e) below from 1 September 2021, on the new loan referred to above and for the agreed repayment period referred to in paragraph 1 ( I) and (g) below, based on a separate loan amortization schedule for that period.
(e) In the case of the rupee facilities considered for the above carry forward, approved banks may charge an interest rate not exceeding the latest 364-day Treasury bill auction rate available as of August 31, 2021 plus 1 percent per year (i.e. 5.93% + 1% – 6.93%). In the case of foreign currency loans, licensed banks may apply a preferential interest rate. In addition, interest on the outstanding principal balance, excluding the deferred principal amount of the existing facility, will continue to accrue at the contractual interest rate after the end of the deferral period.
(f) In the case of installment loans including leasing facilities, an approved bank and the respective borrower must agree on a repayment period starting July 1, 2022, up to 6 months, to settle the new. loan referred to in 1 (d) above, taking into account the financial difficulties encountered by these borrowers, as indicated in point 1 (a) above. The borrower can start repaying the new loan sooner, if they wish. However, the borrower will start repaying the existing facilities from January 1, 2022.
(g) In the event that a borrower requests a period beyond 6 months to settle the new loan referred to in 1 (d) above, the borrower and the bank must agree on a concessional interest rate at – beyond the 6 month period.
(h) Authorized banks should explain the advantages of starting early repayment and the implications of extending the repayment period to the borrower, in order to encourage the borrower to start early repayment of the deferred amount.
(i) Alternatively, licensed banks may restructure existing credit facilities, on a case-by-case basis, over a longer period, taking into account the borrower’s repayment capacity.