• Asks NBFIs to defer recovery of capital, interest or both of borrowers affected by ongoing restrictions 
• Relief applies on loan facilities in performing category as at May 15, 2021
• Borrowers have time till July 15, 2021 to make written requests
• Penal interest cannot be charged during concessionary period from May 15 to August 31

The Central Bank this week extended relief to the borrowers of finance and leasing companies, nearly two weeks after it decided to give relief to the borrowers of the banking sector, as the economic fallout of the extended lockdowns are reaching disproportionate levels. 

The Central Bank said it has been receiving many requests from various parties affected by the economic disaster in the making, due to the ongoing restrictions on the livelihoods, small businesses and other wide swathes of economic activities, imposed to contain the virus spread. 

In response, the Central Bank asked the finance and leasing companies to “defer recovery of capital, interest or both of the existing facilities of the borrowers who are affected by the third wave of COVID-19, on a case-by-case basis, during the period up to August 31, 2021, considering the financial difficulties faced by eligible borrowers, such as loss of job, loss or reduction of income/salaries or sales, closure of businesses, etc.”

This relief applies on the facilities in the performing category, as at May 15, 2021.    

Although the government headed by President Gotabaya Rajapaksa has insisted on the significance of maintaining uninterrupted economic activities, such orders appear apply only on the big businesses or those who are into export manufacturing. 

However, the small businesses remain closed for nearly a month now and the businesses, which require close proximity to people and the ones that require in-person services, are the hardest hit, as businesses such as restaurants, bars, beauty parlours, cinemas, clothing stores, etc. are going bankrupt, for they have had a hard time in drawing clients for nearly two years now. 

Instead of crafting plans to protect the most vulnerable and high-risk segments, Sri Lanka chose to put blanket restrictions on everyone covering the entire country, with its extremely fragile economy.

According to the Central Bank instructions, the borrowers eligible for the relief scheme will be charged with interest no higher than the one-year treasury bill rate, 

at the auctions held on May 19, plus 5.5 percent per annum, which comes to 10.68 percent, chargeable only for the deferred period and only on the deferred amount.

The borrowers have time till July 15, 2021, to make written requests, including through electronic means but the non-bank finance institutions (NBFIs) have been asked to accept such requests received after the deadline, if the reasons for the delay were acceptable. 

Alternatively, these finance and leasing companies can also restructure the existing facilities over a longer period, based on an interest rate agreeable for both the company and borrowers, considering the prevailing low interest rate. 

While the penal interest cannot be charged during the concessionary period from May 15 to August 31, 2021, the finance companies shall also accommodate any requests from the affected borrowers to delay the due dates of the loan repayment by a maximum of 10 working days, due to the prevailing travel restrictions. 

Meanwhile, in respect of the non-performing loans as at May 15, the Central Bank asked the NBFIs to reschedule them over a longer period, considering the repayment capacity of the borrower and an acceptable revival plan, if the borrower is deemed eligible under the scheme. And the NBFI and borrower should agree on the terms and conditions, including the interest rate.  

And the companies will also waive off the penal interest accrued or charged on these eligible borrowers during April 1, 2020 through May 15, 2021. Further, the NBFIs were also asked to suspend all types of recovery actions against these credit facilities classified as non-performing, on or after April 1, 2020, until August 31, 2021. 
And the companies cannot levy or charge excessive fees or charges in relation to granting of these concessions under this relief scheme. 

Furthermore, the NBFIs were also asked to discontinue late payment fees on credit cards and other credit facilities during the period up to June 30, 2021, for those who are demonstrably affected.Meanwhile, any borrowers who prefer to settle their entire facilities on or before August 31, 2021, instead of opting for the deferment or restructuring, can do so without being charged with early settlement fees.