SMEs gain breathing space as suspension on parate execution extended till March 2025

Sri Lanka’s small and medium-sized enterprises (SMEs) and businesses can breathe a sigh of relief as the Cabinet approved an extension of the suspension on parate executions until March 31, 2025.

Cabinet spokesman and Minister Nalinda Jayatissa announced the decision, which follows the previous government’s suspension of the law until December 15. Parate execution allows banks to auction collateral from defaulted loans without court intervention.

The extension was proposed by Finance Minister and President Anura Kumara Dissanayake, who also called for the establishment of a mechanism to address the issue in consultation with all stakeholders.

The decision follows recent discussions at the Presidential Secretariat between Sri Lanka’s banks, regulators and SMEs, where the challenges of loan repayments and the financial strains faced by SMEs were highlighted.
Since the suspension took effect, Sri Lanka’s banking sector has raised concerns, warning that such measures could undermine the value of depositors’ funds. The Sri Lanka Banks’ Association (SLBA) has defended the use of parate execution, maintaining that it is employed only as a last resort to recover outstanding loans.

While banks have faced criticism for alleged misuse of foreclosure practices, the extension aims to provide SMEs with much-needed relief and an opportunity to stabilise their financial position amidst ongoing economic challenges.